Question 1

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 wealth inequality,and for some people this means a more equitable distribution of wealth is needed in the economy.Would an equitable distribution of wealth necessarily be the most efficient distribution of wealth?

Accepted Answer

A) Yes,equitable and efficient are two different words which have the same definition. 
B) Yes,in order for the distribution to be equitable,it must also be efficient. 
C) No,it is impossible to have an economically efficient distribution which is also an equitable distribution. 
D) No,an economically efficient distribution of wealth would not necessarily be equitable.

Question 2

Lionel's Lawn Care is a company that maintains residential yards.Lionel's cost for his standard package of mowing,edging,and trimming is $15,and he charges $25 for this service.For a total price of $40,Lionel will also trim shrubs,a service that adds an additional $10 to the total cost of the standard package.
-What is Lionel's marginal cost of adding the shrub-trimming service to the standard package?

Accepted Answer

A) $10 
B) $15 
C) $25 
D) $40

Question 3

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 4

Which of the following is an example of a "how much" decision?

Accepted Answer

A) Dinah's Diner is only open for breakfast and lunch.Dinah is trying to decide whether to open for dinner as well. 
B) Zander has torn up his front yard and is debating whether to plant grass or install a rock garden. 
C) You received a nice birthday check from your grandmother and are deciding on whether to spend it on a trip to New York or a trip to San Francisco. 
D) Sergio quit his job to go back to school full time.

Question 5

Which of the following is 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) deciding why consumers want its products 
C) whether or not consumers will buy its products 
D) deciding what profit margin it desires for its products

Question 6

"An increase in the price of oranges will increase the demand for grapefruits." This statement is an example of a normative economic statement.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following generates productive efficiency?

Accepted Answer

A) competition among sellers 
B) competition among buyers 
C) government inspectors 
D) government production rules and regulations

Question 8

Cassie's Quilts alters,reconstructs,and restores heirloom quilts.Cassie has just spent $800 purchasing,cleaning,and reconstructing an antique quilt which she expects to sell for $1,500 once she is finished.After having spent $800,Cassie discovers that she would need some special period fabric that would cost her $200 in material and time in order to complete the task.Alternatively,she can sell the quilt "as is" now for $900.
-What should she do?

Accepted Answer

A) She should cut her losses and sell the quilt now. 
B) It does not matter what she does;she is going to take a loss on her project. 
C) She should purchase the period fabric,complete the task and then sell the quilt. 
D) She should not do any more work on the quilt because she has already spent too much time on it and has not been paid for that time.

Question 9

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 10

Which of the following are primarily macroeconomic topics and which are primarily microeconomic topics?
a.college tuition rates
b.farm subsidies
c.national income
d.automobile prices
e.air traffic congestion
f.economic recession

Accepted Answer

The answer of Which of the following are primarily macroeconomic...

Question 11

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.

Question 12

If the marginal cost for Dinky's Donuts to advertise one additional day each week in the local newspaper is $200,then Dinky's Donuts should advertize that additional day

Accepted Answer

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

Question 13

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 14

In 2015,Smileytown consumed 12,000 gallons of mouthwash.In 2016,mouthwash consumption rose to 17,000 gallons.Calculate the percentage change in mouthwash consumption.

Accepted Answer

A) 17.2% 
B) 29.4% 
C) 41.7% 
D) 70.6%

Question 15

Scenario 1-2
Suppose a hat manufacturer currently sells 2,000 hats per week and makes a profit of $5,000 per week.The plant owner observes,"Although the last 300 hats we produced and sold increased our revenue by $1,000 and our costs by $1,100,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 hats."
-Refer to Scenario 1-2.Using marginal analysis terminology,another economic term for the incremental revenue received from the sale of the last 300 hats is

Accepted Answer

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

Question 16

Which of the following generates allocative efficiency in a market economy?

Accepted Answer

A) national government intervention 
B) voluntary exchange between buyers and sellers 
C) United Nations rules for competition 
D) equity

Question 17

Which of the following is an example of a "how much" decision?

Accepted Answer

A) Octavia is debating whether to buy a pair of Jimmy Choo shoes or Steve Madden boots. 
B) Humberto has taken a second job to earn money to buy a Harley-Davidson SuperLow Sportster. 
C) You plan on going to Las Vegas for your birthday and are deciding if you should fly or drive. 
D) Diana is trying to decide if she should open her pet shop on Sundays.

Question 18

What is a marginal cost?

Accepted Answer

The answer of What is a marginal cost?...

Question 19

Suppose when the price of laptops fall,college students buy more laptops.This implies that

Accepted Answer

A) there is a positive relationship between laptop prices and quantities purchased by college students. 
B) there is a negative relationship between laptop prices and quantities purchased by college students. 
C) there is a direct relationship between laptop prices and quantities purchased by college students. 
D) there is a one-to-one relationship between laptop prices and quantities purchased by college students.

Question 20

Cassie's Quilts alters,reconstructs,and restores heirloom quilts.Cassie has just spent $800 purchasing,cleaning,and reconstructing an antique quilt which she expects to sell for $1,500 once she is finished.After having spent $800,Cassie discovers that she would need some special period fabric that would cost her $200 in material and time in order to complete the task.Alternatively,she can sell the quilt "as is" now for $900.
-What is her marginal benefit if she sells the quilt "as is" now?

Accepted Answer

A) $100 
B) $900 
C) She makes a marginal loss of $600,not a marginal benefit. 
D) The marginal benefit cannot be determined.

Exam 1: Economics: Foundations and Models

The relationship between consumer spending and disposable personal income is

Which of the following is an example of a "how much" decision?

Which of the following is an example of an economic trade-off that a firm has to make?

"An increase in the price of oranges will increase the demand for grapefruits." This statement is an example of a normative economic statement.

Which of the following generates productive efficiency?

Which of the following contributes to the efficiency of markets?

Which of the following are primarily macroeconomic topics and which are primarily microeconomic topics? a.college tuition rates b.farm subsidies c.national income d.automobile prices e.air traffic congestion f.economic recession

Which of the following is a normative economic statement?

If the marginal cost for Dinky's Donuts to advertise one additional day each week in the local newspaper is $200,then Dinky's Donuts should advertize that additional day

An "omitted variable" is

In 2015,Smileytown consumed 12,000 gallons of mouthwash.In 2016,mouthwash consumption rose to 17,000 gallons.Calculate the percentage change in mouthwash consumption.

Which of the following generates allocative efficiency in a market economy?

Which of the following is an example of a "how much" decision?

What is a marginal cost?

Suppose when the price of laptops fall,college students buy more laptops.This implies that