Question 1

All centrally planned economies

Accepted Answer

A)  have been political dictatorships. 
B)  started out as market economies. 
C)  began as mixed economies. 
D)  have become mixed economies. 
A)  have been political dictatorships. 
B)  started out as market economies. 
C)  began as mixed economies. 
D)  have become mixed economies.

Question 2

The cost incurred from the production of an additional unit of a product

Accepted Answer

A)  is a marginal cost to the firm. 
B)  is called a loss. 
C)  is called opportunity cost. 
D)  must be zero for a firm to be efficient. 
A)  is a marginal cost to the firm. 
B)  is called a loss. 
C)  is called opportunity cost. 
D)  must be zero for a firm to be efficient.

Question 3

Table 1-2
   Thuy Anh runs a small flower shop in the town of Florabunda. She is debating whether she should extend her hours of operation. Thuy Anh figures that her sales revenue will depend on the number of extra hours the flower shop is open as shown in the table above. She would have to hire a worker for those extra hours at a wage rate of $16 per hour.
-Refer to Table 1-2. Using marginal analysis, by how many hours should Thuy Anh extend her flower shop's hours of operations?

Accepted Answer

A)  2 hours 
B)  3 hours 
C)  4 hours 
D)  5 hours 
E)  6 hours 
A)  2 hours 
B)  3 hours 
C)  4 hours 
D)  5 hours 
E)  6 hours

Question 4

An economic model is a simplified version of reality used to analyze real-world economic situations.

Accepted Answer

A) True 
 B)False

Question 5

All ________ economies have been political dictatorships.

Accepted Answer

A)  centrally planned 
B)  mixed 
C)  market 
D)  mixed and market 
A)  centrally planned 
B)  mixed 
C)  market 
D)  mixed and market

Question 6

In economics, the term ________ refers to a group of buyers and sellers of a product and the arrangement by which they come together to trade.

Accepted Answer

A)  collective 
B)  cooperative 
C)  market 
D)  trade-off 
A)  collective 
B)  cooperative 
C)  market 
D)  trade-off

Question 7

Tabitha shares a flea market booth with her sister. Her share of the rent is $150 per month. She is considering moving to her own, larger booth which she will not have to share with anyone. The larger booth rents for $450 per month. Recently, you ran into Tabitha in the grocery store and she tells you that she has rented the larger booth. Tabitha is as rational as any other person. As an economics major, you rightly conclude that

Accepted Answer

A)  Tabitha did not have a choice; her sister was overcharging her. 
B)  Tabitha figures that the additional benefit of having her own booth (as opposed to sharing) is at least $300. 
C)  Tabitha figures that the additional benefit of having her own booth (as opposed to sharing) is at least $450. 
D)  the cost of having one's own booth outweighs the benefits. 
A)  Tabitha did not have a choice; her sister was overcharging her. 
B)  Tabitha figures that the additional benefit of having her own booth (as opposed to sharing) is at least $300. 
C)  Tabitha figures that the additional benefit of having her own booth (as opposed to sharing) is at least $450. 
D)  the cost of having one's own booth outweighs the benefits.

Question 8

In economics, an organization that produces a good or service is called a

Accepted Answer

A)  firm. 
B)  company. 
C)  business. 
D)  All of the above are correct. 
A)  firm. 
B)  company. 
C)  business. 
D)  All of the above are correct.

Question 9

Who receives the goods and services produced in the United States depends largely on

Accepted Answer

A)  how income is distributed. 
B)  how the goods and services are produced. 
C)  what goods and services are produced. 
D)  government redistribution. 
A)  how income is distributed. 
B)  how the goods and services are produced. 
C)  what goods and services are produced. 
D)  government redistribution.

Question 10

If a straight line passes through the point x = 8 and y = 4 and also through the point x = 12 and y = 6, the slope of this line is

Accepted Answer

A)  negative 4 divided by 2. 
B)  two. 
C)  negative one half. 
D)  one half. 
A)  negative 4 divided by 2. 
B)  two. 
C)  negative one half. 
D)  one half.

Question 11

Fiona shares an office with her ex-husband. Her share of the rent and utilities is $625 per month. She is considering moving to a home office which she will not have to share with anyone. The home office will not cost her anything as far as extra rent or utilities. Recently, you ran into Fiona at the gym and she tells you that she has moved into her home office. Fiona is as rational as any other person. As an economics major, you rightly conclude that

Accepted Answer

A)  Fiona did not have a choice; her ex-husband was a jerk. 
B)  Fiona figures that the additional benefit of having her own office (as opposed to sharing) is at least $625. 
C)  Fiona figures that the benefit of having her own office (as opposed to sharing) is zero, since she is no longer paying rent and utilities. 
D)  The cost of having one's own space outweighs the benefits. 
A)  Fiona did not have a choice; her ex-husband was a jerk. 
B)  Fiona figures that the additional benefit of having her own office (as opposed to sharing) is at least $625. 
C)  Fiona figures that the benefit of having her own office (as opposed to sharing) is zero, since she is no longer paying rent and utilities. 
D)  The cost of having one's own space outweighs the benefits.

Question 12

Suppose the extra annual cost to a nation to enact a mandatory seat belt law for motorcycles is $850. Then, the nation should enact this seat belt law if doing so results in an additional benefit of $850 or more each year.

Accepted Answer

A) True 
 B)False

Question 13

Productive efficiency is achieved when

Accepted Answer

A)  firms add a low profit margin to the goods and services they produce. 
B)  firms produce the goods and services that consumers value most. 
C)  firms produce goods and services at the lowest cost. 
D)  there are no shortages or surpluses in the market. 
A)  firms add a low profit margin to the goods and services they produce. 
B)  firms produce the goods and services that consumers value most. 
C)  firms produce goods and services at the lowest cost. 
D)  there are no shortages or surpluses in the market.

