Exam 1: Economics: Foundations and Models

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

Which of the following is a macroeconomics question?

Productive efficiency is achieved when firms produce goods and services

The government makes all economic decisions in a market economy.

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

When every good or service is produced up to the point where the last unit provides ________, allocative efficiency occurs.

Which of the following is a problem inherent in centrally planned economies?

Your roommate Serafina, a psychology major, said, "The problem with economics is that it assumes that consumers and firms always make the correct decision. But we know that everyone's human, and we all make mistakes." Do you agree with her comment?

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

Marginal benefit refers to the additional benefit that your activity provides to you.

In economics, the total amount received for selling a good or service is referred to as

Scenario 1-3 Suppose a t-shirt manufacturer currently sells 5,000 t-shirts per week and makes a profit of $10,000 per week. A manager at the plant observes, "Although the last 400 t-shirts we produced and sold increased our revenue by $4,000 and our costs by $4,800, we are still making an overall profit of $10,000 per week so I think we're on the right track. We are producing the optimal number of t-shirts." -Refer to Scenario 1-3. Had the firm not produced and sold the last 400 t-shirts, would its profit be higher or lower, and if so by how much?

Which of the following is a normative economic statement?

As population declines, scarcity eventually disappears.

It is necessary for all economic systems to provide people with goods and services and also restrict them from getting as much of these goods and services as they wish, because failure to do this could ________ the efficiency of the system by producing some goods and services that are ________.

What is a market economy?

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

The branch of economics which studies how households and firms interact in markets is called

How can the influence of a third variable be shown on a two-dimensional graph?

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 hours the flower shop is open as shown in the table above. She would have to hire a worker for those 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 three hours instead of two hours?