Question 1

________ is a situation in which a good or service is produced at the lowest possible cost.

Accepted Answer

A)  Allocative efficiency 
B)  Productive efficiency 
C)  Equity 
D)  Optimal marginalism 
A)  Allocative efficiency 
B)  Productive efficiency 
C)  Equity 
D)  Optimal marginalism

Question 2

What is the difference between physical capital and human capital?

Accepted Answer

Physical capital includes manu

Question 3

Suppose that some investors have decided that economic and financial uncertainty have made the prospect of investing in domestic stock markets more risky than investing in foreign stock markets, and therefore choose to invest in foreign markets. By using all available information as they act to achieve their goals, these investors are exemplifying the economic idea that

Accepted Answer

A)  people are rational. 
B)  people respond to economic incentives. 
C)  optimal decisions are made at the margin. 
D)  equity is more important than efficiency. 
A)  people are rational. 
B)  people respond to economic incentives. 
C)  optimal decisions are made at the margin. 
D)  equity is more important than efficiency.

Question 4

Which of the following contributed to the downfall of the Soviet Union in 1991?

Accepted Answer

A)  public dissatisfaction with low living standards and political repression 
B)  producing higher-quality goods than were desired by consumers 
C)  the rapidly increasing standard of living 
D)  the lack of a strong dictator who can coordinate economic activities 
A)  public dissatisfaction with low living standards and political repression 
B)  producing higher-quality goods than were desired by consumers 
C)  the rapidly increasing standard of living 
D)  the lack of a strong dictator who can coordinate economic activities

Question 5

Economists assume that

Accepted Answer

A)  individuals behave in unpredictable ways. 
B)  consumer behavior is explained by the existence of unlimited resources. 
C)  people put other people's interests ahead of their own. 
D)  optimal decisions are made at the margin. 
A)  individuals behave in unpredictable ways. 
B)  consumer behavior is explained by the existence of unlimited resources. 
C)  people put other people's interests ahead of their own. 
D)  optimal decisions are made at the margin.

Question 6

All of the following are part of an economic model except

Accepted Answer

A)  assumptions. 
B)  hypotheses. 
C)  data. 
D)  opinions. 
A)  assumptions. 
B)  hypotheses. 
C)  data. 
D)  opinions.

Question 7

Why is it necessary for all economic systems to not only provide people with goods and services, but also restrict them from getting as much of these goods and services as they wish?

Accepted Answer

A)  Failure to do this could reduce the efficiency of the system by producing some goods and services that are not as highly valued as others. 
B)  Failure to do this could lead to an inequitable allocation of goods and services produced. 
C)  Failure to do this could lead to drastic shortages of good and services. 
D)  Failure to do this could reduce efficiency and lead to an inequitable allocation of output. 
A)  Failure to do this could reduce the efficiency of the system by producing some goods and services that are not as highly valued as others. 
B)  Failure to do this could lead to an inequitable allocation of goods and services produced. 
C)  Failure to do this could lead to drastic shortages of good and services. 
D)  Failure to do this could reduce efficiency and lead to an inequitable allocation of output.

Question 8

Allison's Auto Art is a company that applies pinstripes to vehicles. Allison's cost for a basic 1-color pinstriping job is $35, and she charges $95 for this service. For a total price of $175, Allison will apply a fancier 3-color pinstripe application to an automobile, a service that adds an additional $40 to the total cost of the package. What is the marginal cost of moving up from the 1-color application to the 3-color application?

Accepted Answer

A)  $35 
B)  $40 
C)  $80 
D)  $175 
A)  $35 
B)  $40 
C)  $80 
D)  $175

Question 9

Which of the following is a microeconomics question?

Accepted Answer

A)  Why do economies experience periods of recession? 
B)  Will government intervention lower the unemployment rate? 
C)  Why has growth in the economy slowed down over the past decade? 
D)  How will Apple decide on a selling price for the iPad? 
A)  Why do economies experience periods of recession? 
B)  Will government intervention lower the unemployment rate? 
C)  Why has growth in the economy slowed down over the past decade? 
D)  How will Apple decide on a selling price for the iPad?

Question 10

The processes used to produce goods and services describes

Accepted Answer

A)  innovation. 
B)  entrepreneurship. 
C)  technology. 
D)  capital. 
A)  innovation. 
B)  entrepreneurship. 
C)  technology. 
D)  capital.

Question 11

Lionel's Lawn Care is a company that maintains residential yards. Lionel's cost for his standard package of mowing, edging, and trimming is $15, and he charges $25 for this service. For a total price of $40, Lionel will also trim shrubs, a service that adds an additional $10 to the total cost of the standard package. What is Lionel's marginal cost of adding the shrub-trimming service to the standard package?

