Exam 1: Economics: Foundations and Models

Table 1-2 Extra Hours Open Total Revenue (dollars) 1 45 70 4 90 5 105 6 110 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 extra hours the flower shop is open as shown in the table above.She would have to hire a worker for those extra 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 an extra three hours instead of two hours?

Which of the following is motivated by an equity concern?

A college must decide if it wants to offer more adult literacy classes.This decision involves answering the economic question of "what to produce."

Voluntary exchange ________ economic efficiency because neither the buyer nor the seller would agree to a trade unless ________.

Suppose the extra cost for a company to advertise for one extra day each week in the local newspaper is $200.Then,the company should advertise on that additional day if it can generate additional revenue of $200 each week.

Scenario 1-4 Suppose a cigar manufacturer currently sells 1,500 cigars per week and makes a profit of $3,000 per week.The plant foreman observes,"Although the last 500 cigars we produced and sold increased our revenue by $7,500 and our costs by $7,000,we are only making an overall profit of $3,000 per week so I think we need to cut back on production. -Refer to Scenario 1-4.Had the firm not produced and sold the last 500 cigars,would its profit be higher or lower,and if so by how much?

Which of the following is a positive economic statement?

Every society faces trade-offs.Explain the concept of trade-offs.

The term "market" refers to trading arrangements by which buyers and sellers come together.

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 who did trade in their old automobiles to take advantage of the government offer would be exemplifying the economic idea that

Explain why economics is considered a social science.

In economics,choices must be made because we live in a world of

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,it would be impossible for low-skilled workers to live comfortably in the city without minimum wage laws. 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?

Which of the following is a microeconomics question?

If it costs Sinclair $300 to produce 3 suede jackets and $420 to produce 4 suede jackets,then the difference of $120 is the marginal cost of producing the 4th suede jacket.

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

What does the word "marginal" mean in economics? What is a marginal benefit? What is a marginal cost? What is marginal analysis?

The Farm Factory,a booth at the local Farmer's Market,sells fresh eggs for $1.50 per dozen and fresh milk for $2.50 per gallon.What is the opportunity cost of buying a gallon of milk?

The decisions General Motors makes in determining production levels for its Chevy Volt is an example of a microeconomics topic.

Automobile manufacturers produce a range of automobiles such as sports utility vehicles,luxury sedans,pickup trucks,and compact cars.What fundamental economic question are they addressing by making this range of products?