Exam 1: Economics: Foundations and Models

Which of the following statements is false?

Which of the following statements about economic resources is false?

Every society faces economic trade-offs.This means

In market economies,income distribution is always going to be completely equitable.

Which of the following best describes an assumption economists make about human behavior?

Which of the following contributed to the downfall of the Soviet Union in 1991?

Scenario 1-1 Suppose a t-shirt manufacturer currently sells 5,000 t-shirts per week and makes a profit of $10,000 per week. A manager at the plant observes, "Although the last 400 t-shirts we produced and sold increased our revenue by $4,000 and our costs by $4,800, we are still making an overall profit of $10,000 per week so I think we're on the right track. We are producing the optimal number of t-shirts." -Refer to Scenario 1-1.Using marginal analysis terminology,what is another economic term for the incremental cost of producing the last 500 cigars?

Which of the following are positive economic statements and which are normative economic statements? a.An increase in the minimum wage causes unemployment. b.The government should raise the minimum wage above $7.25 per hour. c.The prolonged recession has caused the unemployment rate to reach a 30-year high. d.Interest rates need to be lower for the economy to emerge from the recession. e.Inflation has decreased since the onset of the recession. f.Once the recession has ended,interest rates should increased to assure that inflation does not go up.

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

What is an economic variable? Give an example of an economic variable.

The government makes all economic decisions in a centrally planned economy.

Which of the following is a positive economic statement?

Competition forces firms to produce and sell products as long as the ________ to consumers exceeds the ________ of production.

Which of the following is a normative economic statement?

Human capital refers to the accumulated skills and training that workers possess.

The number of people who have gray hair is very high among residents living in Florida.A student concludes that living in Florida causes hair to turn gray.What is the flaw in this student's reasoning?

In a centrally planned economy,the government decides how economic resources will be allocated.

In the first six months of 2003,branches of Commerce Bank in New York City were robbed 14 times.The New York City Police recommended steps the bank could take to deter robberies,including the installation of plastic barriers called "bandit barriers." The police were surprised the bank did not take their advice.According to a deputy commissioner of police,"Commerce does very little of what we recommend.They've told our detectives they have no interest in ever putting in the barriers." It would seem that Commerce bank would have a strong incentive to install "bandit barriers" to deter robberies.Why wouldn't they do it?

Tabitha shares a flea market booth with her sister.Her share of the rent is $150 per month.She is considering moving to her own,larger booth which she will not have to share with anyone.The larger booth rents for $450 per month.Recently,you ran into Tabitha in the grocery store and she tells you that she has rented the larger booth.Tabitha is as rational as any other person.As an economics major,you rightly conclude that

In a market economy,who decides what goods and services will be produced?