Accepted Answer

A)  $10 
B)  $15 
C)  $25 
D)  $40 
A)  $10 
B)  $15 
C)  $25 
D)  $40

Question 12

All of the following is counted as "capital" in economics except

Accepted Answer

A)  money. 
B)  machine tools. 
C)  factory buildings. 
D)  warehouses. 
A)  money. 
B)  machine tools. 
C)  factory buildings. 
D)  warehouses.

Question 13

What is a centrally planned economy?

Accepted Answer

A centrally planned economy is

Question 14

Suppose the U.S. government encouraged consumers to trade in their old automobiles for more efficient, new models by paying up to $5,000 for the old automobiles. These consumers would be exemplifying the economic idea that

Accepted Answer

A)  people are rational. 
B)  people respond to economic incentives. 
C)  optimal decisions are made at the margin. 
D)  equity is more important than efficiency. 
A)  people are rational. 
B)  people respond to economic incentives. 
C)  optimal decisions are made at the margin. 
D)  equity is more important than efficiency.

Question 15

Which of the following statements is true about revenue?

Accepted Answer

A)  Revenue is the total amount received for selling a good or service. 
B)  Revenue is calculated by dividing the price per unit by the number of units sold. 
C)  The terms "revenue" and "profit" can be used interchangeably. 
D)  A firm's revenue will increase as its costs increase. 
A)  Revenue is the total amount received for selling a good or service. 
B)  Revenue is calculated by dividing the price per unit by the number of units sold. 
C)  The terms "revenue" and "profit" can be used interchangeably. 
D)  A firm's revenue will increase as its costs increase.

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Table 1-4
   Eva runs a small bakery in the village of Roggerli. She is debating whether she should extend her hours of operation. Eva figures that her sales revenue will depend on the number of hours the bakery is open as shown in the table above. She would have to hire a worker for those hours at a wage rate of $12 per hour.
-Refer to Table 1-4. What is Eva's marginal cost if she decides to stay open for two hours instead of one hour?

Accepted Answer

A)  $12 
B)  $24 
C)  $36 
D)  $71 
A)  $12 
B)  $24 
C)  $36 
D)  $71

Question 18

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. Should DeShawn continue to offer the engine detailing service?

Accepted Answer

A)  Yes, he still makes a profit by selling the engine detailing service with the basic detailing package. 
B)  Yes, but only if he raises the price of the basic detailing package. 
C)  No, his marginal benefit is less than his marginal cost. 
D)  More information is needed for DeShawn to make this decision. 
A)  Yes, he still makes a profit by selling the engine detailing service with the basic detailing package. 
B)  Yes, but only if he raises the price of the basic detailing package. 
C)  No, his marginal benefit is less than his marginal cost. 
D)  More information is needed for DeShawn to make this decision.

Question 19

The U.S. Health Resources and Services Administration (HRSA) forecasts that in 2020

Accepted Answer

A)  there will be a shortage of doctors in the United States. 
B)  the number of doctors in the United States will decrease and the number of doctors needed will increase. 
C)  the number of doctors in the United States will increase and the number of doctors needed will decrease. 
D)  there will be a surplus of doctors in the United States. 
A)  there will be a shortage of doctors in the United States. 
B)  the number of doctors in the United States will decrease and the number of doctors needed will increase. 
C)  the number of doctors in the United States will increase and the number of doctors needed will decrease. 
D)  there will be a surplus of doctors in the United States.

Question 20

Which of the following is a normative economic statement?

Accepted Answer

A)  The price of wheat is too low. 
B)  The current low price of wheat is the result of increased worldwide supply. 
C)  When the price of wheat falls, the quantity of wheat purchased rises. 
D)  When the price of wheat falls, the cost of wheat-based products falls. 
A)  The price of wheat is too low. 
B)  The current low price of wheat is the result of increased worldwide supply. 
C)  When the price of wheat falls, the quantity of wheat purchased rises. 
D)  When the price of wheat falls, the cost of wheat-based products falls.

Exam 1: Economics: Foundations and Models

________ is a situation in which a good or service is produced at the lowest possible cost.

What is the difference between physical capital and human capital?

Which of the following contributed to the downfall of the Soviet Union in 1991?

Economists assume that

All of the following are part of an economic model except

Why is it necessary for all economic systems to not only provide people with goods and services, but also restrict them from getting as much of these goods and services as they wish?

Which of the following is a microeconomics question?

The processes used to produce goods and services describes

All of the following is counted as "capital" in economics except

What is a centrally planned economy?

Suppose the U.S. government encouraged consumers to trade in their old automobiles for more efficient, new models by paying up to $5,000 for the old automobiles. These consumers would be exemplifying the economic idea that

Which of the following statements is true about revenue?

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

The U.S. Health Resources and Services Administration (HRSA) forecasts that in 2020

Which of the following is a normative economic statement?

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters