Question 1

Which of the following is an example of an efficiency-equity trade-off faced by economic agents?

Accepted Answer

A)  According to an article by in the American Journal of Public Health by Edward Kaplan and Michael Merson of Yale University School of Medicine, the federal government's current method of allocating HIV-prevention resources is not cost-effective. Instead of allocating resources to states in proportion to reported AIDS cases, resources should flow first to those activities that prevent more infections per dollar and then to less and less effective combinations of programs and populations until funds are exhausted, even if it means that some populations would be left without any prevention services. 
B)  Concerned about the falling birth rate, the French government has pledged more money for families with three children, in an effort to encourage working women to have more babies. 
C)  Some U.S. colleges are actively recruiting foreign students for their technology-based programs. 
D)  All New York City art museums are considering adopting a free-admission policy for local residents one weekend per month. 
A)  According to an article by in the American Journal of Public Health by Edward Kaplan and Michael Merson of Yale University School of Medicine, the federal government's current method of allocating HIV-prevention resources is not cost-effective. Instead of allocating resources to states in proportion to reported AIDS cases, resources should flow first to those activities that prevent more infections per dollar and then to less and less effective combinations of programs and populations until funds are exhausted, even if it means that some populations would be left without any prevention services. 
B)  Concerned about the falling birth rate, the French government has pledged more money for families with three children, in an effort to encourage working women to have more babies. 
C)  Some U.S. colleges are actively recruiting foreign students for their technology-based programs. 
D)  All New York City art museums are considering adopting a free-admission policy for local residents one weekend per month.

Question 2

How are the fundamental economic decisions determined in China?

Accepted Answer

A)  Individuals, firms, and the government interact in a market to make these economic decisions. 
B)  These decisions are made by the country's elders who have had much experience in answering these questions. 
C)  The government decides because China is a centrally planned economy. 
D)  The United Nations decides because China is a developing economy. 
A)  Individuals, firms, and the government interact in a market to make these economic decisions. 
B)  These decisions are made by the country's elders who have had much experience in answering these questions. 
C)  The government decides because China is a centrally planned economy. 
D)  The United Nations decides because China is a developing economy.

Question 3

Suppose the U.S. government encouraged new teachers to take jobs in underperforming schools by paying the new teachers a $20,000 bonus. These teachers 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 4

The term ________ in economics refers to a group of buyers and sellers of a product and the arrangement by which they come together to trade.

Accepted Answer

A)  collective 
B)  cooperative 
C)  market 
D)  trade-off 
A)  collective 
B)  cooperative 
C)  market 
D)  trade-off

Question 5

"An increase in the price of oranges will increase the demand for grapefruits." This statement is an example of a normative economic statement.

Accepted Answer

A) True 
 B)False

Question 6

Selling tickets to graduation ceremonies has long been a tradition among students at institutions that limit the number of guests. Suppose your classmate, Heidi purchased two tickets for $40 each. Is this transaction economically efficient?

Accepted Answer

A)  No, people should never be allowed to sell items they received for free. 
B)  Yes, it was a voluntary exchange that benefited both parties. 
C)  No, Heidi paid too much for the tickets. 
D)  Yes, it is efficient only from the perspective of the seller and not from the perspective of the buyer. 
A)  No, people should never be allowed to sell items they received for free. 
B)  Yes, it was a voluntary exchange that benefited both parties. 
C)  No, Heidi paid too much for the tickets. 
D)  Yes, it is efficient only from the perspective of the seller and not from the perspective of the buyer.

Question 7

"A decrease in the price of digital cameras will decrease the demand for camera film." This statement is an example of a positive economic statement.

Accepted Answer

A) True 
 B)False

Question 8

Suppose the extra cost for a plumber to keep her shop open for one extra hour is $145. Then, the plumber should not stay open for the extra hour if she can only generate additional revenue of $145 for that hour.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

The revenue received from the sale of ________ of a product is a marginal benefit to the firm.

Accepted Answer

A)  an additional unit 
B)  the total number of units 
C)  no units 
D)  only profitable units 
A)  an additional unit 
B)  the total number of units 
C)  no units 
D)  only profitable units

Question 11

The decision about what goods and services will be produced made in a market economy is made by

Accepted Answer

A)  lawmakers in the government voting on what will be produced. 
B)  workers deciding to produce only what the boss says must be produced. 
C)  producers deciding what society wants most. 
D)  consumers and firms choosing which goods and services to buy or produce. 
E)  consumers dictating to firms what they need most. 
A)  lawmakers in the government voting on what will be produced. 
B)  workers deciding to produce only what the boss says must be produced. 
C)  producers deciding what society wants most. 
D)  consumers and firms choosing which goods and services to buy or produce. 
E)  consumers dictating to firms what they need most.

