Exam 1: Economics: Foundations and Models

Policies based on positive economic ideas tend to decrease economic efficiency and reduce equity.

Which of the following are primarily macroeconomic topics and which are primarily microeconomic topics? a.gasoline prices b.unemployment c.inflation d.health care costs e.air pollution f.economic growth

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

Examining the conditions that could lead to unemployment in an economy is an example of a microeconomic topic.

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

What is opportunity cost?

What is equity, and how does it differ from efficiency?

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 cost of producing the last 300 hats is

All economic questions arise from the fact that resources are unlimited.

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

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.What is Thuy Anh's marginal benefit if she decides to stay open for an extra three hours instead of two hours?

All of the following are part of an economic model except

Economists spend much of their time

A primary role of economists is to not only describe how choices are made and analyze the results of those choices, but also to advise on how better decisions can be made.

Table 1-4 -Refer to Table 1-4.The table above shows the sales of LED light bulbs in North America.Present the information using a bar graph.

Which of the following is a positive economic statement?

Suppose when the price of laptops fall, college students buy more laptops.This implies that

Economics does not study correct or incorrect behaviors but rather it assumes that economic agents behave ________, meaning they make the best decisions given their knowledge of the costs and benefits.

Trina's Tropical Fish Store sells goldfish for $2 each and angelfish for $10 each.What is the opportunity cost of buying a goldfish?

When voluntary exchange takes place, both parties gain from the exchange.