Exam 1: Economics: Foundations and Models

Consider the following economic agents: a.the government b. consumers c. producers Who, in a centrally planned economy, decides what goods and services will be produced with the scarce resources available in that economy?

The government makes all economic decisions in a mixed economy.

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

Which of the following is a normative economic statement?

A university must decide if it wants to offer more Internet-based classes.This decision involves answering the economic question of 'what to produce.'

Suppose that to increase sales of hybrid vehicles, auto manufacturers are offering large cash incentives.This is an example of a macroeconomics topic.

Suppose a doctor can earn an additional $25 000 in revenue per year by keeping her office open on Sundays.At what additional cost would keeping the office open on Sundays not be considered economically rational? __________________________________________________________________________________________________________________________________________________________________________________________

What is the extra cost associated with undertaking an activity called?

Economists assume that rational people do all of the following except:

What does the term 'equity' mean, in economics?

Explain the economic idea that 'people respond to incentives.' __________________________________________________________________________________________________________________________________________________________________________________________

In a market economy, what is generated by voluntary exchange between buyers and sellers?

Scarcity refers to a situation in which unlimited wants exceed the limited resources available to fulfil those wants.

A market economy results in:

What is a mixed economy? __________________________________________________________________________________________________________________________________________________________________________________________

The highest valued alternative that must be given up to engage in an activity is the definition of:

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

'The distribution of income should be determined by the government' is an example of a positive economic statement.

Suppose the extra cost for a doctor to keep his office open for one extra hour is $200.Then, the doctor should stay open for the extra hour if he can generate additional revenue of $200 for that hour.

Economists assume that rational behaviour is useful in explaining choices people make________.