Question 1

How are the fundamental economic questions answered in a market economy?

Accepted Answer

A) The government alone decides the answers. 
B) Individuals,firms,and the government interact in markets to decide the answers to these questions. 
C) Households and firms interact in markets to decide the answers to these questions. 
D) Large corporations alone decide the answers. 
A) The government alone decides the answers. 
B) Individuals,firms,and the government interact in markets to decide the answers to these questions. 
C) Households and firms interact in markets to decide the answers to these questions. 
D) Large corporations alone decide the answers.

Question 2

Allocative efficiency is achieved when

Accepted Answer

A) goods and services are fairly distributed among consumers in an economy. 
B) firms produce the goods and services that consumers value most. 
C) firms produce goods and services at the lowest cost. 
D) there are no shortages or surpluses in the market. 
A) goods and services are fairly distributed among consumers in an economy. 
B) firms produce the goods and services that consumers value most. 
C) firms produce goods and services at the lowest cost. 
D) there are no shortages or surpluses in the market.

Question 3

Economists assume that individuals

Accepted Answer

A) behave in unpredictable ways. 
B) will never take actions to help others. 
C) prefer to live in a society that values fairness above all else. 
D) are rational and respond to incentives. 
A) behave in unpredictable ways. 
B) will never take actions to help others. 
C) prefer to live in a society that values fairness above all else. 
D) are rational and respond to incentives.

Question 4

The government makes all economic decisions in a mixed economy.

Accepted Answer

A) True 
 B)False

Question 5

The government makes all economic decisions in a market economy.

Accepted Answer

A) True 
 B)False

Question 6

A firm's technology may depend on which of the following factors?

Accepted Answer

A) the skill of its managers 
B) the training of its workers 
C) the speed and efficiency of its equipment 
D) all of the above 
A) the skill of its managers 
B) the training of its workers 
C) the speed and efficiency of its equipment 
D) all of the above

Question 7

Making optimal decisions "at the margin" requires

Accepted Answer

A) making decisions according to one's whims and fancies. 
B) making consistently irrational decisions. 
C) weighing the costs and benefits of a decision before deciding if it should be pursued. 
D) making borderline decisions. 
A) making decisions according to one's whims and fancies. 
B) making consistently irrational decisions. 
C) weighing the costs and benefits of a decision before deciding if it should be pursued. 
D) making borderline decisions.

Question 8

In 2015,Smileytown consumed 50,000 tubes of toothpaste.In 2016,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%

Question 9

Which of the following is a positive economic statement?

Accepted Answer

A) Everyone should live at the same standard of living. 
B) If the price of gasoline rises,a smaller quantity of it will be bought. 
C) The government should close income tax loopholes. 
D) U.S.firms should not be allowed to outsource production of goods and services. 
A) Everyone should live at the same standard of living. 
B) If the price of gasoline rises,a smaller quantity of it will be bought. 
C) The government should close income tax loopholes. 
D) U.S.firms should not be allowed to outsource production of goods and services.

Question 10

Table 1-8
 $$\begin{array} { | c | c | } 
\hline \text { Year } & \begin{array} { c } 
\text { Flat-Panel } \
\text { TV Sets } \
\text { (millions) }
\end{array} \
\hline 2012 & 1.0 \
\hline 2013 & 1.5 \
\hline 2014 & 7.3 \
\hline 2015 & 12.7 \
\hline 2016 & 20.0 \
\hline
\end{array}$$
-Refer to Table 1-8.The table above shows the sales of flat-panel television sets in Central America.Present the information using a bar graph.

Accepted Answer

The answer of Table 1-8
 \[\begin{array} { | c |...

Question 11

Mrs.Lovejoy decides to invest in companies which she believes are producing its goods based on the preferences of consumers.Mrs.Lovejoy is investing in companies that are

Accepted Answer

A) productively efficient. 
B) allocatively efficient. 
C) both productively and allocatively efficient. 
D) always going to be profitable. 
A) productively efficient. 
B) allocatively efficient. 
C) both productively and allocatively efficient. 
D) always going to be profitable.

Question 12

Which of the following statements is false?

Accepted Answer

A) Anytime you have to decide which action to take you are facing an economic trade-off. 
B) Trade-offs do not apply when the consumers purchase a product for which there is excess supply,such as a stock clearance sale. 
C) Every individual,no matter how rich or poor,is faced with making trade-offs. 
D) Economics is a social science that studies the trade-offs we are forced to make because of scarcity. 
A) Anytime you have to decide which action to take you are facing an economic trade-off. 
B) Trade-offs do not apply when the consumers purchase a product for which there is excess supply,such as a stock clearance sale. 
C) Every individual,no matter how rich or poor,is faced with making trade-offs. 
D) Economics is a social science that studies the trade-offs we are forced to make because of scarcity.

Question 13

The decision about what goods and services will be produced 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 14

________ have a horizontal and a vertical axis and are used in economics to illustrate relationships between two economic variables.

