Question 1

When every good or service is produced up to the point where the last unit provides ________,allocative efficiency occurs.

Accepted Answer

A)  a marginal benefit to society equal to the marginal cost of producing it 
B)  a marginal benefit to society greater than the marginal cost of producing it 
C)  a marginal benefit to society less than the marginal cost of producing it 
D)  a marginal benefit to society equal to zero

Question 2

When voluntary exchange takes place,both parties gain from the exchange.

Accepted Answer

A) True 
 B)False

Question 3

Why is it necessary for all economic systems to not only provide people with goods and services,but also restrict them from getting as much of these goods and services as they wish?

Accepted Answer

A)  Failure to do this could reduce the efficiency of the system by producing some goods and services that are not as highly valued as others. 
B)  Failure to do this could lead to an inequitable allocation of goods and services produced. 
C)  Failure to do this could lead to drastic shortages of good and services. 
D)  Failure to do this could reduces efficiency and leads to an inequitable allocation of output.

Question 4

Mr.Peabody chooses to invest in companies that produce goods and services at the lowest possible cost.Mr.Peabody is investing in companies that are

Accepted Answer

A)  allocatively efficient. 
B)  productively efficient. 
C)  guaranteed to make a profit. 
D)  all of the above.

Question 5

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 6

In economics,choices must be made because we live in a world of

Accepted Answer

A)  unemployment. 
B)  scarcity. 
C)  greed. 
D)  unlimited resources.

Question 7

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 his marginal benefit if he sells the machine "as is" now?

Accepted Answer

A)  $300 
B)  $900 
C)  $1,000 
D)  The marginal benefit cannot be determined.

Question 8

Scenario 1-1
Suppose a cell phone manufacturer currently sells 20,000 cell phones per week and makes a profit of $5,000 per week. A manager at the plant observes, "Although the last 3,000 cell phones we produced and sold increased our revenue by $6,000 and our costs by $6,700, we are still making an overall profit of $5,000 per week so I think we're on the right track. We are producing the optimal number of cell phones."
-Refer to Scenario 1-1.Had the firm not produced and sold the last 3,000 cell phones,would its profit be higher or lower,and if so by how much?

Accepted Answer

A)  Its profit will be $6,700 higher. 
B)  Its profit will be $700 higher. 
C)  Its profit will be $700 lower. 
D)  Its profit will be $6,000 lower.

Question 9

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 10

One desirable outcome of a market economy is that it leads to a more equitable distribution of income.

Accepted Answer

A) True 
 B)False

Question 11

Suppose the U.S.government encouraged consumers to trade in their old automobiles for more efficient,new models by paying up to $5,000 for the old automobiles.These consumers 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.

Question 12

Suppose that some teachers have decided that economic and financial uncertainty have made the prospect of retiring more risky,and therefore carry a higher cost than not retiring.By using all available information as they act to achieve their goals,these teachers are 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.

Question 13

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.

Question 14

In the market for factors of production,firms earn income by selling goods and services to households.

Accepted Answer

A) True 
 B)False

Question 15

A grocery store sells a bag of potatoes at a fixed price of $2.30.Which of the following is a term used by economists to describe the money received from the sale of an additional bag of potatoes?

Accepted Answer

A)  marginal revenue 
B)  gross earnings 
C)  pure profit 
D)  marginal costs 
E)  net benefit

Question 16

If a straight line passes through the point x = 14 and y = 3 and also through the point x = 4 and y = 10,the slope of this line is

Accepted Answer

A)  negative 11 divided by 6. 
B)  seven tenths. 
C)  negative seven tenths. 
D)  6 divided by 11.

Question 17

DeShawn's Detailing is a service that details cars at the customers' homes or places of work.DeShawn's cost for a basic detailing package is $40,and he charges $75 for this service.For a total price of $90,DeShawn will also detail the car's engine,a service that adds an additional $20 to the total cost of the package.Should DeShawn continue to offer the engine detailing service?

Accepted Answer

A)  yes, he still makes a profit by selling the engine detailing service with the basic detailing package 
B)  yes, but only if he raises the price of the basic detailing package 
C)  no, his marginal benefit is less than his marginal cost 
D)  More information is needed for DeShawn to make this decision.

Question 18

What is the difference between an invention and an innovation?

Accepted Answer

The answer of What is the difference between an invention...

Question 19

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.

Question 20

Which of the following is a normative economic statement?

Accepted Answer

A)  The price of wheat is too low. 
B)  The current low price of wheat is the result of increased worldwide supply. 
C)  When the price of wheat falls, the quantity of wheat purchased rises. 
D)  When the price of wheat falls, the cost of wheat-based products falls.

Exam 1: Economics: Foundations and Models

When every good or service is produced up to the point where the last unit provides ________,allocative efficiency occurs.

When voluntary exchange takes place,both parties gain from the exchange.

Why is it necessary for all economic systems to not only provide people with goods and services,but also restrict them from getting as much of these goods and services as they wish?

Mr.Peabody chooses to invest in companies that produce goods and services at the lowest possible cost.Mr.Peabody is investing in companies that are

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

In economics,choices must be made because we live in a world of

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

One desirable outcome of a market economy is that it leads to a more equitable distribution of income.

Suppose the U.S.government encouraged consumers to trade in their old automobiles for more efficient,new models by paying up to $5,000 for the old automobiles.These consumers would be exemplifying the economic idea that

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

In the market for factors of production,firms earn income by selling goods and services to households.

A grocery store sells a bag of potatoes at a fixed price of $2.30.Which of the following is a term used by economists to describe the money received from the sale of an additional bag of potatoes?

If a straight line passes through the point x = 14 and y = 3 and also through the point x = 4 and y = 10,the slope of this line is

What is the difference between an invention and an innovation?

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

Which of the following is a normative economic statement?