Question 1

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 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.
-Fiona shares an office with her ex-husband. Her share of the rent and utilities are $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.

Question 2

In economics, tangible merchandise is referred to as

Accepted Answer

A)  invention. 
B)  human capital. 
C)  services. 
D)  goods.

Question 3

Which of the following contributes to the efficiency of markets?

Accepted Answer

A)  Governments play an active role in the day-to-day operations of markets. 
B)  Markets are able to bring about an equitable distribution of goods and services. 
C)  Markets promote equal standards of living. 
D)  Markets promote competition and voluntary exchange.

Question 4

Macroeconomics is the study of

Accepted Answer

A)  how households make choices. 
B)  how firms make choices. 
C)  how households and firms make choices. 
D)  the economy as a whole.

Question 5

Which of the following is a normative economic statement?

Accepted Answer

A)  The price of gasoline is too high. 
B)  The current high price of gasoline is the result of strong worldwide demand. 
C)  When the price of gasoline rises, the quantity of gasoline purchased falls. 
D)  When the price of gasoline rises, transportation costs rise.

Question 6

What is the difference between economic efficiency and equity?

Accepted Answer

The answer of What is the difference between economic efficiency...

Question 7

Suppose a doctor can earn an additional $10,000 in revenue per year from keeping her office open on Saturdays. What must the additional cost of keeping the office open on Saturdays be to make this decision economically rational?

Accepted Answer

The answer of Suppose a doctor can earn an additional...

Question 8

Trina's Tropical Fish Store sells goldfish for $2 each and angelfish for $10 each. What is the opportunity cost of buying a goldfish?

Accepted Answer

A)  5 angelfish 
B)  1/5 of an angelfish 
C)  $10 
D)  $2

Question 9

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 cell 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. Using marginal analysis terminology, what is another economic term for the incremental revenue received from the sale of the last 500 cigars?

Accepted Answer

A)  gross earnings 
B)  marginal revenue 
C)  sales revenue 
D)  gross profit

Question 10

Political candidates often hold fund raisers by charging "per plate" for dinner. Wendy purchased four tickets to a $1,000 per plate dinner for a local city council candidate. Is this transaction economically efficient?

Accepted Answer

A)  No, political candidates should never be allowed to overcharge for a fund raising dinner. 
B)  Yes, it was a voluntary exchange that benefited both parties. 
C)  No, Wendy paid too much for four dinners. 
D)  Yes, it is efficient only from the perspective of the candidate but not from the perspective of Wendy.

Question 11

Which of the following is a microeconomics question?

Accepted Answer

A)  Why do economies experience periods of high inflation? 
B)  Will Federal Reserve intervention lower the inflation rate? 
C)  Why has growth in the economy increased since the end of the recession? 
D)  Will the merger of American Airlines and US Airways increase or decrease airfares?

Question 12

Which of the following is a positive economic statement?

Accepted Answer

A)  U.S. citizens should only buy products which are produced in the United States. 
B)  The government should ban the production and sale of incandescent light bulbs. 
C)  Raising the tax on gasoline raises the selling price of gasoline. 
D)  The government should revamp its immigration policies.

Question 13

Which of the following is not an example of an economic trade-off that a firm has to make?

Accepted Answer

A)  whether it is cheaper to produce with more machines or with more workers 
B)  whether it is to outsource the production of a good or service 
C)  whether or not consumers will buy its products 
D)  whether it should produce more of its product

Question 14

Which of the following is counted as "capital" in economics?

Accepted Answer

A)  the money people have 
B)  the machines workers have to work with 
C)  the accumulated skills and training workers have 
D)  the wealth people have

Question 15

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.
-Refer to Table 1-5. What is Julius's marginal benefit if he decides to stay open for three hours instead of two hours?

Accepted Answer

A)  $15 
B)  $25 
C)  $65 
D)  $80

Question 16

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.

Question 17

Assume that it will cost a plumber an additional $35,000 each year by keeping her shop open for one additional hour per week. What must the additional revenue from keeping the shop open this additional hour per week be to make staying open for the extra hour economically rational?

Accepted Answer

The answer of Assume that it will cost a plumber...

Question 18

At a recent company meeting, Ravi Batra, sales manager of Life's a Beach, a surfboard producer, announced, "We have increased our sales by 13 percent in just 9 months." Suppose 9 months ago, its sales amounted to $245,000. What is the value of its sales today?

Accepted Answer

A)  $31,850 
B)  $207,638 
C)  $276,850 
D)  $359,905

Question 19

In market economies, income distribution is always going to be completely equitable.

Accepted Answer

A) True 
 B)False

Question 20

Based on projections from the U.S. Census Bureau and the Congressional Budget Office,

Accepted Answer

A)  there will be a significant increase in the demand for health care by the year 2020. 
B)  there will be a significant decrease in the demand for health care by the year 2020. 
C)  there will be no significant change in the demand for health care by the year 2020. 
D)  the change in the supply of health care will more than make up for the change in demand for health care by the year 2020.

Exam 1: Economics: Foundations and Models