Exam 1: Economics: Foundations and Models

Billie's Billiard Barn has seen its business slow down ever since Patti's Ping Pong Parlour opened up across the street.Since the opening of Patti's Ping Pong Palace, the opportunity cost of shooting pool at Billie's Billiard Barn has ________ for Billie's customers who also like to play ping pong.

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

What is the difference between goods and services?

Consider the following statements: A.Car owners purchase more gasoline from a gas station that sells gasoline at a lower price than other rival gas 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?

Explain the economic assumption that "people are rational."

Assume that a florist can earn an additional $20,000 of revenue each year from advertising once a week on a local television station.What must the additional cost of this once-a-week advertising be to make this advertising economically rational?

A college must decide if it wants to offer more adult literacy classes.This decision involves answering the economic question of "what to produce."

The basic economic problem of ________ has always existed and will continue to exist.

The Coffee Nook, a small cafe near campus, sells cappuccinos for $2.50 and Russian tea cakes for $1.00 each.What is the opportunity cost of buying a Russian tea cake?

An economic ________ is a simplified version of some aspect of economic life used to analyze an economic issue.

Which of the following statements about economic resources is true?

In the market for factors of production, firms earn income by selling factors of production to households.

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

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

DeShawn's Detailing is a service that details cars at the customers' homes or places of work.DeShawn's cost for a basic detailing package is $40, and he charges $75 for this service.For a total price of $90, DeShawn will also detail the car's engine, a service that adds an additional $20 to the total cost of the package.What is DeShawn's marginal benefit if he sells a basic detailing package?

Which of the following is a positive economic statement?

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

The development of a new good or a new process for making a good is called

Making "how much" decisions involves

Which of the following is a normative economic statement?