Accepted Answer

A) Two-dimensional graphs 
B) One-dimensional graphs 
C) Pie Charts 
D) Bar graphs 
A) Two-dimensional graphs 
B) One-dimensional graphs 
C) Pie Charts 
D) Bar graphs

Question 15

Who receives the goods and services produced in the United States depends largely on

Accepted Answer

A) how income is distributed. 
B) how the goods and services are produced. 
C) what goods and services are produced. 
D) government redistribution. 
A) how income is distributed. 
B) how the goods and services are produced. 
C) what goods and services are produced. 
D) government redistribution.

Question 16

Economics promotes which of the following as the way to make the best decision?

Accepted Answer

A) Continue an enjoyable activity as long as you do not have to pay for it. 
B) Continue an enjoyable activity until it is no longer enjoyable. 
C) Continue an enjoyable activity until you cannot afford to pursue it. 
D) Continue an enjoyable activity up to the point where its marginal benefit equals its marginal cost. 
A) Continue an enjoyable activity as long as you do not have to pay for it. 
B) Continue an enjoyable activity until it is no longer enjoyable. 
C) Continue an enjoyable activity until you cannot afford to pursue it. 
D) Continue an enjoyable activity up to the point where its marginal benefit equals its marginal cost.

Question 17

Where do economic agents such as individuals,firms,and nations interact with each other?

Accepted Answer

A) in public locations monitored by the government 
B) in any arena that brings together buyers and sellers 
C) in any physical location where people can physically get together for selling goods,such as shopping malls 
D) in any location where transactions can be monitored by consumer groups and taxed by the government 
A) in public locations monitored by the government 
B) in any arena that brings together buyers and sellers 
C) in any physical location where people can physically get together for selling goods,such as shopping malls 
D) in any location where transactions can be monitored by consumer groups and taxed by the government

Question 18

Consider the following economic agents: 
A.the government
B.consumers
C.producers
Who,in a market economy,decides what goods and services will be produced with the scarce resources available in that economy?

Accepted Answer

A) the government 
B) producers 
C) consumers 
D) consumers and producers 
E) the government,consumers,and producers 
A) the government 
B) producers 
C) consumers 
D) consumers and producers 
E) the government,consumers,and producers

Question 19

What is scarcity,and why is it a fundamental concept in economics?

Accepted Answer

Scarcity refers to a situation in which

Question 20

Fiona shares an office with her ex-husband.Her share of the rent and utilities is $625 per month.She is considering moving to a home office which she will not have to share with anyone.The home office will not cost her anything as far as extra rent or utilities.Recently,you ran into Fiona at the gym and she tells you that she has moved into her home office.Fiona is as rational as any other person.As an economics major,you rightly conclude that

Accepted Answer

A) Fiona did not have a choice;her ex-husband was a jerk. 
B) Fiona figures that the additional benefit of having her own office (as opposed to sharing)is at least $625. 
C) Fiona figures that the benefit of having her own office (as opposed to sharing)is zero,since she is no longer paying rent and utilities. 
D) The cost of having one's own space outweighs the benefits. 
A) Fiona did not have a choice;her ex-husband was a jerk. 
B) Fiona figures that the additional benefit of having her own office (as opposed to sharing)is at least $625. 
C) Fiona figures that the benefit of having her own office (as opposed to sharing)is zero,since she is no longer paying rent and utilities. 
D) The cost of having one's own space outweighs the benefits.

Exam 1: Economics: Foundations and Models

How are the fundamental economic questions answered in a market economy?

Allocative efficiency is achieved when

Economists assume that individuals

The government makes all economic decisions in a mixed economy.

The government makes all economic decisions in a market economy.

A firm's technology may depend on which of the following factors?

Making optimal decisions "at the margin" requires

In 2015,Smileytown consumed 50,000 tubes of toothpaste.In 2016,toothpaste consumption rose to 62,000 tubes.Calculate the percentage change in toothpaste consumption.

Which of the following is a positive economic statement?

Table 1-8 Year Flat-Panel TV Sets (millions) 2012 1.0 2013 1.5 2014 7.3 2015 12.7 2016 20.0 -Refer to Table 1-8.The table above shows the sales of flat-panel television sets in Central America.Present the information using a bar graph.

Mrs.Lovejoy decides to invest in companies which she believes are producing its goods based on the preferences of consumers.Mrs.Lovejoy is investing in companies that are

Which of the following statements is false?

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

________ have a horizontal and a vertical axis and are used in economics to illustrate relationships between two economic variables.

Who receives the goods and services produced in the United States depends largely on

Economics promotes which of the following as the way to make the best decision?

Where do economic agents such as individuals,firms,and nations interact with each other?

Consider the following economic agents: A.the government B.consumers C.producers Who,in a market economy,decides what goods and services will be produced with the scarce resources available in that economy?

What is scarcity,and why is it a fundamental concept in economics?

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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