Exam 1: Economics: Foundations and Models

Consider the following statements: A.Car owners purchase more gasoline from a gas station that sells gasoline at a lower price than other rival gas stations in the area. B.Banks do not take steps to increase security since they believe it is less costly to allow some bank robberies than to install expensive security monitoring equipment. C.Firms produce more of a particular DVD when its selling price rises. Which of the above statements demonstrates that economic agents respond to incentives?

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

Which of the following are positive economic statements and which are normative economic statements? a.An increase in the price of gasoline will decrease the quantity of gasoline purchased. b.The government should eliminate the minimum wage. c.All states should raise the minimum wage to at least $10 per hour. d.The government should scrap its current income tax structure in favor of a flat tax. e.Unemployment has increased since the onset of the recession. f.The government should not bail out investment banks during a financial crisis.

A college must decide if it wants to offer more Internet-based classes.This decision involves answering the economic question of "what to produce."

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.

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.If governments increased equity by reducing the incomes of high-income people and increasing the incomes of the poor, would it be possible that fewer goods and services would be produced and less saving would take place?

The government makes all economic decisions in a mixed economy.

When Mr.Peabody decides on the companies to which he will donate his time and money, a ________ issue is being addressed.

Consider the following economic agents: A.the government B.consumers C.producers Who, in a market economy, decides what goods and services will be produced with the scarce resources available in that economy?

Which of the following is a macroeconomic question?

A restaurant sells a large soft drink at a fixed price of $1.79.A term used by economists to describe the money received from the sale of an additional large soft drink is

Scenario 1-2 Suppose a hat manufacturer currently sells 2,000 hats per week and makes a profit of $5,000 per week. The plant owner observes, "Although the last 300 hats we produced and sold increased our revenue by $1,000 and our costs by $1,100, 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 hats." -Refer to Scenario 1-2.Using marginal analysis terminology, another economic term for the incremental revenue received from the sale of the last 300 hats is

Which of the following is a microeconomic question?

Which of the following statements about competition in a market is true?

What is an entrepreneur, and what decisions does an entrepreneur make in a market system?

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?

Suppose the extra cost to a city of lowering the speed limits in all school zones by 10 mph is $10,000 per year.Then, the city should lower the school-zone speed limits by 10 mph if doing so results in an additional benefit of less than $10,000 per year.

Which of the following is not an example of an economic trade-off that a firm has to face?

Which of the following generates productive efficiency?

The term "market" refers to trading arrangements by which buyers and sellers come together.