Question 1

If a straight line passes through the point x = 12 and y = 4 and also through the point x = 4 and y = 8, the slope of this line is

Accepted Answer

A)  negative 8 divided by 4. 
B)  seven tenths. 
C)  negative one half. 
D)  one -and one half. 
A)  negative 8 divided by 4. 
B)  seven tenths. 
C)  negative one half. 
D)  one -and one half.

Question 2

What is a marginal benefit?

Accepted Answer

Marginal benefit is

Question 3

Very few businesses, and virtually no nonprofit organizations, hire economists.

Accepted Answer

A) True 
 B)False

Question 4

An office supply store sells a ream of printer paper at a fixed price of $4.50. Which of the following is a term used by economists to describe the money received from the sale of an additional ream of paper?

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 5

The town of Harmonia gives away all 500 tickets to its annual Founder's Day Free Concert-in-the-Park to local residents. Each year, more than 500 people wish to attend the concert, so some of the residents who receive the free tickets sell them for as much as $75 each. Is a transaction where someone pays a resident $75 for a "free ticket" economically efficient?

Accepted Answer

A)  No, people should never be allowed to sell items they received for free. 
B)  Yes, it was a voluntary exchange that benefited both parties. 
C)  No, the buyer paid too much for the ticket. 
D)  Yes, but it is efficient only from the perspective of the seller and not from the perspective of the buyer. 
A)  No, people should never be allowed to sell items they received for free. 
B)  Yes, it was a voluntary exchange that benefited both parties. 
C)  No, the buyer paid too much for the ticket. 
D)  Yes, but it is efficient only from the perspective of the seller and not from the perspective of the buyer.

Question 6

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 Russian tea cake?

Accepted Answer

A)  2 1/2 cappuccinos 
B)  2/5 of a cappuccino 
C)  $2.50 
D)  $1.00 
A)  2 1/2 cappuccinos 
B)  2/5 of a cappuccino 
C)  $2.50 
D)  $1.00

Question 7

The prime minister of the tiny island nation of Wowza has proposed that the speed limit on its only highway be reduced by 10 miles per hour on Thursdays. Enacting this proposal would be optimal

Accepted Answer

A)  only if the marginal cost of reducing the speed limit falls to zero. 
B)  as long as the marginal benefit of reducing the speed limit is just equal to or greater than the marginal cost of reducing the speed limit. 
C)  as long as the marginal cost does not rise. 
D)  until the marginal benefit of this action is maximized. 
A)  only if the marginal cost of reducing the speed limit falls to zero. 
B)  as long as the marginal benefit of reducing the speed limit is just equal to or greater than the marginal cost of reducing the speed limit. 
C)  as long as the marginal cost does not rise. 
D)  until the marginal benefit of this action is maximized.

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is part of an economic model?

Accepted Answer

A)  preferences of economic agents 
B)  data 
C)  norms 
D)  opinions 
A)  preferences of economic agents 
B)  data 
C)  norms 
D)  opinions

Question 10

Consumers make all economic decisions in a mixed economy.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is an example of an activity undertaken by an entrepreneur?

Accepted Answer

A)  choosing the color scheme for your renovated kitchen 
B)  being promoted to the position of Chief of Police 
C)  being appointed to the U.S. Supreme Court 
D)  starting a snow cone business 
A)  choosing the color scheme for your renovated kitchen 
B)  being promoted to the position of Chief of Police 
C)  being appointed to the U.S. Supreme Court 
D)  starting a snow cone business

Question 12

Allison's Auto Art is a company that applies pinstripes to vehicles. Allison's cost for a basic 1-color pinstriping job is $35, and she charges $95 for this service. For a total price of $175, Allison will apply a fancier 3-color pinstripe application to an automobile, a service that adds an additional $40 to the total cost of the package. What is the marginal cost of moving up from the 1-color application to the 3-color application?

Accepted Answer

A)  $35 
B)  $40 
C)  $80 
D)  $175 
A)  $35 
B)  $40 
C)  $80 
D)  $175

Question 13

Which of the following statements is true?

Accepted Answer

A)  Only government policymakers can improve decision making by using economic principles. 
B)  Only government policymakers and business managers can improve decision making by using economic principles. 
C)  Only business managers and individuals can improve decision making by using economic principles. 
D)  Government policymakers, business managers, and individuals can all improve decision making by using economic principles. 
A)  Only government policymakers can improve decision making by using economic principles. 
B)  Only government policymakers and business managers can improve decision making by using economic principles. 
C)  Only business managers and individuals can improve decision making by using economic principles. 
D)  Government policymakers, business managers, and individuals can all improve decision making by using economic principles.

