Exam 1: Economics Foundations and Models

Positive analysis is concerned with 'what ought to be,' while normative analysis is concerned with 'what is.'

The highest valued alternative that must be given up to engage in an activity is the definition of

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?

Which of the following are positive economic statements and which are normative economic statements? a. An increase in the price of petrol will decrease the quantity of petrol 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 favour 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.

________ is a problem that occurs when one concludes that a change in variable X caused a change in variable Y when in actual fact, it is a change in variable Y that caused a change in variable X.

What is a marginal cost?

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

If a straight line passes through the point x = 14 and y = 3 and also through the point x = 4 and y = 10, the slope of this line is

The extra cost associated with undertaking an activity is called

Mr. Peabody chooses to invest in companies that produce goods and services based on consumer preferences. Mr. Peabody is investing in companies that are attempting to be

Which of the following is a result of a market economy?

Soo Jin shares a one-bedroom apartment with her classmate. Her share of the rent is $700 per month. She is considering moving to a studio apartment which she will not have to share with anyone. The studio apartment rents for $950 per month. Recently, you ran into Soo Jin on campus and she tells you that she has moved into the studio apartment. Soo Jin is as rational as any other person. As an economics major, you rightly conclude that

What is voluntary exchange?

'The distribution of income should be determined by the government' is an example of a positive economic statement.

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?

Define productive efficiency. Does productive efficiency imply allocative efficiency? Explain.

Society faces a trade-off in all of the following situations except

Which of the following is part of an economic model?

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

Which of the following statements is true about scarcity?