What do economists mean when they say that there is no such thing as a free lunch?
What will be an ideal response?
Everything has a cost, even when you do not pay money for it. Suppose that somebody bought you lunch. Resources from the economy were used to make that lunch, even though those resources may not belong to you. Consequently, the economy gave up anything else it could have made with the resources it used to make the lunch. The opportunity cost of that lunch is the lost opportunity to use those resources in some other way.
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The impact of financial markets on the economy comes partly through
A) the substitution effect. B) the wealth effect. C) the international trade effect. D) the travel effect.
Suppose Jack and Kate are at the town fair and are choosing which game to play. The first game has a bag with four marbles in it-1 red marble and 3 blue ones. The player draws one marble from the bag; if it is red, they win $20 and if it is blue, they win $1. The second game has a bag with 10 marbles in it-1 red, 4 blue, and 5 green. The player draws one marble from the bag; if it is red, they win $20; if it is blue, they win $5; and if it is green, they win $1. Both games cost $5 to play. If Jack only cares about expected value, and not risk, he should decide to play a game if:
A. the expected value of the payoff is higher than the expected value of the payoff in the other game. B. the expected value of the payoff is lower than the price to play the game. C. the expected value of the payoff is higher than the price to play the game. D. the expected value of the payoff is double the price to play the game.
When Iceland can generate a product using fewer labor hours and resources than the United States, an economist would say that Iceland had
a. a comparative advantage in production of the product.
b. an absolute advantage in production of the product.
c. a higher opportunity cost of producing the product.
d. no incentive to import the product, regardless of the cost-price conditions for other products.
Under a fixed exchange rate system, if the inflation rate of the United States is less than the inflation rate of other nations, the
A) United States will develop a trade surplus. B) dollar will appreciate. C) United States will develop a trade deficit. D) dollar will depreciate.