Ten Principles of Economics-Part 2

What is the fundamental problem of economics? 

• How to keep consumers out of debt?
• How to fulfill our unlimited wants and needs with limited resources?
• How to figure out the way to make the most money?
• How do we ensure all people get a college education?

Opportunity Cost is best defined as

• The best rejected alternative you give up when making a decision 
• The price you pay to purchase something 
• The benefit you gain by making a decision 
• The amount of debt you take on by making a decision 

Soil, minerals, air, water, and coal are all examples of

• Fossil fules
• Conservation
• recycling
• natural resources

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

• True

• False

The fact that people are willing to pay much more for a diamond, which is not needed for survival, than they are willing to pay for a cup of water, which is needed for survival, is an example of irrational behavior.

• True

• False

Which of the following situations describes the greatest market power?

• Subaru’s impact on the price of cars

• a farmer's impact on the price of corn

• Microsoft's impact on the price of desktop operating systems

• a student's impact on college tuition

Which of the following activities is most likely to produce an externality?

• A student eats a hamburger in the student union.

• A student reads a novel for pleasure.

• A student sits at home and watches T.V.

• A student has a party in her room in the student hall of residence

Suppose the government taxes the wealthy at a higher rate than it taxes the poor and then develops programs to redistribute the tax revenue from the wealthy to the poor. This redistribution of wealth

• is more efficient and more equal for society.

• is more efficient but less equal for society.

• is more equal but less efficient for society.

• is less equal and less efficient for society.

Making rational decisions "at the margin" means that people

• make those decisions that do not impose a marginal cost.

• compare the marginal costs and marginal benefits of each decision.

• evaluate how easily a decision can be reversed if problems arise.

• always calculate the marginal dollar costs for each decision.

Foreign trade

• increases the scarcity of resources

• makes a country more equitable

• allows a country to avoid tradeoffs

• allows a country to have a greater variety of products at a lower cost than if it tried to produce everything at home.