Exam 1: Ten Principles of Economics: Part B

If wages for accountants rose,then accountants' leisure time would have a lower opportunity cost.

Equality means distributing society's resources in the most efficient manner.

Economics is the study of how evenly goods and services are distributed within society.

Inflation increases the value of money.

The cost of an action is measured in terms of foregone opportunities.

One way that governments can improve market outcomes is to ensure that individuals are able to own and exercise control over their scarce resources.

Market failure refers to a situation in which the market does not allocate resources efficiently.

The government can potentially improve market outcomes if market inequalities or market failure exists.

Productivity is defined as the quantity of goods and services produced from each unit of labor input.

The "invisible hand" influences market behavior through trade.

The invisible hand ensures that economic prosperity is distributed equally.

Market power and externalities are two possible causes of market failure.

Economics is the study of how society allocates its unlimited resources.

Market failure occurs when no individual has the ability to substantially influence market prices.

In the long run the primary effect of increasing the quantity of money is higher prices.

If the average cost of transporting a passenger on the train from Chicago to St.Louis is $75,it would be irrational for the railroad to allow any passenger to ride for less than $75.

Suppose one county in Missouri decides it wants to reduce alcohol consumption,so the county passes a law that raises the price of a bottle of beer by $1.As a result,people drive to other counties to drink alcohol,which results in an increase in drunk driving.This illustrates the principle that people respond to incentives.

Inflation is the primary determinant of a country's living standards.

Efficiency means everyone in the economy should receive an equal share of the goods and services produced.

The goal of President Obama's stimulus package and increased government spending following the deep economic downturn in 2008 and 2009 was to reduce inflation.