Exam 1: Economics: Foundations and Models

Which of the following is a problem inherent in centrally planned economies?

Consider the following statements: A.Car owners purchase more petrol from a petrol station that sells petrol at a lower price than other rival petrol stations in the area. B.Banks do not take steps to increase security since they believe it is less costly to allow some bank robberies than to install expensive security monitoring equipment. C.Firms produce more of a particular DVD when its selling price rises. Which of the above statements demonstrates that economic agents respond to incentives?

A situation in which a good or service is produced at the lowest possible cost is:

Daniel shares a small food truck with his sister. His share of the expenses is $600 per month. He has decided to get his own, newer food truck which he will not have to share with anyone. His expenses for the newer truck are $1 500 per month. Daniel is as rational as any other person. As an economics major, you rightly conclude that:

Which of the following is not part of an economic model?

Define 'productive efficiency'. Does productive efficiency imply 'allocative efficiency'? Explain. _____________________________________________________________________________________________ _____________________________________________________________________________________________

Which of the following are 'positive economic statements' and which are 'normative economic statements'? a.An increase in the price of petrol will decrease the quantity of petrol purchased. b.The government should eliminate the minimum wage. c.All States/Territories should raise the minimum wage to at least $10 per hour. d.The government should scrap its current income tax structure in favour 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. _____________________________________________________________________________________________ _____________________________________________________________________________________________

Figure 1.1 -Refer to Figure 1.1. Using the information in the figure above, calculate the percentage change in sales of alcoholic beverages between 2011 and 2015.

Automobile manufacturers produce a range of automobiles such as sports utility vehicles, luxury sedans, pickup trucks and compact cars. What fundamental economic question are they addressing by making this range of products?

'An increase in the price of petrol will increase the demand for hybrid vehicles.' This statement is an example of a positive economic statement.

'The distribution of income should be left to the market' is an example of a positive economic statement.

Which of the following statements is true about scarcity?

What is an 'economic variable'? _____________________________________________________________________________________________ _____________________________________________________________________________________________

The Coffee Korner, a small cafe near campus, sells lattes for $3.00 and biscotti for $1.50 each. What is the opportunity cost of buying a biscotti?

Which of the following statements is false?

What do economists call the extra cost associated with undertaking an activity?

'Marginal benefit' refers to the additional benefit that your activity provides to you.

All centrally planned economies:

What term, in economics, means 'extra' or 'additional'?

Suppose that some teachers have decided that economic and financial uncertainty have made the prospect of retiring more risky, and therefore carry a higher cost than not retiring. By using all available information as they act to achieve their goals, these teachers are exemplifying the economic idea that: