Exam 1: Economics: Foundations and Models

Optimal decisions are made at the point where marginal cost equals zero.

The Farm Factory, a booth at the local Farmer's Market, sells fresh eggs for $1.50 per dozen and fresh milk for $2.50 per gallon. What is the opportunity cost of buying a dozen eggs?

If a straight line passes through the point x = 24 and y = 8 and also through the point x = 8 and y = 16, the slope of this line is

Article Summary In a January, 2017 report, the World Economic Forum stated that the growing income gap has become one of the biggest threats to the global economy and cannot be remedied solely by higher economic growth. Although income inequality has fallen over the past 30 years on a global level, in high-income countries like the United States and the United Kingdom, the top 1% of income earners have benefitted disproportionately from economic growth. This has led a growing belief that the traditional model for economic growth does not result in a population-wide increase in income. According to the report, "The growing mood of anti-establishment populism suggests we may have passed the stage where [reviving economic growth] alone would remedy fractures in society: reforming market capitalism must also be added to the agenda." Source: Lauren Gensler, "Rising Income Inequality Is Throwing The Future Of Capitalism Into Question, Says World Economic Forum," Forbes, January 11, 2017. -Refer to the Article Summary. The article discusses income inequality and how economic growth alone is no longer resulting in a more equitable distribution of income. Would an equitable distribution of income necessarily be the most efficient distribution of income?

________ is a situation in which a good or service is produced at the lowest possible cost.

How are the fundamental economic decisions determined in North Korea?

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. Using marginal analysis terminology, what is another economic term for the incremental cost of producing the last 3,000 cell phones?

An economic model is a complex version of reality used to analyze real-world economic situations.

Which of the following are primarily macroeconomic topics and which are primarily microeconomic topics? a. gasoline prices b. unemployment c. inflation d. health care costs e. air pollution f. economic growth

Trade-offs force society to make choices when answering what three fundamental questions?

Which of the following is a macroeconomic question?

Your roommate, Serafina, a psychology major, said, "The problem with economics is that it assumes that consumers and firms always make the correct decision. But we know that everyone's human, and we all make mistakes." Do you agree with her comment?

In 2017, Hooverville consumed 205,000 tons of sugar. In 2018, sugar consumption rose to 245,000 tons. Calculate the percentage change in sugar consumption.

Which of the following is a normative economic statement?

Who receives the most of what is produced in a market economy?

If it costs Sinclair $300 to produce 3 suede jackets and $420 to produce 4 suede jackets, then the difference of $120 is the marginal cost of producing the 4th suede jacket.

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 a market economy, who decides what goods and services will be produced?

Making "how much" decisions involves

Suppose a town can earn an additional $10,000 per year in revenue if it installs a red-light camera at its busiest intersection. At what additional cost would installing this camera not be considered economically rational?