Modern Principles of Economics (1)

The opportunity cost of winning a free ticket to the Super Bowl worth $950 and attending the game is

at least $950; the lost market value of selling the ticket and the time to go

Why do you think goods are sometimes marked in prices that end in 9 ($29.99 instead of $30)

1. Consumers respond to incentives (they believe they are saving money because the product appears cheaper) 2. A sales strategy that makes people think they are saving money

In an effort to clean the air, many communities impose restrictions on the burning of garbage. This policy causes more garbage to be buried underground, potentially increasing groundwater contamination. What concept does this example represent?

A trade off

Drug Loss

Because of the hire cost of testing a drug, fewer drugs are made and more lives are lost

Invisible Hand

Behavior based on self-interest can lead to an overall benefit to society

Booms and Busts

Fluctuations in economic activity over time

Imposing the death penalty on rapists may increase the number of murders, because

Once a victim is raped there is no additional penalty imposed for also killing the victim

A dependable legal system and competitive, open markets help to

Shape incentives that induce economic growth

Adam Smith's insight into market behavior

Society benefits when people and firms pursue their own self interests

Positive Relationship between the unemployment rate and college enrollment rate

The OC of going of attending college falls during the recession, leading to higher enrollment rates

When deciding whether or not to undertake an activity, economists compare

The additional cost of the activity against the additional benefits received

Opportunity Cost

The value of the next best option

Wealthy Countries

Wealthy countries tend to have a lot of physical capital per worker and a lot of human capital per worker

Drug Lag

when lives are lost because safe drugs that are still in the testing stage have not yet been approved