Question 1

The three fundamental questions that any economy must address are:

Accepted Answer

A) What will be the prices of goods and services;how will these goods and services be produced;and who will receive them? 
B) What goods and services to produce;how will these goods and services be produced;and who receives them? 
C) Who gets jobs;what wages do workers earn;and who owns what property? 
D) How much will be saved;what will be produced;and how can these goods and services be fairly distributed? 
A) What will be the prices of goods and services;how will these goods and services be produced;and who will receive them? 
B) What goods and services to produce;how will these goods and services be produced;and who receives them? 
C) Who gets jobs;what wages do workers earn;and who owns what property? 
D) How much will be saved;what will be produced;and how can these goods and services be fairly distributed?

Question 2

Economists assume that rational people

Accepted Answer

A) never use all available information as they act to achieve their goals. 
B) undertake activities that benefit others and hurt themselves. 
C) only weigh the benefits and costs of the most desirable alternative actions. 
D) respond to economic incentives. 
A) never use all available information as they act to achieve their goals. 
B) undertake activities that benefit others and hurt themselves. 
C) only weigh the benefits and costs of the most desirable alternative actions. 
D) respond to economic incentives.

Question 3

Figure 1-5  
-Refer to Figure 1-5.Calculate the area of the triangle A.

Accepted Answer

A) $8.4 million 
B) $6.3 million 
C) $3.15 million 
D) $2.1 million 
A) $8.4 million 
B) $6.3 million 
C) $3.15 million 
D) $2.1 million

Question 4

Holding all other personal characteristics-such as age,gender,and income-constant,economists would expect that

Accepted Answer

A) people without health insurance will be less likely to be overweight than people with health insurance. 
B) people without health insurance will be more likely to be overweight than people with health insurance. 
C) people without health insurance will be equally likely to be overweight as people with health insurance. 
D) there is no correlation between not having health insurance and being overweight. 
A) people without health insurance will be less likely to be overweight than people with health insurance. 
B) people without health insurance will be more likely to be overweight than people with health insurance. 
C) people without health insurance will be equally likely to be overweight as people with health insurance. 
D) there is no correlation between not having health insurance and being overweight.

Question 5

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 6

Table 1-6
 $$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Hours } \
\text { Open }
\end{array} & \begin{array} { c } 
\text { Total Revenue } \
\text { (dollars) }
\end{array} \
\hline 1 & \$ 275 \
\hline 2 & 375 \
\hline 3 & 450 \
\hline 4 & 500 \
\hline 5 & 530 \
\hline 6 & 550 \
\hline
\end{array}$$ Ivan runs a custom jewelry shop in Sparkle City.He is debating whether he should extend his hours of operation.Ivan figures that his sales revenue will depend on the number of additional hours the jewelry shop is open as shown in the table above.He would have to hire a worker for those hours at a wage rate of $25 per hour.
-Refer to Table 1-6.Using marginal analysis,how many hours should Ivan extend his hours of operations?

Accepted Answer

A) 2 hours 
B) 3 hours 
C) 4 hours 
D) 5 hours 
E) 6 hours 
A) 2 hours 
B) 3 hours 
C) 4 hours 
D) 5 hours 
E) 6 hours

Question 7

Suppose a used car dealer can earn an additional $25,000 in revenue per year by increasing advertising on a local radio station from 3 times a day to 5 times a day.At what additional cost would this increase in advertising not be considered economically rational?

Accepted Answer

If the additional cost of the

Question 8

The Coffee Nook,a small cafe near campus,sells cappuccinos for $2.50 and Russian tea cakes for $1.00 each
-What is the opportunity cost of buying a cappuccino?

Accepted Answer

A) 2 1/2 Russian tea cakes 
B) 2/5 of a Russian tea cake 
C) $2.50 
D) $1.00 
A) 2 1/2 Russian tea cakes 
B) 2/5 of a Russian tea cake 
C) $2.50 
D) $1.00

Question 9

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 10

The relationship between sales and revenue is

Accepted Answer

A) an inverse relationship. 
B) a direct relationship. 
C) a negative relationship. 
D) independent. 
A) an inverse relationship. 
B) a direct relationship. 
C) a negative relationship. 
D) independent.

Question 11

If the marginal cost for Big Ed's Used Car Emporium to advertise one additional day each week on a local TV station is $1,500,then Big Ed's should advertize that additional day

Accepted Answer

A) only if the marginal benefit the company receives each week is greater than $1,500 plus an acceptable profit margin. 
B) as long as the marginal benefit the company receives each week is just equal to or greater than $1,500. 
C) as long as the weekly marginal cost does not rise. 
D) until the marginal benefit the company receives reaches zero. 
A) only if the marginal benefit the company receives each week is greater than $1,500 plus an acceptable profit margin. 
B) as long as the marginal benefit the company receives each week is just equal to or greater than $1,500. 
C) as long as the weekly marginal cost does not rise. 
D) until the marginal benefit the company receives reaches zero.

