Question 1

Which of the following is an example of a "how much" decision?

Accepted Answer

A)  The Pleasantville movie theatre is open only in the evenings. The theatre's manager is debating whether to add daily matinee shows. 
B)  The Zhous have demolished their old home and are debating whether to build a ranch-style house or a Craftsman home. 
C)  You're planning to hold a graduation party and must decide between having your party catered or having a pot-luck. 
D)  Chelsea has withdrawn from the swim team to take a full-time job. 
A)  The Pleasantville movie theatre is open only in the evenings. The theatre's manager is debating whether to add daily matinee shows. 
B)  The Zhous have demolished their old home and are debating whether to build a ranch-style house or a Craftsman home. 
C)  You're planning to hold a graduation party and must decide between having your party catered or having a pot-luck. 
D)  Chelsea has withdrawn from the swim team to take a full-time job.

Question 2

What does the term "marginal" mean in economics?

Accepted Answer

A)  the edge of a market 
B)  an additional or extra 
C)  illegal 
D)  secondary 
E)  trivial 
A)  the edge of a market 
B)  an additional or extra 
C)  illegal 
D)  secondary 
E)  trivial

Question 3

Table 1-1
   Lydia runs a small nail salon in the town of New Hope. She is debating whether she should extend her hours of operation. Lydia figures that her sales revenue will depend on the number of extra hours the nail salon is open as shown in the table above. She would have to hire a worker for those extra hours at a wage rate of $10 per hour.
-Refer to Table 1-1. What is Lydia's marginal cost if she decides to stay open for an extra two hours instead of one hour?

Accepted Answer

A)  $10 
B)  $20 
C)  $25 
D)  $40 
A)  $10 
B)  $20 
C)  $25 
D)  $40

Question 4

The branch of economics which studies the behavior of entire economies is called

Accepted Answer

A)  public economics. 
B)  microeconomics. 
C)  macroeconomics. 
D)  normative economics. 
A)  public economics. 
B)  microeconomics. 
C)  macroeconomics. 
D)  normative economics.

Question 5

Which of the following is a macroeconomic question?

Accepted Answer

A)  What determines the unemployment rate? 
B)  How is the production quantity of digital cameras determined? 
C)  What factors determine the price of iPhones? 
D)  What determines the wages and benefits of flight attendants? 
A)  What determines the unemployment rate? 
B)  How is the production quantity of digital cameras determined? 
C)  What factors determine the price of iPhones? 
D)  What determines the wages and benefits of flight attendants?

Question 6

Zane's Vanes is a service that restores old weather vanes. Zane has just spent $125 purchasing a 1920s-era weather vane which he expects to restore and sell for $500 once the work is completed. After having spent $125, Zane realizes that he will need to spend an additional $200 on materials to complete the restoration. Alternatively, he can sell the weather vane without restoring it for $200. What should he do?

Accepted Answer

A)  He should sell the weather vane now to make the most profit. 
B)  It does not matter what he does; he is going to take a loss on the project. 
C)  He should finish the restoration and then sell the weather vane. 
D)  He should sell the weather vane back to the party he purchased it from and cut his losses. 
A)  He should sell the weather vane now to make the most profit. 
B)  It does not matter what he does; he is going to take a loss on the project. 
C)  He should finish the restoration and then sell the weather vane. 
D)  He should sell the weather vane back to the party he purchased it from and cut his losses.

Question 7

Suppose the U.S. government encouraged consumers to trade in their old automobiles for more efficient, new models by paying up to $5,000 for the old automobiles. These consumers who did trade in their old automobiles to take advantage of the government offer would be exemplifying the economic idea that

Accepted Answer

A)  people are rational. 
B)  people respond to economic incentives. 
C)  optimal decisions are made at the margin. 
D)  equity is more important than efficiency. 
A)  people are rational. 
B)  people respond to economic incentives. 
C)  optimal decisions are made at the margin. 
D)  equity is more important than efficiency.

Question 8

In economics, the difference between a firm's revenues and its costs is referred to as

Accepted Answer

A)  physical capital. 
B)  profit. 
C)  capital gains. 
D)  factor payments. 
A)  physical capital. 
B)  profit. 
C)  capital gains. 
D)  factor payments.

Question 9

Consider the following economic agents: 
a.	the government
b. 	consumers
c.	producers
Who, in a modern mixed economy, decides what goods and services will be produced with the scarce resources available in that economy?

Accepted Answer

A)  the government 
B)  producers 
C)  consumers 
D)  consumers and producers 
E)  the government, consumers, and producers 
A)  the government 
B)  producers 
C)  consumers 
D)  consumers and producers 
E)  the government, consumers, and producers

Question 10

Consider the following economic agents: 
a.	the government
b. 	consumers
c.	producers
Who, in a centrally planned economy, decides what goods and services will be produced with the scarce resources available in that economy?

