Exam 1: Economics: Foundations and Models

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?

In economics, choices must be made because we live in a world of

You explain to your roommate Surya, who makes beaded headbands, about an economic theory which asserts that consumers will purchase more of a product at lower prices than they will at higher prices.She contends that the theory is incorrect because over the past two years she has lowered the price of her headbands and yet has seen a decrease in sales.How would you respond to Surya?

The distribution of income primarily determines which of the fundamental economic questions?

Voluntary exchange between buyers and sellers generates ________ in a market economy.

"The distribution of income should be left to the market" is an example of a positive economic statement.

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.Had the firm not produced and sold the last 300 hats, would its profit be higher or lower, and by how much?

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?

In economics, all of the following is counted as "capital" except

In 2017, Smileytown consumed 12,000 gallons of mouthwash.In 2018, mouthwash consumption rose to 17,000 gallons.Calculate the percentage change in mouthwash consumption.

How are the fundamental economic questions answered in a market economy?

Which of the following is a microeconomic question?

The extra cost associated with undertaking an activity is called

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

Which of the following is a positive economic statement?

Markets promote

Making "how much" decisions involves

Explain the economic assumption that "people are rational."

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 should he do?

Suppose the U.S.government encouraged new medical school graduates to take over existing practices from doctors wishing to retire by paying both the new and retiring doctors $100,000.These doctors would be exemplifying the economic idea that