Exam 1: Economics: Foundations and Models

You explain to your roommate Surya, who makes beaded headbands, about an economic theory which asserts that consumers will purchase more of a product at lower prices than they will at higher prices. She contends that the theory is incorrect because over the past two years she has lowered the price of her headbands and yet has seen a decrease in sales. How would you respond to Surya?

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

Even if the population declines, scarcity will still exist.

Explain the economic assumption that "people are rational."

Explain the term "economics."

Human capital refers to the accumulated skills and training that workers possess.

Economic models do all of the following except

What does the word "marginal" mean in economics? What is a marginal benefit? What is a marginal cost? What is marginal analysis?

Suppose when the price of hybrid automobiles rises, consumers buy fewer hybrid automobiles. This implies that

Microeconomics is the study of

Voluntary exchange ________ economic efficiency because neither the buyer nor the seller would agree to a trade unless ________.

Voluntary exchange between buyers and sellers generates ________ in a market economy.

In a centrally planned economy, the households and firms decide how economic resources will be allocated.

Which of the following statements about positive economic analysis is false?

"The distribution of income should be determined by the government" is an example of a normative economic statement.

It is necessary for all economic systems to provide people with goods and services and also restrict them from getting as much of these goods and services as they wish, because failure to do this could ________ the efficiency of the system by producing some goods and services that are ________.

Table 1-2 Thuy Anh runs a small flower shop in the town of Florabunda. She is debating whether she should extend her hours of operation. Thuy Anh figures that her sales revenue will depend on the number of extra hours the flower shop is open as shown in the table above. She would have to hire a worker for those extra hours at a wage rate of $16 per hour. -Refer to Table 1-2. What is Thuy Anh's marginal benefit if she decides to stay open for an extra three hours instead of two hours?

Economics is the study of the ________ people make to attain their goals, given their ________ resources.

Which of the following correctly describes the relationship between economic efficiency and economic equity?

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?