Question 12

Competition among sellers generates

Accepted Answer

A)  productive efficiency. 
B)  allocative efficiency. 
C)  equity. 
D)  scarcity. 
A)  productive efficiency. 
B)  allocative efficiency. 
C)  equity. 
D)  scarcity.

Question 13

What is a marginal cost?

Accepted Answer

Marginal cost is the

Question 14

All of the following questions or statements regarding medical school are positive except:

Accepted Answer

A)  How do changes in expected future incomes affect the decisions of medical students about which specialty to choose? 
B)  Medical students who enter specialized fields make a larger contribution to society than do student who enter primary care. 
C)  What role does tuition play in a student's decision about whether to attend medical school? 
D)  Have tuition increases had a large effect or a small effect on the number of applications to medical school? 
A)  How do changes in expected future incomes affect the decisions of medical students about which specialty to choose? 
B)  Medical students who enter specialized fields make a larger contribution to society than do student who enter primary care. 
C)  What role does tuition play in a student's decision about whether to attend medical school? 
D)  Have tuition increases had a large effect or a small effect on the number of applications to medical school?

Question 15

What is the difference between goods and services?

Accepted Answer

Goods are tangible merchandise

Question 16

Scenario 1-2
Suppose a hat manufacturer currently sells 2,000 hats per week and makes a profit of $5,000 per week. The plant owner observes, "Although the last 300 hats we produced and sold increased our revenue by $1,000 and our costs by $1,100, 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 hats."
-Refer to Scenario 1-2. Using marginal analysis terminology, another economic term for the incremental cost of producing the last 300 hats is

Accepted Answer

A)  marginal cost. 
B)  operating cost. 
C)  explicit cost. 
D)  Any of the above terms are correct. 
A)  marginal cost. 
B)  operating cost. 
C)  explicit cost. 
D)  Any of the above terms are correct.

Question 17

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 cost if she decides to stay open for three hours instead of two hours?

Accepted Answer

A)  $0 
B)  $16 
C)  $25 
D)  $32 
E)  $45 
A)  $0 
B)  $16 
C)  $25 
D)  $32 
E)  $45

Question 18

Economic models do all of the following except

Accepted Answer

A)  answer economic questions. 
B)  portray reality in all its minute details. 
C)  make economic ideas explicit and concrete for use by decision makers. 
D)  simplify some aspect of economic life. 
A)  answer economic questions. 
B)  portray reality in all its minute details. 
C)  make economic ideas explicit and concrete for use by decision makers. 
D)  simplify some aspect of economic life.

Question 19

The branch of economics which studies the behavior of entire economies is called

Accepted Answer

A)  public economics. 
B)  microeconomics. 
C)  macroeconomics. 
D)  normative economics. 
A)  public economics. 
B)  microeconomics. 
C)  macroeconomics. 
D)  normative economics.

Question 20

In 2012, Smileytown consumed 50,000 tubes of toothpaste. In 2013, toothpaste consumption rose to 62,000 tubes. Calculate the percentage change in toothpaste consumption.

Accepted Answer

A)  12% 
B)  16.42% 
C)  19.35% 
D)  24% 
A)  12% 
B)  16.42% 
C)  19.35% 
D)  24%

Exam 1: Economics: Foundations and Models

Which of the following is an example of an efficiency-equity trade-off faced by economic agents?

How are the fundamental economic decisions determined in China?

Suppose the U.S. government encouraged new teachers to take jobs in underperforming schools by paying the new teachers a $20,000 bonus. These teachers would be exemplifying the economic idea that

The term ________ in economics refers to a group of buyers and sellers of a product and the arrangement by which they come together to trade.

"An increase in the price of oranges will increase the demand for grapefruits." This statement is an example of a normative economic statement.

Selling tickets to graduation ceremonies has long been a tradition among students at institutions that limit the number of guests. Suppose your classmate, Heidi purchased two tickets for $40 each. Is this transaction economically efficient?

"A decrease in the price of digital cameras will decrease the demand for camera film." This statement is an example of a positive economic statement.

Suppose the extra cost for a plumber to keep her shop open for one extra hour is $145. Then, the plumber should not stay open for the extra hour if she can only generate additional revenue of $145 for that hour.

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

The revenue received from the sale of ________ of a product is a marginal benefit to the firm.

The decision about what goods and services will be produced made in a market economy is made by

Competition among sellers generates

What is a marginal cost?

All of the following questions or statements regarding medical school are positive except:

What is the difference between goods and services?

Economic models do all of the following except

The branch of economics which studies the behavior of entire economies is called

In 2012, Smileytown consumed 50,000 tubes of toothpaste. In 2013, toothpaste consumption rose to 62,000 tubes. Calculate the percentage change in toothpaste consumption.

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

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