Exam 1: First Principles

If you decide to go to Cancún with your friends during spring break, you cannot go to Paris with your sister in the summer. This statement best represents this economic concept:

An economy is efficient when:

Which of these is one of the four principles of individual choice?

Economists tend to believe that to change people's behavior you must:

In Thailand, the land, labor, and capital in society are used to exploit all opportunities to make everyone better off. This statement best represents this economic concept:

In 2003, Congress passed a tax cut. The country did NOT incur any opportunity cost from this decision.

While buying refreshments for an upcoming party, you notice that a six-pack of Americana Beer costs $2 and a six-pack of Bavarian Beer costs $4. You buy the six-pack of Bavarian Beer, although you wonder if maybe two six-packs of Americana Beer would have been a better choice. The opportunity cost of the Bavarian Beer is:

When hurricane Katrina devastated the Gulf coast, the businesses in the area, even those not physically damaged by the storm, had losses. Explain how this illustrates the principle that "one person's spending is another person's income."

An economy has achieved _____ if it _____ pass up any opportunities to make some people better off without making others worse off.

Whenever a choice is made:

Which of the following methods of encouraging recycling is likely to be MOST effective because people usually exploit opportunities to make themselves better off?

If resources are scarce, it means that they:

Margo spends $10,000 on one year's college tuition. The opportunity cost of spending one year in college for Margo is:

A new startup airline is offering free round-trip tickets to anywhere to the first 600 people who enter the office on the airline's first day of business. You arrive 24 hours before it is scheduled to open to be sure to get the free tickets, and you buy food from vendors while waiting in line. The cost of the tickets to you is:

A bank offers two compensation plans to its tellers. Plan A provides an hourly wage of $12. Plan B offers $10 per hour plus additional compensation if customers sign up for a related bank product. If a teller chooses plan B, most likely this person would:

Some products, like tobacco, are taxed. Why would the government interfere in a market that if left untaxed would probably move to equilibrium on its own?

The fact that individuals in a market economy act so as to make themselves better off is a major reason a market equilibrium is usually efficient.

As long as individuals know that they can find the goods and services they want in the market, they are willing to forgo being self-sufficient and are willing to specialize.

Which book illustrates the advantages of specialization using an eighteenth-century pin factory?

An economy is efficient if one person can be made better off by reallocating resources without making anyone else worse off.