Question 1

Opportunity cost is defined as

Accepted Answer

A)  the benefit of an activity. 
B)  the monetary expense associated with an activity. 
C)  the highest valued alternative that must be given up to engage in an activity. 
D)  the total value of all alternatives that must be given up to engage in an activity. 
A)  the benefit of an activity. 
B)  the monetary expense associated with an activity. 
C)  the highest valued alternative that must be given up to engage in an activity. 
D)  the total value of all alternatives that must be given up to engage in an activity.

Question 2

In economics, tangible merchandise is referred to as

Accepted Answer

A)  invention. 
B)  human capital. 
C)  services. 
D)  goods. 
A)  invention. 
B)  human capital. 
C)  services. 
D)  goods.

Question 3

Which of the following is a normative economic statement?

Accepted Answer

A)  Rising global demand for diesel and heating oil has led to increases in the price of crude oil. 
B)  With falling home prices and rising mortgage interest rates, the amount of foreclosures has increased. 
C)  The federal government is considering raising the gasoline tax to promote the use of public transportation. 
D)  Fashion designers should be allowed to copyright designs to promote innovation. 
A)  Rising global demand for diesel and heating oil has led to increases in the price of crude oil. 
B)  With falling home prices and rising mortgage interest rates, the amount of foreclosures has increased. 
C)  The federal government is considering raising the gasoline tax to promote the use of public transportation. 
D)  Fashion designers should be allowed to copyright designs to promote innovation.

Question 4

Scenario 1-4
Suppose a cigar manufacturer currently sells 1,500 cigars per week and makes a profit of $3,000 per week. The plant foreman observes, "Although the last 500 cigars we produced and sold increased our revenue by $7,500 and our costs by $7,000, we are only making an overall profit of $3,000 per week so I think we need to cut back on production

-Refer to Scenario 1-4. Using marginal analysis terminology, what is another economic term for the incremental cost of producing the last 500 cigars?

Accepted Answer

A)  marginal cost 
B)  operating cost 
C)  explicit cost 
D)  Any of the above terms are correct. 
A)  marginal cost 
B)  operating cost 
C)  explicit cost 
D)  Any of the above terms are correct.

Question 5

The Coffee Nook, a small cafe near campus, sells cappuccinos for $2.50 and Russian tea cakes for $1.00 each. What is the opportunity cost of buying a cappuccino?

Accepted Answer

A)  2 1/2 Russian tea cakes 
B)  2/5 of a Russian tea cake 
C)  $2.50 
D)  $1.00 
A)  2 1/2 Russian tea cakes 
B)  2/5 of a Russian tea cake 
C)  $2.50 
D)  $1.00

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Table 1-1
   Lydia runs a small nail salon in the town of New Hope. She is debating whether she should extend her hours of operation. Lydia figures that her sales revenue will depend on the number of extra hours the nail salon is open as shown in the table above. She would have to hire a worker for those extra hours at a wage rate of $10 per hour.
-Refer to Table 1-1. Using marginal analysis, by how many hours should Lydia extend her nail salon's hours of operations?

Accepted Answer

A)  2 hours 
B)  3 hours 
C)  4 hours 
D)  5 hours 
E)  6 hours 
A)  2 hours 
B)  3 hours 
C)  4 hours 
D)  5 hours 
E)  6 hours

Question 8

What is an economic market?

Accepted Answer

An economic market refers to a

Question 9

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. 
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 10

How can the influence of a third variable be shown on a two-dimensional graph?

Accepted Answer

A)  by allowing the relationship to be nonlinear 
B)  by allowing the position of the relationship line or curve to shift on the graph 
C)  by drawing a third axis coming out of the two axes 
D)  by super-imposing the third variable on the two-dimensional graph 
A)  by allowing the relationship to be nonlinear 
B)  by allowing the position of the relationship line or curve to shift on the graph 
C)  by drawing a third axis coming out of the two axes 
D)  by super-imposing the third variable on the two-dimensional graph

Question 11

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

Question 12

The economic analysis of minimum wage involves both normative and positive analysis. Consider the following consequences of a minimum wage:
a.	The minimum wage law causes unemployment.
b.	A minimum wage law benefits some groups and hurts others.
c.	In some cities such as San Francisco and New York, it would be impossible for low-skilled workers to live comfortably in the city without minimum wage laws.
d.	The gains to winners of a minimum wage law should be valued more highly than the losses to losers because the latter primarily comprises businesses.
Which of the consequences above are positive statements and which are normative statements?