Question 14

Which of the following is an example of an efficiency-equity trade-off faced by economic agents?

Accepted Answer

A)  According to an article by in the American Journal of Public Health by Edward Kaplan and Michael Merson of Yale University School of Medicine, the federal government's current method of allocating HIV-prevention resources is not cost-effective. Instead of allocating resources to states in proportion to reported AIDS cases, resources should flow first to those activities that prevent more infections per dollar and then to less and less effective combinations of programs and populations until funds are exhausted, even if it means that some populations would be left without any prevention services. 
B)  Concerned about the falling birth rate, the French government has pledged more money for families with three children, in an effort to encourage working women to have more babies. 
C)  Some U.S. colleges are actively recruiting foreign students for their technology-based programs. 
D)  All New York City art museums are considering adopting a free-admission policy for local residents one weekend per month. 
A)  According to an article by in the American Journal of Public Health by Edward Kaplan and Michael Merson of Yale University School of Medicine, the federal government's current method of allocating HIV-prevention resources is not cost-effective. Instead of allocating resources to states in proportion to reported AIDS cases, resources should flow first to those activities that prevent more infections per dollar and then to less and less effective combinations of programs and populations until funds are exhausted, even if it means that some populations would be left without any prevention services. 
B)  Concerned about the falling birth rate, the French government has pledged more money for families with three children, in an effort to encourage working women to have more babies. 
C)  Some U.S. colleges are actively recruiting foreign students for their technology-based programs. 
D)  All New York City art museums are considering adopting a free-admission policy for local residents one weekend per month.

Question 15

Which of the following is a normative economic statement?

Accepted Answer

A)  Tobacco products should be banned in all public spaces. 
B)  The increase in tobacco taxes has caused an increase in the price of cigarettes. 
C)  Better awareness of health risks has decreased tobacco use. 
D)  A reduction in tobacco subsidies has caused the price of tobacco to increase. 
A)  Tobacco products should be banned in all public spaces. 
B)  The increase in tobacco taxes has caused an increase in the price of cigarettes. 
C)  Better awareness of health risks has decreased tobacco use. 
D)  A reduction in tobacco subsidies has caused the price of tobacco to increase.

Question 16

Which of the following statements about positive economic analysis is true?

Accepted Answer

A)  Positive analysis uses an economic model to estimate the costs and benefits of different course of actions. 
B)  There is much less disagreement among economists over normative economic analysis than over positive economic analysis. 
C)  There is much more disagreement among economists over positive economic analysis than over normative economic analysis. 
D)  Unlike positive economic analysis, normative economic analysis can be tested. 
A)  Positive analysis uses an economic model to estimate the costs and benefits of different course of actions. 
B)  There is much less disagreement among economists over normative economic analysis than over positive economic analysis. 
C)  There is much more disagreement among economists over positive economic analysis than over normative economic analysis. 
D)  Unlike positive economic analysis, normative economic analysis can be tested.

Question 17

Which of the following are positive economic statements and which are normative economic statements?
a. An increase in the price of gasoline will decrease the quantity of gasoline purchased.
b. The government should eliminate the minimum wage.
c. All states should raise the minimum wage to at least $10 per hour.
d. The government should scrap its current income tax structure in favor of a flat tax.
e. Unemployment has increased since the onset of the recession.
f. The government should not bail out investment banks during a financial crisis.

Accepted Answer

Statements a and e are positiv

Question 18

Positive analysis is concerned with "what ought to be," while normative analysis is concerned with "what is."

Accepted Answer

A) True 
 B)False

Question 19

"An increase in the price of oranges will increase the demand for grapefruits." This statement is an example of a normative economic statement.

Accepted Answer

A) True 
 B)False

Question 20

Of the following examples, which would likely be performed by an economist working for Apple?

Accepted Answer

A)  forecasting the demand for wearable technology that synchronizes with the iPhone 
B)  using economic models to analyze the future of cell phone usage in the United States 
C)  analyzing data related to a potential buyout of semiconductor manufacturer Intel Corp. 
D)  all of the above 
A)  forecasting the demand for wearable technology that synchronizes with the iPhone 
B)  using economic models to analyze the future of cell phone usage in the United States 
C)  analyzing data related to a potential buyout of semiconductor manufacturer Intel Corp. 
D)  all of the above

Exam 1: Economics: Foundations and Models

All centrally planned economies

The cost incurred from the production of an additional unit of a product

An economic model is a simplified version of reality used to analyze real-world economic situations.

All ________ economies have been political dictatorships.

In economics, the term ________ refers to a group of buyers and sellers of a product and the arrangement by which they come together to trade.

In economics, an organization that produces a good or service is called a

Who receives the goods and services produced in the United States depends largely on

If a straight line passes through the point x = 8 and y = 4 and also through the point x = 12 and y = 6, the slope of this line is

Suppose the extra annual cost to a nation to enact a mandatory seat belt law for motorcycles is $850. Then, the nation should enact this seat belt law if doing so results in an additional benefit of $850 or more each year.

Productive efficiency is achieved when

Which of the following is an example of an efficiency-equity trade-off faced by economic agents?

Which of the following is a normative economic statement?

Which of the following statements about positive economic analysis is true?

Positive analysis is concerned with "what ought to be," while normative analysis is concerned with "what is."

"An increase in the price of oranges will increase the demand for grapefruits." This statement is an example of a normative economic statement.

Of the following examples, which would likely be performed by an economist working for Apple?

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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