Exam 1: Economics Foundations and Models

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

________ have a horizontal and a vertical axis and are used in economics to illustrate relationships between two economic variables.

The ________ the sale of an additional unit of a product is a marginal benefit to the firm.

The sales revenue a seller receives from the sale of an additional unit of goods is called the marginal benefit.

Allocative efficiency best explains ________, and productive efficiency best explains ________.

Allison's Auto Art is a company that applies pinstripes to vehicles. Allison's cost for a basic 1-colour pinstriping job is $35, and she charges $95 for this service. For a total price of $175, Allison will apply a fancier 3-colour 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-colour application to the 3-colour application?

The government makes all economic decisions in a market economy.

Suppose when the price of laptops falls, university students buy more laptops. This implies that

When voluntary exchange takes place, neither party gains from the exchange.

Assume that a doctor can earn an additional $20 000 of revenue each year from keeping his office open for one additional hour per week. What must the additional cost of keeping the office open this additional hour per week be to make staying open for the extra hour economically rational?

Consider the following statements: a. Consumers buy more MP3 players from an electronics store that sells MP3 players at a lower price than other rival electronics stores in the area. B. Schools take steps to increase security since they believe it is more costly to allow vandalism than to hire additional security guards. C. Citrus growers produce more oranges when the selling price of oranges falls. Which of the above statements demonstrates that economic agents respond to incentives?

The three fundamental questions that any economy must address are

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?

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

Economics does not study correct or incorrect behaviours but rather it assumes that economic agents behave ________, meaning they make the best decisions given their knowledge of the costs and benefits.

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

Arlene quits her $125 000-a-year job to take care of her ailing parents. What is the opportunity cost of her decision?

Macroeconomics is the study of

Which of the following statements about positive economic analysis is false?

On a two-dimensional graph, ________ allows for the effects of additional variables.