Accepted Answer

A)  a, b, and c are positive statements and d is a normative statement. 
B)  a and b are positive statements, c and d are normative statement. 
C)  Only a is a positive statement, b, c, and d are normative statements. 
D)  a and c are positive statements, b and d are normative statements. 
A)  a, b, and c are positive statements and d is a normative statement. 
B)  a and b are positive statements, c and d are normative statement. 
C)  Only a is a positive statement, b, c, and d are normative statements. 
D)  a and c are positive statements, b and d are normative statements.

Question 13

Competition among sellers generates

Accepted Answer

A)  productive efficiency. 
B)  allocative efficiency. 
C)  equity. 
D)  scarcity. 
A)  productive efficiency. 
B)  allocative efficiency. 
C)  equity. 
D)  scarcity.

Question 14

The three fundamental questions that any economy must address are:

Accepted Answer

A)  What will be the prices of goods and services; how will these goods and services be produced; and who will receive them? 
B)  What goods and services to produce; how will these goods and services be produced; and who receives them? 
C)  Who gets jobs; what wages do workers earn; and who owns what property? 
D)  How much will be saved; what will be produced; and how can these goods and services be fairly distributed? 
A)  What will be the prices of goods and services; how will these goods and services be produced; and who will receive them? 
B)  What goods and services to produce; how will these goods and services be produced; and who receives them? 
C)  Who gets jobs; what wages do workers earn; and who owns what property? 
D)  How much will be saved; what will be produced; and how can these goods and services be fairly distributed?

Question 15

Consider the following statements:
a. 	Consumers buy more MP3 players from an electronics store that sells MP3 players at a lower price than other rival electronics stores in the area.
b. 	Schools take steps to increase security since they believe it is more costly to allow vandalism than to hire additional security guards.
c. 	Citrus growers produce more oranges when the selling price of oranges falls.
Which of the above statements demonstrates that economic agents respond to incentives?

Accepted Answer

A)  a only 
B)  b only 
C)  c only 
D)  a and b 
E)  a, b, and c 
A)  a only 
B)  b only 
C)  c only 
D)  a and b 
E)  a, b, and c

Question 16

Which of the following is a positive economic statement?

Accepted Answer

A)  The standard of living in the United States is too low. 
B)  If the price of beef falls, a larger quantity of it will be bought. 
C)  The government should implement a national consumption tax. 
D)  The U.S. government should increase regulations on the banking industry. 
A)  The standard of living in the United States is too low. 
B)  If the price of beef falls, a larger quantity of it will be bought. 
C)  The government should implement a national consumption tax. 
D)  The U.S. government should increase regulations on the banking industry.

Question 17

If it costs Danitra $225 to create 4 necklaces and $275 to create 5 necklaces, then the marginal cost of producing the 5th necklace is $50.

Accepted Answer

A) True 
 B)False

Question 18

Explain the difference between a firm's revenue and its profit.

Accepted Answer

A firm's revenue is the total amount rec

Question 19

Since 1994, obesity rates in the United States

Accepted Answer

A)  have been on a slow and steady decline. 
B)  have increased in all 50 states. 
C)  have primarily increased in the Southeast and remained constant or slightly decreased in the remainder of the country. 
D)  have remained fairly constant throughout the country. 
A)  have been on a slow and steady decline. 
B)  have increased in all 50 states. 
C)  have primarily increased in the Southeast and remained constant or slightly decreased in the remainder of the country. 
D)  have remained fairly constant throughout the country.

Question 20

The term "market" in economics refers to

Accepted Answer

A)  a place where money changes hands. 
B)  a legal institution where exchange can take place. 
C)  a group of buyers and sellers of a product and the arrangement by which they come together to trade. 
D)  an organization which sells goods and services. 
A)  a place where money changes hands. 
B)  a legal institution where exchange can take place. 
C)  a group of buyers and sellers of a product and the arrangement by which they come together to trade. 
D)  an organization which sells goods and services.

Exam 1: Economics: Foundations and Models

Opportunity cost is defined as

In economics, tangible merchandise is referred to as

Which of the following is a normative economic statement?

The Coffee Nook, a small cafe near campus, sells cappuccinos for $2.50 and Russian tea cakes for $1.00 each. What is the opportunity cost of buying a cappuccino?

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

What is an economic market?

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

How can the influence of a third variable be shown on a two-dimensional graph?

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?

Competition among sellers generates

The three fundamental questions that any economy must address are:

Which of the following is a positive economic statement?

If it costs Danitra $225 to create 4 necklaces and $275 to create 5 necklaces, then the marginal cost of producing the 5th necklace is $50.

Explain the difference between a firm's revenue and its profit.

Since 1994, obesity rates in the United States

The term "market" in economics refers to

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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