Question 14

Table 1-4
   Eva runs a small bakery in the village of Roggerli. She is debating whether she should extend her hours of operation. Eva figures that her sales revenue will depend on the number of additional hours the bakery is open as shown in the table above. She would have to hire a worker for those hours at a wage rate of $12 per hour.
-Refer to Table 1-4. What is Eva's marginal benefit if she decides to stay open for two hours instead of one hour?

Accepted Answer

A)  $25 
B)  $36 
C)  $60 
D)  $95 
A)  $25 
B)  $36 
C)  $60 
D)  $95

Question 15

If the marginal cost for the state of Montana to increase the speed limit on its interstate highways to 100 mph is estimated to be $500 per day, then Montana should increase the speed limit to 100 mph

Accepted Answer

A)  only if the marginal benefit received each day is less than $500. 
B)  as long as the marginal benefit received each day is just equal to or greater than $500. 
C)  as long as the daily marginal cost is lower than it had been before the speed limit increase. 
D)  unless the marginal benefit received falls to zero. 
A)  only if the marginal benefit received each day is less than $500. 
B)  as long as the marginal benefit received each day is just equal to or greater than $500. 
C)  as long as the daily marginal cost is lower than it had been before the speed limit increase. 
D)  unless the marginal benefit received falls to zero.

Question 16

Selling tickets to graduation ceremonies has long been a tradition among students at institutions that limit the number of guests. Suppose your classmate, Heidi, purchased two tickets for $40 each. Is this transaction economically efficient?

Accepted Answer

A)  No, people should never be allowed to sell items they received for free. 
B)  Yes, it was a voluntary exchange that benefited both parties. 
C)  No, Heidi paid too much for the tickets. 
D)  Yes, it is efficient only from the perspective of the seller and not from the perspective of the buyer. 
A)  No, people should never be allowed to sell items they received for free. 
B)  Yes, it was a voluntary exchange that benefited both parties. 
C)  No, Heidi paid too much for the tickets. 
D)  Yes, it is efficient only from the perspective of the seller and not from the perspective of the buyer.

Question 17

In the market for factors of production, firms earn income by selling goods and services to households.

Accepted Answer

A) True 
 B)False

Question 18

Jewelry manufacturers produce a range of products such as rings, necklaces, bracelets, and brooches. What fundamental economic question are they addressing by offering this range of items?

Accepted Answer

A)  How to produce goods that consumers want? 
B)  Why produce a variety of items? 
C)  What to produce? 
D)  Who to produce the items for? 
A)  How to produce goods that consumers want? 
B)  Why produce a variety of items? 
C)  What to produce? 
D)  Who to produce the items for?

Question 19

Which of the following is a positive economic statement?

Accepted Answer

A)  The inflation rate in the United States is too high. 
B)  Unemployment insurance payments increase when the unemployment rate rises. 
C)  The government should defund Obamacare. 
D)  States should be able to enact their own marijuana legalization laws. 
A)  The inflation rate in the United States is too high. 
B)  Unemployment insurance payments increase when the unemployment rate rises. 
C)  The government should defund Obamacare. 
D)  States should be able to enact their own marijuana legalization laws.

Question 20

Table 1-6
   Ivan runs a custom jewelry shop in Sparkle City. He is debating whether he should extend his hours of operation. Ivan figures that his sales revenue will depend on the number of additional hours the jewelry shop is open as shown in the table above. He would have to hire a worker for those hours at a wage rate of $25 per hour.
-Refer to Table 1-6. Using marginal analysis, how many hours should Ivan extend his 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

Exam 1: Economics: Foundations and Models

If a straight line passes through the point x = 12 and y = 4 and also through the point x = 4 and y = 8, the slope of this line is

What is a marginal benefit?

Very few businesses, and virtually no nonprofit organizations, hire economists.

An office supply store sells a ream of printer paper at a fixed price of $4.50. Which of the following is a term used by economists to describe the money received from the sale of an additional ream of paper?

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 Russian tea cake?

The prime minister of the tiny island nation of Wowza has proposed that the speed limit on its only highway be reduced by 10 miles per hour on Thursdays. Enacting this proposal would be optimal

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

Which of the following is part of an economic model?

Consumers make all economic decisions in a mixed economy.

Which of the following is an example of an activity undertaken by an entrepreneur?

Which of the following statements is true?

If the marginal cost for the state of Montana to increase the speed limit on its interstate highways to 100 mph is estimated to be $500 per day, then Montana should increase the speed limit to 100 mph

Selling tickets to graduation ceremonies has long been a tradition among students at institutions that limit the number of guests. Suppose your classmate, Heidi, purchased two tickets for $40 each. Is this transaction economically efficient?

In the market for factors of production, firms earn income by selling goods and services to households.

Jewelry manufacturers produce a range of products such as rings, necklaces, bracelets, and brooches. What fundamental economic question are they addressing by offering this range of items?

Which of the following is a positive economic statement?

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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