Exam 1: Economics: Foundations and Models

If the price of gasoline was $3.25 a gallon and it is now $3.75 a gallon, what is the percentage change in price?

Article Summary In a January, 2017 report, the World Economic Forum stated that the growing income gap has become one of the biggest threats to the global economy and cannot be remedied solely by higher economic growth. Although income inequality has fallen over the past 30 years on a global level, in high-income countries like the United States and the United Kingdom, the top 1% of income earners have benefitted disproportionately from economic growth. This has led a growing belief that the traditional model for economic growth does not result in a population-wide increase in income. According to the report, "The growing mood of anti-establishment populism suggests we may have passed the stage where [reviving economic growth] alone would remedy fractures in society: reforming market capitalism must also be added to the agenda." Source: Lauren Gensler, "Rising Income Inequality Is Throwing The Future Of Capitalism Into Question, Says World Economic Forum," Forbes, January 11, 2017. -Refer to the Article Summary. The article discusses income inequality and how economic growth alone is no longer resulting in a more equitable distribution of income. If governments increased equity by reducing the incomes of high-income people and increasing the incomes of the poor, would it be possible that fewer goods and services would be produced and less saving would take place?

A restaurant sells a large soft drink at a fixed price of $1.79. A term used by economists to describe the money received from the sale of an additional large soft drink is

________ is a problem that occurs when one concludes that a change in variable X caused a change in variable Y when in actual fact, it is a change in variable Y that caused a change in variable X.

Lionel's Lawn Care is a company that maintains residential yards. Lionel's cost for his standard package of mowing, edging, and trimming is $15, and he charges $25 for this service. For a total price of $40, Lionel will also trim shrubs, a service that adds an additional $10 to the total cost of the standard package. What is Lionel's marginal benefit if he sells the standard package?

What is the difference between goods and services?

Voluntary exchange increases economic efficiency

How are most fundamental economic decisions now determined in China?

Which of the following is counted as "capital" in economics?

The ________ the sale of an additional unit of a product is a marginal benefit to the firm.

Marginal cost is the ________ associated with a particular increase in an activity.

What is a marginal cost?

Which of the following statements is true?

The number of people who have gray hair is very high among residents living in Florida. A student concludes that living in Florida causes hair to turn gray. What is the flaw in this student's reasoning?

Which of the following is a positive economic statement?

Macroeconomics is the study of

Table 1-6 Ivan runs a custom jewelry shop in Sparkle City. He is debating whether he should extend his hours of operation. Ivan figures that his sales revenue will depend on the number of additional hours the jewelry shop is open as shown in the table above. He would have to hire a worker for those hours at a wage rate of $25 per hour. -Refer to Table 1-6. What is Ivan's marginal benefit if he decides to stay open for six hours instead of five hours?

Scenario 1-2 Suppose a hat manufacturer currently sells 2,000 hats per week and makes a profit of $5,000 per week. The plant owner observes, "Although the last 300 hats we produced and sold increased our revenue by $1,000 and our costs by $1,100, 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 hats." -Refer to Scenario 1-2. Using marginal analysis terminology, another economic term for the incremental revenue received from the sale of the last 300 hats is

What is an economic model?