Accepted Answer

A)  the government 
B)  producers 
C)  consumers 
D)  consumers and producers 
E)  the government, consumers, and producers 
A)  the government 
B)  producers 
C)  consumers 
D)  consumers and producers 
E)  the government, consumers, and producers

Question 11

In economics, choices must be made because we live in a world of

Accepted Answer

A)  unemployment. 
B)  scarcity. 
C)  greed. 
D)  unlimited resources. 
A)  unemployment. 
B)  scarcity. 
C)  greed. 
D)  unlimited resources.

Question 12

Consider the following statements:
a. 	Consumers rent more kayaks from a vendor that rents kayaks at a lower price than other rival kayak vendors along Waikiki beach.
b. 	Department stores take steps to increase security since they believe it is more costly to allow shoplifting than to install expensive security monitoring equipment.
c. 	Farmers produce more cotton when its selling price falls.
Which of the above statements demonstrates that economic agents respond to incentives?

Accepted Answer

A)  a only. 
B)  b only. 
C)  c only. 
D)  a and b. 
E)  a, b, and c. 
A)  a only. 
B)  b only. 
C)  c only. 
D)  a and b. 
E)  a, b, and c.

Question 13

Which of the following is a microeconomic question?

Accepted Answer

A)  When will the government better secure the borders? 
B)  Why hasn't the federal government raised the minimum wage? 
C)  How does Fiat decide on the price of the 500 Pop model? 
D)  What determines the level of U.S. imports and exports? 
A)  When will the government better secure the borders? 
B)  Why hasn't the federal government raised the minimum wage? 
C)  How does Fiat decide on the price of the 500 Pop model? 
D)  What determines the level of U.S. imports and exports?

Question 14

The relationship between consumer spending and disposable personal income is

Accepted Answer

A)  an inverse relationship. 
B)  a direct relationship. 
C)  a negative relationship. 
D)  independent. 
A)  an inverse relationship. 
B)  a direct relationship. 
C)  a negative relationship. 
D)  independent.

Question 15

Two-dimensional graphs have a horizontal and a vertical axis and are used in economics to illustrate

Accepted Answer

A)  relationships between two economic variables. 
B)  one variable. 
C)  a flow chart. 
D)  a pie chart. 
A)  relationships between two economic variables. 
B)  one variable. 
C)  a flow chart. 
D)  a pie chart.

Question 16

Which of the following statements is true about revenue?

Accepted Answer

A)  Revenue is the total amount received for selling a good or service. 
B)  Revenue is calculated by dividing the price per unit by the number of units sold. 
C)  The terms "revenue" and "profit" can be used interchangeably. 
D)  A firm's revenue will increase as its costs increase. 
A)  Revenue is the total amount received for selling a good or service. 
B)  Revenue is calculated by dividing the price per unit by the number of units sold. 
C)  The terms "revenue" and "profit" can be used interchangeably. 
D)  A firm's revenue will increase as its costs increase.

Question 17

________ have a horizontal and a vertical axis and are used in economics to illustrate relationships between two economic variables.

Accepted Answer

A)  Two-dimensional graphs 
B)  One-dimensional graphs 
C)  Pie Charts 
D)  Bar graphs 
A)  Two-dimensional graphs 
B)  One-dimensional graphs 
C)  Pie Charts 
D)  Bar graphs

Question 18

What is an economic variable?

Accepted Answer

An economic variable is someth

Question 19

What is a market economy?

Accepted Answer

A market economy is an economy

Question 20

What is technology and what factors does it depend on?

Accepted Answer

Technology is the processes a firm uses

Exam 1: Economics: Foundations and Models

Which of the following is an example of a "how much" decision?

What does the term "marginal" mean in economics?

The branch of economics which studies the behavior of entire economies is called

Which of the following is a macroeconomic question?

In economics, the difference between a firm's revenues and its costs is referred to as

Consider the following economic agents: a. the government b. consumers c. producers Who, in a modern mixed economy, decides what goods and services will be produced with the scarce resources available in that economy?

Consider the following economic agents: a. the government b. consumers c. producers Who, in a centrally planned economy, decides what goods and services will be produced with the scarce resources available in that economy?

In economics, choices must be made because we live in a world of

Which of the following is a microeconomic question?

The relationship between consumer spending and disposable personal income is

Two-dimensional graphs have a horizontal and a vertical axis and are used in economics to illustrate

Which of the following statements is true about revenue?

________ have a horizontal and a vertical axis and are used in economics to illustrate relationships between two economic variables.

What is an economic variable?

What is a market economy?

What is technology and what factors does it depend on?

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

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