Exam 1: First Principles

Because one person's spending is another person's income, if one group in the economy spends more, they increase their share of income and decrease the incomes of other groups.

Increases in total output realized when individuals specialize in particular tasks and trade are known as:

The problem of determining what goods and services society should produce:

The university recently inherited a large mansion from a wealthy alumnus. The university plans to use the mansion for faculty parties and to house distinguished guests. The opportunity cost of the mansion to the university is:

Too little spending in an economy often leads to:

For an economist, the cost of something is:

Which of the following is a question of marginal analysis?

A college student waits in line for hours to purchase a ticket to the Rose Bowl, but an attorney does not. Rather than spend hours in line, he purchases a much more expensive ticket through a ticket broker. Why?

Julie is getting ready for final exams. She has three exams during the first three days of the exam period. To prepare, she has outlined a schedule that includes reviewing for her first exam on one day, her next exam on the following day, and her third exam on the third day. On each day, she has also allocated some time when she can watch TV or basically do nothing. Which best explains why Julie provides some time for leisure?

If an economy is efficient:

Because people usually exploit opportunities to make themselves better off, which of the following methods of reducing pollution is likely to be most effective?

A college student stays up late writing a history paper and as a result sleeps through her morning economics class. What is the cost of sleeping through the class?

Scarcity exists when:

A two-year-old child is eating raisins one at a time from a large box. Even though the child doesn't understand formal economic theory, he knows when to stop eating because he is full. Describe how this child has already mastered marginal analysis.

Handicapped-designated parking spaces are an example of the market economy achieving efficiency.

Which of the following policies is MOST likely to reduce traffic congestion in a large metropolitan area because people usually exploit opportunities to make themselves better off?

An apartment complex included a fixed price of water in the monthly rent. One day the city decided to attach a water meter to each individual apartment and charge the tenant for actual water usage. As a result, water usage in the apartment complex went way down. Explain this situation using a principle of economics.

In an attempt to reduce shooting deaths, some cities have offered money to people who turn in illegal guns. This program is an example of the government using _____ to influence behavior.

When people want more goods and services than are available, the economy undergoes inflation. This statement best represents this economic concept:

A choice made _____ is a choice whether to do a little more or a little less of something.