Question 1

Markets promote

Accepted Answer

A)  equity and competition. 
B)  voluntary exchange and equality. 
C)  equity and equality. 
D)  competition and voluntary exchange.

Question 2

Table 1-5
  Julius runs a small tailor shop in the city of Bloomfield. He is debating whether he should extend his hours of operation. Julius figures that his sales revenue will depend on the number of hours the tailor shop is open as shown in the table above. He would have to hire a worker for those hours at a wage rate of $18 per hour.
-Tabitha shares a flea market booth with her sister. Her share of the rent is $150 per month. She is considering moving to her own, larger booth which she will not have to share with anyone. The larger booth rents for $450 per month. Recently, you ran into Tabitha in the grocery store and she tells you that she has rented the larger booth. Tabitha is as rational as any other person. As an economics major, you rightly conclude that

Accepted Answer

A)  Tabitha did not have a choice; her sister was overcharging her. 
B)  Tabitha figures that the additional benefit of having her own booth (as opposed to sharing) is at least $300. 
C)  Tabitha figures that the benefit of having her own booth (as opposed to sharing) is at least $450. 
D)  the cost of having one's own booth outweighs the benefits.

Question 3

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.

Question 4

Pookie's Pinball Palace restores old Pinball machines. Pookie has just spent $300 purchasing and cleaning a 1960s-era machine which he expects to sell for $2,000 once he is finished with the restoration. After having spent $300, Pookie discovers that he will need to rewire the entire machine at a cost of $1,100 in order to finish the restoration. Alternatively, he can sell the machine "as is" now for $1,000. What is the marginal cost of completing the task?

Accepted Answer

A)  $300 
B)  $800 
C)  $1,100 
D)  $1,400

Question 5

The prevalence of Alzheimer's dementia is very high among residents living in nursing homes. A student concludes that it is likely that living in a nursing home causes Alzheimer's dementia. What is the flaw in the student's reasoning?

Accepted Answer

A)  The student has failed to take into account other causes of Alzheimer's disease. 
B)  The student is drawing a false conclusion; he is confusing cause and effect. 
C)  The student is using an inadequate sample size. 
D)  The student is drawing a false conclusion by making the mistake of omitting critical variables such as the age and gender of the residents.

Question 6

Figure 1-1 
-Refer to Figure 1-1. Using the information in the figure above, calculate the percentage change in sales of alcoholic beverages between 2007 and 2011.

Accepted Answer

A)  30% 
B)  50% 
C)  66.7% 
D)  100%

Question 7

Which of the following is motivated by an efficiency concern?

Accepted Answer

A)  In December 2006, the Bush administration restarted a short-term housing assistance program for victims of Hurricane Katrina. 
B)  Each year, the University of Notre Dame conducts a lottery to parcel out the 30,000 seats available to contributors, former athletes and parents in the 80,000-seat stadium. 
C)  The United Network for Organ Sharing advocates a system of rationing scarce kidneys that would favor young patients over old in an effort to wring more life out of donated organs. 
D)  The federal government's housing choice voucher program assists very low-income families, the elderly, and the disabled to afford decent, safe, and sanitary housing in the private market.

Question 8

The study of economics arises due to

Accepted Answer

A)  money. 
B)  scarcity. 
C)  greed. 
D)  resources.

Question 9

Which of the following statements is true about profit?

Accepted Answer

A)  Profit refers to the revenue received from the sale of a quantity of goods. 
B)  Profit is calculated by multiplying price and quantity sold. 
C)  The terms "accounting profit" and "economic profit" can be used interchangeably. 
D)  Profit is the difference between revenue and cost.

Question 10

The relationship between consumer spending and disposable personal income is

Accepted Answer

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

Question 11

Which of the following is part of an economic model?

Accepted Answer

A)  preferences of economic agents 
B)  data 
C)  norms 
D)  opinions

Question 12

Allocative efficiency best explains ________, and productive efficiency best explains ________.

Accepted Answer

A)  how something will be produced; when something will be produced 
B)  when something will be produced; why something will be produced 
C)  why something will be produced; what will be produced 
D)  what will be produced; how something will be produced

Question 13

Examining the conditions that could lead to unemployment in an economy is an example of microeconomics topic.

Accepted Answer

A) True 
 B)False

Question 14

Table 1-5
  Julius runs a small tailor shop in the city of Bloomfield. He is debating whether he should extend his hours of operation. Julius figures that his sales revenue will depend on the number of hours the tailor shop is open as shown in the table above. He would have to hire a worker for those hours at a wage rate of $18 per hour.
-Consider the following statements: a. Soda drinkers purchase more soda from a grocery store that sells soda at a lower price than other rival grocery stores in the area.
B. Homeowners do not take steps to increase security even though they believe it is more costly to allow burglaries than to install security monitoring equipment.
C. Manufacturers produce less of a particular cell phone when its selling price rises.
Which of the above statements demonstrates that economic agents respond to incentives?

Accepted Answer

A)  a only 
B)  b only 
C)  c only 
D)  a and b 
E)  a, b, and c

Question 15

Suppose the extra cost to a doctor of keeping her office open on Saturdays is $800. Then, the doctor should not stay open on Saturdays if keeping the office open can only bring in additional revenue of $800.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is a macroeconomics question?

Accepted Answer

A)  What determines the growth rate of gross domestic product? 
B)  How is the production quantity of snowboards determined? 
C)  What factors determine the price of electronic cigarettes? 
D)  What determines the salaries of Wall Street executives?

Question 17

Recent changes occurring within the U.S. health care system, including lower insurance reimbursement rates, have resulted in

Accepted Answer

A)  a growing number of doctors choosing to open private practices. 
B)  more medical practices being owned by hospitals than by individual doctors. 
C)  a majority of hospitals closing routine medical practices in order to focus only on emergency care facilities. 
D)  a majority of doctors working directly for insurance companies.

Question 18

If the price of pineapple juice was $4.50 a gallon and it is now $5.75 a gallon, what is the percentage change in price?

Accepted Answer

A)  7.8 percent 
B)  12.5 percent 
C)  27.7 percent 
D)  57.5 percent

Question 19

Define allocative efficiency. Explain the significance of this concept in economics?

Accepted Answer

The answer of Define allocative efficiency. Explain the significance of...

Question 20

What is an economic model?

Accepted Answer

The answer of What is an economic model?...

Exam 1: Economics: Foundations and Models