Exam 2: The Key Principles of Economics

The notion of opportunity cost allows the measurement of tradeoffs.

Different people eat different amounts of food when they go to buffet restaurants, even though they all pay the same price. Explain how this relates to the marginal principle.

Table 2.5 -Refer to the table above. By what percentage did the federal minimum wage increase from 1974 to 2011?

Suppose your bank pays you 5 percent interest per year on your savings account. If prices increase by 5 percent per year over that time, approximately how much real value do you gain by keeping $100 in the bank for a year?

The principle that individuals and firms pick the activity level where the incremental benefit of that activity equals the incremental cost of that activity is known as the

According to the principle of diminishing returns, if the number of workers is increased beyond the point of diminishing returns, then the additional worker

The principle of opportunity cost

A Major League Baseball player signs a contract that pays $27 million over 5 years. The $27 million is the contract's ________ value.

When you have a job and your employer compensates you for your time with money, resulting in both of you being better off, it is an example of a voluntary exchange.

Figure 2.1 -Referring to Figure 2.1, if you increase the production of farm goods, what other area is affected?

Table 2.3 -Refer to Table 2.3. What can be observed about the given resources?

When Lonnie produces 1 pair of cowboy boots his costs total $300. When he produces 2 pairs of cowboy boots his total costs are $500. This means that Lonnie's marginal cost of producing the second pair of cowboy boots is $200.

Spending money on a new car instead of a used car when you are on a fixed budget is an example of

Recall the Application about Rory McIlroy and weed-whacking to answer the following question(s). The Application assumes that Rory McIlroy could whack down all the weeds on his estate in one hour at an opportunity cost of $1,000, but it would take 20 hours for a gardener to do it at a price of $10 per hour. -Based on the assumptions in the Application, should Rory hire a gardener or cut the weeds himself?

A "market" is an arrangement that allows people to exchange things.

Recall the Application about the use of fertilizer and its impact on crop yields to answer the following question(s). The table is taken from this Application. Fertilizer and Corn Yield -Refer to the table above. After applying the second bag of fertilizer, the farmer experienced

Table 2.4 -Refer to Table 2.4. Increasing the tanks of fertilizer from 3 to 4 will increase the truckloads of potatoes by

Suppose that you lend $1,000 to a friend and he or she pays you back one year later. What is the opportunity cost of lending the money?

How would an increase in prices in retail stores change the real value of the money you earn as wages?

If Rory McIlroy only earned $500 per hour playing golf instead of $1,000 per hour, what should he do?