Question 12

Society faces a trade-off in all of the following situations except

Accepted Answer

A) when deciding who will receive the goods and services produced. 
B) when deciding what goods and services will be produced. 
C) when deciding how goods and services will be produced. 
D) when some previously unemployed workers find jobs. 
A) when deciding who will receive the goods and services produced. 
B) when deciding what goods and services will be produced. 
C) when deciding how goods and services will be produced. 
D) when some previously unemployed workers find jobs.

Question 13

Which of the following is a macroeconomics question?

Accepted Answer

A) What determines the minimum wage? 
B) What determines the production of video game consoles? 
C) What factors determine the price of Oreo cookies? 
D) What determines the salaries of college professors? 
A) What determines the minimum wage? 
B) What determines the production of video game consoles? 
C) What factors determine the price of Oreo cookies? 
D) What determines the salaries of college professors?

Question 14

Article Summary
Recent studies about wealth inequality and income inequality indicate that the American public's estimates of the distribution of wealth and income are quite different than actual data suggests.With respect to wealth,the top 20 percent of households hold more than 84% and the bottom 40 percent hold less than 1%,yet the public's estimates were 59% and 9%,respectively.In terms of income inequality,the public estimated that the CEO-to-worker pay-ratio was 30-to-1,whereas data suggests the actual ratio is 354-to-1,up from 20-to-1 in the 1960s.
President Obama has referred to economic inequality as "the defining challenge of our time," and although Americans seem to recognize that income and wealth gaps have widened,only 5 percent indicate that this inequality is a problem that needs to be addressed.
-Refer to the Article Summary.The article discusses income inequality,and for some people this means a more equitable distribution of income is needed in the economy.What is meant by a more equitable distribution of income?

Accepted Answer

A) a more allocatively efficient distribution of income 
B) a more productively efficient distribution of income 
C) a more fair distribution of income 
D) Income distributed based on skill levels 
A) a more allocatively efficient distribution of income 
B) a more productively efficient distribution of income 
C) a more fair distribution of income 
D) Income distributed based on skill levels

Question 15

All centrally planned economies

Accepted Answer

A) have been political dictatorships. 
B) started out as market economies. 
C) began as mixed economies. 
D) have become mixed economies. 
A) have been political dictatorships. 
B) started out as market economies. 
C) began as mixed economies. 
D) have become mixed economies.

Question 16

Voluntary exchange between buyers and sellers generates ________ in a market economy.

Accepted Answer

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

Question 17

Optimal decisions are made at the point where marginal cost equals zero.

Accepted Answer

A) True 
 B)False

Question 18

In economics,the term "equity" means

Accepted Answer

A) everyone has an equal standard of living. 
B) the hardest working individuals consume all they want. 
C) only elected officials have high standards of living. 
D) economic benefits are distributed fairly. 
A) everyone has an equal standard of living. 
B) the hardest working individuals consume all they want. 
C) only elected officials have high standards of living. 
D) economic benefits are distributed fairly.

Question 19

An economic model is a complex version of reality used to analyze real-world economic situations.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following statements is true?

Accepted Answer

A) An inverse relationship has a positive slope value. 
B) A direct relationship has a negative slope value. 
C) A curved line has slope values that change at every point. 
D) A straight line has a slope of one. 
A) An inverse relationship has a positive slope value. 
B) A direct relationship has a negative slope value. 
C) A curved line has slope values that change at every point. 
D) A straight line has a slope of one.

Exam 1: Economics: Foundations and Models

The three fundamental questions that any economy must address are:

Economists assume that rational people

Figure 1-5 -Refer to Figure 1-5.Calculate the area of the triangle A.

Holding all other personal characteristics-such as age,gender,and income-constant,economists would expect that

Suppose a used car dealer can earn an additional $25,000 in revenue per year by increasing advertising on a local radio station from 3 times a day to 5 times a day.At what additional cost would this increase in advertising not be considered economically rational?

The Coffee Nook,a small cafe near campus,sells cappuccinos for $2.50 and Russian tea cakes for $1.00 each -What is the opportunity cost of buying a cappuccino?

Which of the following statements is true about revenue?

The relationship between sales and revenue is

If the marginal cost for Big Ed's Used Car Emporium to advertise one additional day each week on a local TV station is $1,500,then Big Ed's should advertize that additional day

Society faces a trade-off in all of the following situations except

Which of the following is a macroeconomics question?

All centrally planned economies

Voluntary exchange between buyers and sellers generates ________ in a market economy.

Optimal decisions are made at the point where marginal cost equals zero.

In economics,the term "equity" means

An economic model is a complex version of reality used to analyze real-world economic situations.

Which of the following statements is true?

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