Exam 1: Economics: Foundations and Models

________ 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.

Scenario 1.1 Suppose a cell phone manufacturer currently sells 20,000 cell phones per week and makes a profit of $5,000 per week.A manager at the plant observes, "Although the last 3,000 cell phones we produced and sold increased our revenue by $6,000 and our costs by $6,700, 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 cell phones." -Refer to Scenario 1.1.Using marginal analysis terminology, what is another economic term for the incremental cost of producing the last 3,000 cell phones?

Which of the following is an example of an activity undertaken by an entrepreneur?

McCain Foods Ltd.is one of the largest producer s of frozen french fries in the world. If the marginal cost of producing an extra million kilograms of french fries is $1 million, then McCain Foods Ltd.should produce the extra french fries

In economics, the accumulated skills and training that workers have is known as

Marginal analysis involves undertaking an activity

Allocative efficiency best explains ________, and productive efficiency best explains ________.

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

Which of the following statements about the economic decisions consumers, firms, and the government have to make is false?

The economic analysis of minimum wage involves both normative and positive analysis.Consider the following consequences of a minimum wage: a.The minimum wage law causes unemployment. b.A minimum wage law benefits some groups and hurts others. c.In some cities such as San Francisco and New York, minimum wage laws are necessary for low-skilled workers to stay in the city. d.The gains to winners of a minimum wage law should be valued more highly than the losses to losers because the latter primarily comprises businesses. Which of the consequences above are positive statements and which are normative statements?

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 hours the nail salon is open as shown in the table above.She would have to hire a worker for those 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 two hours instead of one hour?

Central planning relies on ________ to determine what types of products to make

Economists assume that rational people do all of the following except

What is the "omitted variable" problem in determining cause and effect?

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

-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.

If climate change continues to reduce the amount of green coffee available to roasters

Explain the economic idea that "people respond to incentives."

Scenario 1.1 Suppose a cell phone manufacturer currently sells 20,000 cell phones per week and makes a profit of $5,000 per week.A manager at the plant observes, "Although the last 3,000 cell phones we produced and sold increased our revenue by $6,000 and our costs by $6,700, 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 cell phones." -Refer to Scenario 1.1.Using marginal analysis terminology, what is another economic term for the incremental revenue received from the sale of the last 3,000 cell phones?

Making optimal decisions "at the margin" requires