Question 1

Which of the following is a normative economic statement?

Accepted Answer

A)  Rising global demand for coal has led to increases in the price of coal. 
B)  With rising mortgage rates and rising unemployment rates, the number of unsold homes has increased. 
C)  The state of Texas is considering increasing funds for light-rail development to promote the use of public transportation. 
D)  Pharmaceutical manufacturers should not be allowed to patent their products so prescription drugs would be more affordable.

Question 2

The extra cost associated with undertaking an activity is called

Accepted Answer

A)  net loss. 
B)  marginal cost. 
C)  opportunity cost. 
D)  foregone cost.

Question 3

When voluntary exchange takes place, neither party usually gains from the exchange.

Accepted Answer

A) True 
 B)False

Question 4

Political candidates often hold fundraisers by charging "per plate" for dinner. Wendy purchased four tickets to a $1,000 per plate dinner for a local city council candidate. Does this transaction benefit both parties?

Accepted Answer

A)  No, political candidates should never be allowed to overcharge for a fundraising dinner as that limits the number of people who can afford to attend. 
B)  Yes, it was a voluntary exchange that benefited both parties. 
C)  No, Wendy paid too much for four dinners. 
D)  Yes, but only if the dinners served actually cost $1,000 each.

Question 5

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

Question 6

Skeeter's Skeeball Castle has seen its business slow down ever since Kerrie's Off-Key Karaoke opened up next door. Since the opening of Kerrie's Off-Key Karaoke, the opportunity cost of playing skeeball at Skeeter's has

Accepted Answer

A)  decreased. 
B)  increased. 
C)  fallen to zero. 
D)  not changed.

Question 7

An "omitted variable" is

Accepted Answer

A)  a variable which is purposely omitted from an economic analysis. 
B)  a variable which is inadvertently omitted from an economic analysis. 
C)  a variable that has no impact on other variables in an economic analysis. 
D)  a variable that affects other variables and its omission from economic analysis can lead to false conclusions about cause and effect.

Question 8

What is the difference between physical capital and human capital?

Accepted Answer

The answer of What is the difference between physical capital...

Question 9

Table 1-6
  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. What is Ivan's marginal cost if he decides to stay open for six hours instead of five hours?

Accepted Answer

A)  $10 
B)  $20 
C)  $25 
D)  $91.67

Question 10

Which of the following is a positive economic statement?

Accepted Answer

A)  People should use public transportation more often. 
B)  The government should ban diesel engines in automobiles. 
C)  Due to a decrease in state funding, university tuition has risen. 
D)  Foreign citizens should not be allowed to work without a work visa.

Question 11

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

Accepted Answer

The answer of What is scarcity, and why is it...

Question 12

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 additional 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. Using marginal analysis, how many hours should Eva extend her bakery's hours of operations?

Accepted Answer

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

Question 13

The sales revenue a seller receives from the sale of an additional unit of goods is called the marginal benefit.

Accepted Answer

A) True 
 B)False

Question 14

If the marginal cost of producing a television is constant at $200, then a firm should produce this item

Accepted Answer

A)  only if the marginal benefit it receives is greater than $200 plus an acceptable profit margin. 
B)  as long as the marginal benefit it receives is just equal to or greater than $200. 
C)  as long as its marginal cost does not rise. 
D)  until the marginal benefit it receives reaches zero.

Question 15

Marginal benefit refers to the additional benefit that your activity provides to you.

Accepted Answer

A) True 
 B)False

Question 16

The branch of economics which studies the behavior of entire economies and policies that affect the economy as a whole is called

Accepted Answer

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

Question 17

Of the following examples, which would most likely be performed by an economist working for American Airlines?

Accepted Answer

A)  using economic models to analyze unemployment and inflation rates in Australia 
B)  assessing whether automobile injuries are directly related to speed limits 
C)  analyzing data related to passenger air traffic in China 
D)  forecasting the demand for U.S.-produced organic produce over the next 15 years

Question 18

When Dr. Goldfinger decides on the companies in which he will invest, a ________ issue is being addressed.

Accepted Answer

A)  microeconomic 
B)  macroeconomic 
C)  positive economic 
D)  normative economic

Question 19

At a recent faculty meeting, Lorraine Waverly, president of Skywalker College, announced that enrollment is up by 12 percent over the previous semester. If enrollment the previous semester was 3,250 students, what is the student enrollment this semester?

Accepted Answer

A)  390 
B)  2,860 
C)  3,640 
D)  4,030

Question 20

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.

Exam 1: Economics: Foundations and Models

Which of the following is a normative economic statement?

The extra cost associated with undertaking an activity is called

When voluntary exchange takes place, neither party usually gains from the exchange.

Political candidates often hold fundraisers by charging "per plate" for dinner. Wendy purchased four tickets to a $1,000 per plate dinner for a local city council candidate. Does this transaction benefit both parties?

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

Skeeter's Skeeball Castle has seen its business slow down ever since Kerrie's Off-Key Karaoke opened up next door. Since the opening of Kerrie's Off-Key Karaoke, the opportunity cost of playing skeeball at Skeeter's has

An "omitted variable" is

What is the difference between physical capital and human capital?

Which of the following is a positive economic statement?

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

The sales revenue a seller receives from the sale of an additional unit of goods is called the marginal benefit.

If the marginal cost of producing a television is constant at $200, then a firm should produce this item

Marginal benefit refers to the additional benefit that your activity provides to you.

The branch of economics which studies the behavior of entire economies and policies that affect the economy as a whole is called

Of the following examples, which would most likely be performed by an economist working for American Airlines?

When Dr. Goldfinger decides on the companies in which he will invest, a ________ issue is being addressed.

At a recent faculty meeting, Lorraine Waverly, president of Skywalker College, announced that enrollment is up by 12 percent over the previous semester. If enrollment the previous semester was 3,250 students, what is the student enrollment this semester?

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