Exam 1: First Principles

Mr. Freezee operates a fleet of ice cream trucks that drive around neighborhoods selling ice cream. He is trying to decide whether he should buy another ice cream truck to add to his fleet. He determines that one more truck will add $750 to his revenue but that the truck will also increase his costs by $1,000. Based on marginal analysis, Mr. Freezee decides:

A dozen friends got together to celebrate a birthday. If the birthday cake is cut into 12 pieces of the same size and each of the 12 partygoers gets a slice, this cake distribution is:

Which of the following is an example of marginal analysis?

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?

Trade allows people to get more of what they want.

Economists make predictions about individual behavior based on the assumption that people exploit opportunities to make themselves better off. The fact that different individuals make different choices when confronted with the same situation implies that this assumption is often violated.

Which of the following is the BEST example of making a choice at the margin?

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

Which of the following statements is TRUE?

You have $1 to spend on a vending machine snack. A bag of chips will cost you $1 and a candy bar will also cost you $1. If you choose the bag of chips, the opportunity cost of buying the chips is:

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

Market failure occurs when:

Which of the following is NOT true?

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

When someone says resources are scarce, this suggests that:

Economists believe that resources should be used as efficiently as possible to:

When markets fail:

An increase in efficiency means that an economy has:

Which of the following principles underlies the economics of individual choices?

A busy professor can't decide whether to stay in his office to grade papers for another hour or to go home and go to bed. This is an example of: