Question 1

The development of a new good or a new process for making a good is called

Accepted Answer

A)  an innovation. 
B)  an invention. 
C)  a factor of production. 
D)  a service. 
A)  an innovation. 
B)  an invention. 
C)  a factor of production. 
D)  a service.

Question 2

All of the following questions or statements regarding tariffs are positive except

Accepted Answer

A)  Economic models can be used to estimate the dollar amounts gained by the winners from the imposition of a tariff. 
B)  Economic analysis can decide whether a tariff proposal should be enacted. 
C)  Economic analysis can show the size of the loss of economic efficiency from the imposition of a tariff. 
D)  Economic models can be used to estimate the dollar amounts lost by the losers from the imposition of a tariff. 
A)  Economic models can be used to estimate the dollar amounts gained by the winners from the imposition of a tariff. 
B)  Economic analysis can decide whether a tariff proposal should be enacted. 
C)  Economic analysis can show the size of the loss of economic efficiency from the imposition of a tariff. 
D)  Economic models can be used to estimate the dollar amounts lost by the losers from the imposition of a tariff.

Question 3

How are the fundamental economic questions answered in a market economy?

Accepted Answer

A)  The government alone decides the answers. 
B)  Individuals, firms, and the government interact in markets to decide the answers to these questions. 
C)  Households and firms interact in markets to decide the answers to these questions. 
D)  Large corporations alone decide the answers. 
A)  The government alone decides the answers. 
B)  Individuals, firms, and the government interact in markets to decide the answers to these questions. 
C)  Households and firms interact in markets to decide the answers to these questions. 
D)  Large corporations alone decide the answers.

Question 4

Define productive efficiency. Does productive efficiency imply allocative efficiency? Explain.

Accepted Answer

Productive efficiency is an efficiency c

Question 5

Define macroeconomics.

Accepted Answer

Macroeconomics is the study of

Question 6

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. 
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 7

Economic models

Accepted Answer

A)  make no assumptions in order to remain as accurate as possible. 
B)  are simplified versions of reality. 
C)  can not be used to analyze real-world issues. 
D)  magnify the complexity of economic issues in order to provide useful data. 
A)  make no assumptions in order to remain as accurate as possible. 
B)  are simplified versions of reality. 
C)  can not be used to analyze real-world issues. 
D)  magnify the complexity of economic issues in order to provide useful data.

Question 8

A university must decide if it should stop offering foreign language classes. This decision involves answering the economic question of "how to produce."

Accepted Answer

A) True 
 B)False

Question 9

A firm's technology may depend on which of the following factors?

Accepted Answer

A)  the skill of its managers 
B)  the training of its workers 
C)  the speed and efficiency of its equipment 
D)  all of the above 
A)  the skill of its managers 
B)  the training of its workers 
C)  the speed and efficiency of its equipment 
D)  all of the above

Question 10

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. 
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 11

Which of the following is a microeconomic question?

Accepted Answer

A)  How much will be saved and how much will be produced in the entire economy? 
B)  What will the level of economic growth be in the entire economy? 
C)  What factors determine the price of carrots? 
D)  What determines the average price level and inflation? 
A)  How much will be saved and how much will be produced in the entire economy? 
B)  What will the level of economic growth be in the entire economy? 
C)  What factors determine the price of carrots? 
D)  What determines the average price level and inflation?

Question 12

Which of the following contributed to the downfall of the Soviet Union in 1991?

Accepted Answer

A)  public dissatisfaction with low living standards and political repression 
B)  producing higher-quality goods than were desired by consumers 
C)  the rapidly increasing standard of living 
D)  the lack of a strong dictator who could coordinate economic activities 
A)  public dissatisfaction with low living standards and political repression 
B)  producing higher-quality goods than were desired by consumers 
C)  the rapidly increasing standard of living 
D)  the lack of a strong dictator who could coordinate economic activities

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Scenario 1-3
Suppose a t-shirt manufacturer currently sells 5,000 t-shirts per week and makes a profit of $10,000 per week. A manager at the plant observes, "Although the last 400 t-shirts we produced and sold increased our revenue by $4,000 and our costs by $4,800, we are still making an overall profit of $10,000 per week so I think we're on the right track. We are producing the optimal number of t-shirts."

-Refer to Scenario 1-3. Using marginal analysis terminology, what is another economic term for the incremental revenue received from the sale of the last 400 t-shirts?

Accepted Answer

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

Question 15

Table 1-3
   Santiago runs a comic book store in the town of East Arbor. He is debating whether he should extend his hours of operation. Santiago figures that his sales revenue will depend on the number of extra hours the store is open as shown in the table above. He would have to hire a worker for those extra hours at a wage rate of $18 per hour.
-Refer to Table 1-3. What is Santiago's marginal cost if he decides to stay open for an extra two hours instead of one hour?

Accepted Answer

A)  $18 
B)  $36 
C)  $38 
D)  $102 
A)  $18 
B)  $36 
C)  $38 
D)  $102

Question 16

Which of the following is a macroeconomic question?

Accepted Answer

A)  What determines the minimum wage? 
B)  What determines the production of video game consoles? 
C)  What factors determine the price of Oreo cookies? 
D)  What determines the salaries of college professors? 
A)  What determines the minimum wage? 
B)  What determines the production of video game consoles? 
C)  What factors determine the price of Oreo cookies? 
D)  What determines the salaries of college professors?

Question 17

The decisions Apple makes in determining production levels for its iPhone is an example of a microeconomic topic.

Accepted Answer

A) True 
 B)False

Question 18

Dr. Goldfinger decides to invest in companies which he believes can "improve the productivity and efficiency" of health care services. What would Dr. Goldfinger need to do to try to achieve allocative efficiency?

Accepted Answer

A)  invest in companies that produce goods and services based on consumer preferences 
B)  invest in companies that produce goods and services at the lowest possible cost 
C)  invest in companies that fairly distribute their products and services 
D)  invest in companies that produce up to the point where the marginal cost of the last unit produced is zero 
A)  invest in companies that produce goods and services based on consumer preferences 
B)  invest in companies that produce goods and services at the lowest possible cost 
C)  invest in companies that fairly distribute their products and services 
D)  invest in companies that produce up to the point where the marginal cost of the last unit produced is zero

Question 19

Which of the following is motivated by an equity concern?

Accepted Answer

A)  Some U.S. colleges have cut back on merit scholarships since these programs siphon money from need-based programs, thus harming lower-income students with greater financial need. 
B)  Following the removal of subsidies in urban water use, household demand for water decreased quite significantly in Bogor, Indonesia. 
C)  In November 2003, the Federal Communications Commission implemented the "local number portability" rule which gives cell phone customers the option of keeping their number when they switch carriers within the same geographic region. 
D)  The United States protects intellectual property rights, allowing inventors to prevent others from using their inventions without payment. 
A)  Some U.S. colleges have cut back on merit scholarships since these programs siphon money from need-based programs, thus harming lower-income students with greater financial need. 
B)  Following the removal of subsidies in urban water use, household demand for water decreased quite significantly in Bogor, Indonesia. 
C)  In November 2003, the Federal Communications Commission implemented the "local number portability" rule which gives cell phone customers the option of keeping their number when they switch carriers within the same geographic region. 
D)  The United States protects intellectual property rights, allowing inventors to prevent others from using their inventions without payment.

Question 20

Examining the conditions that could lead to inflation in an economy is an example of a microeconomic topic.

Accepted Answer

A) True 
 B)False

Exam 1: Economics: Foundations and Models

The development of a new good or a new process for making a good is called

All of the following questions or statements regarding tariffs are positive except

How are the fundamental economic questions answered in a market economy?

Define productive efficiency. Does productive efficiency imply allocative efficiency? Explain.

Define macroeconomics.

Which of the following is a positive economic statement?

Economic models

A university must decide if it should stop offering foreign language classes. This decision involves answering the economic question of "how to produce."

A firm's technology may depend on which of the following factors?

Which of the following is a normative economic statement?

Which of the following is a microeconomic question?

Which of the following contributed to the downfall of the Soviet Union in 1991?

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

Which of the following is a macroeconomic question?

The decisions Apple makes in determining production levels for its iPhone is an example of a microeconomic topic.

Dr. Goldfinger decides to invest in companies which he believes can "improve the productivity and efficiency" of health care services. What would Dr. Goldfinger need to do to try to achieve allocative efficiency?

Which of the following is motivated by an equity concern?

Examining the conditions that could lead to inflation in an economy is an example of a microeconomic topic.

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

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