Exam 1: Economics: Foundations and Models

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.What is Lydia's marginal cost if she decides to stay open for an extra two hours instead of one hour?

Pookie's Pinball Palace restores old Pinball machines.Pookie has just spent $300 purchasing and cleaning a 1960s-era machine which he expects to sell for $2,000 once he is finished with the restoration.After having spent $300, Pookie discovers that he will need to rewire the entire machine at a cost of $1,100 in order to finish the restoration.Alternatively, he can sell the machine "as is" now for $1,000.What is the marginal cost of completing the task?

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

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?

One desirable outcome of a market economy is that it leads to a more equitable distribution of income.

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

Suppose that some investors have decided that economic and financial uncertainty have made the prospect of investing in domestic stock markets more risky than investing in foreign stock markets, and therefore choose to invest in foreign markets.By using all available information as they act to achieve their goals, these investors are exemplifying the economic idea that

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

Which of the following statements is true?

What is the difference between positive economic analysis and normative economic analysis? Give one example each of a positive and normative economic issue or question or statement.

In economics, the accumulated skills and training that workers have is known as

What is the "omitted variable" problem in determining cause and effect?

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

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

Macroeconomics is the study of

The three fundamental questions that any economy must address are:

What is meant by the statement that "optimal decisions are made at the margin"?

The revenue received from the sale of ________ of a product is a marginal benefit to the firm.

When every good or service is produced up to the point where the last unit provides ________, allocative efficiency occurs.

Suppose the U.S.government encouraged consumers to trade in their old automobiles for more efficient, new models by paying up to $5,000 for the old automobiles.These consumers who did trade in their old automobiles to take advantage of the government offer would be exemplifying the economic idea that