Exam 1: Economics: Foundations and Models

What is the difference between positive economic analysis and normative economic analysis? Give one example each of a positive and normative economic issue or question or statement.

Which of the following is motivated by an efficiency concern?

Scenario 1-1 Suppose a cell phone manufacturer currently sells 20,000 cell phones per week and makes a profit of $5,000 per week. A manager at the plant observes, "Although the last 3,000 cell phones we produced and sold increased our revenue by $6,000 and our costs by $6,700, we are still making an overall profit of $5,000 per week so I think we're on the right track. We are producing the optimal number of cell phones." -Refer to Scenario 1-1. Using marginal analysis terminology, what is another economic term for the incremental revenue received from the sale of the last 3,000 cell phones?

"The distribution of income should be determined by the government" is an example of a positive economic statement.

How does the study of microeconomics differ from that of macroeconomics? Give one example each of an issue studied in microeconomics and in macroeconomics.

What is an economic model?

Cassie's Quilts alters, reconstructs, and restores heirloom quilts. Cassie has just spent $800 purchasing, cleaning, and reconstructing an antique quilt which she expects to sell for $1,500 once she is finished. After having spent $800, Cassie discovers that she would need some special period fabric that would cost her $200 in material and time in order to complete the task. Alternatively, she can sell the quilt "as is" now for $900. What is her marginal benefit if she sells the quilt "as is" now?

What is opportunity cost?

The term "market" refers to trading arrangements by which buyers and sellers come together.

What is meant by the statement that "optimal decisions are made at the margin"?

"A decrease in the price of digital cameras will decrease the demand for camera film." This statement is an example of a positive economic statement.

In a market economy, those who are willing and able to buy what is produced

Fast food restaurants produce a range of menu items such as hamburgers, chicken sandwiches, salads, and french fries. What fundamental economic question are they addressing by offering this range of items?

Every society faces trade-offs. Explain the concept of trade-offs.

The decision about what goods and services will be produced in a centrally planned economy is made by

Scarcity is a problem that will eventually disappear as technology advances.

Which of the following is a normative economic statement?

One desirable outcome of a market economy is that it leads to a more equitable distribution of income.

Table 1-7 -Refer to Table 1-7. The table above shows the sales of LED light bulbs in North America. Present the information using a bar graph.

Figure 1.1 -Refer to Figure 1-1. Using the information in the figure above, calculate the percentage change in revenue from alcoholic beverage sales between 2013 and 2016.