Exam 1: Economics: Foundations and Models

One example of human capital is the amount of skills that you have.

Article Summary Recent studies about wealth inequality and income inequality indicate that the American public's estimates of the distribution of wealth and income are quite different than actual data suggests. With respect to wealth, the top 20 percent of households hold more than 84% and the bottom 40 percent hold less than 1%, yet the public's estimates were 59% and 9%, respectively. In terms of income inequality, the public estimated that the CEO-to-worker pay-ratio was 30-to-1, whereas data suggests the actual ratio is 354-to-1, up from 20-to-1 in the 1960s. President Obama has referred to economic inequality as "the defining challenge of our time," and although Americans seem to recognize that income and wealth gaps have widened, only 5 percent indicate that this inequality is a problem that needs to be addressed. Source: Nicholas Fitz, "Economic Inequality: It's Far Worse Than You Think," Scientific American, March 31, 2015 -Refer to the Article Summary above.The article discusses wealth inequality, and for some people this means a more equitable distribution of wealth is needed in the economy.Would an equitable distribution of wealth necessarily be the most efficient distribution of wealth?

Pookie's Pinball Palace restores old Pinball machines.Pookie has just spent $300 purchasing and cleaning a 1960s-era machine which he expects to sell for $2,000 once he is finished with the restoration.After having spent $300, Pookie discovers that he will need to rewire the entire machine at a cost of $1,100 in order to finish the restoration.Alternatively, he can sell the machine "as is" now for $1,000.What should he do?

All of the following are part of an economic model except

The three fundamental questions that any economy must address are:

Allocative efficiency is achieved when firms produce goods and services

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.

Table 1-1 Lydia runs a small nail salon in the town of New Hope.She is debating whether she should extend her hours of operation.Lydia figures that her sales revenue will depend on the number of extra hours the nail salon is open as shown in the table above.She would have to hire a worker for those extra hours at a wage rate of $10 per hour. -Refer to Table 1-1.What is Lydia's marginal benefit if she decides to stay open for an extra two hours instead of one hour?

At a recent company meeting, Ravi Batra, sales manager of Life's a Beach, a surfboard producer announced, "We have increased our sales by 13 percent in just 9 months." Suppose 9 months ago, its sales amounted to $245,000, what is the value of its sales today?

What is meant by the statement that "optimal decisions are made at the margin"?

In economics, the term ________ means "additional" or "extra."

Which of the following is a result of a market economy?

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

One desirable outcome of a market economy is that it leads to a more equitable distribution of income.

Which of the following is a microeconomics question?

Economists assume that individuals

Damian shares a small food truck with his sister.His share of the expenses is $500 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 $1,400 per month.Damian is as rational as any other person.As an economics major, you rightly conclude that

________ 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.

The distribution of income primarily determines which of the fundamental economic questions?

In the United States in 2012, the number of new, diagnosed diabetes cases was highest for people in the age range of ________, and the rate of new diabetes cases per 1,000 people was highest for people in the age range of ________.