Question 1

Which of the following is a microeconomic question?

Accepted Answer

A)  Why do economies experience periods of high inflation? 
B)  Will Federal Reserve intervention lower the inflation rate? 
C)  Why has growth in the economy increased since the end of the recession? 
D)  Will the merger of American Airlines and US Airways increase or decrease airfares?

Question 2

If the price of gasoline was $3.25 a gallon and it is now $3.75 a gallon,what is the percentage change in price?

Accepted Answer

A)  7.1 percent 
B)  13.3 percent 
C)  15.4 percent 
D)  33.3 percent

Question 3

All economic questions arise from the fact that resources are unlimited.

Accepted Answer

A) True 
 B)False

Question 4

Of the following examples,which would most likely be performed by an economist working for the Federal Reserve Bank of San Francisco?

Accepted Answer

A)  using economic models to analyze crime rates in Central America 
B)  forecasting production trends in the Pacific Northwest 
C)  analyzing data related to European antitrust laws 
D)  assessing whether immigration policy has affected population numbers in Massachusetts

Question 5

Which of the following is an example of a "how much" decision?

Accepted Answer

A)  Dinah's Diner is only open for breakfast and lunch. Dinah is trying to decide whether to open for dinner as well. 
B)  Zander has torn up his front yard and is debating whether to plant grass or install a rock garden. 
C)  You received a nice birthday check from your grandmother and are deciding on whether to spend it on a trip to New York or a trip to San Francisco. 
D)  Sergio quit his job to go back to school full time.

Question 6

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 this necessarily increase efficiency?

Accepted Answer

A)  Yes, efficiency always increases when the income gap between the rich and poor is reduced. 
B)  Yes, because equity and efficiency are the same. 
C)  No, it is impossible to have an equitable distribution of income which is also efficient. 
D)  No, a more equitable distribution of income may reduce efficiency

Question 7

Table 1-4
 $\begin{array}{|c|c}
\hline \begin{array}{c}
\text { Hours } \
\text { Open }
\end{array} & \begin{array}{c}
\text { Total Revenue } \
\text { (dollars) }
\end{array} \
\hline 1 & \$ 35 \
\hline 2 & 60 \
\hline 3 & 80 \
\hline 4 & 92 \
\hline 5 & 100 \
\hline 6 & 105 \
\hline
\end{array}$ Eva runs a small bakery in the village of Roggerli. She is debating whether she should extend her hours of operation. Eva figures that her sales revenue will depend on the number of additional hours the bakery is open as shown in the table above. She would have to hire a worker for those hours at a wage rate of $12 per hour.
-Refer to Table 1-4.What is Eva's marginal cost if she decides to stay open for two hours instead of one hour?

Accepted Answer

A)  $12 
B)  $24 
C)  $36 
D)  $71

Question 8

If it costs Hobie $900 to produce 5 lamps and $1,200 to produce 6 lamps,then the difference of $300 is the marginal cost of producing the 5th lamp.

Accepted Answer

A) True 
 B)False

Question 9

A college must decide if it wants to offer more evening and weekend classes.This decision involves answering the economic question of "for whom to produce."

Accepted Answer

A) True 
 B)False

Question 10

If a graph has a line that shows the quantity of flat-screen televisions sold in the last five years,it is known as

Accepted Answer

A)  a pie chart. 
B)  a time-series graph. 
C)  a demand curve for outsourcing. 
D)  a supply curve of outsourcing.

Question 11

Which of the following are primarily macroeconomic topics and which are primarily microeconomic topics?
a.college tuition rates
b.farm subsidies
c.national income
d.automobile prices
e.air traffic congestion
f.economic recession

Accepted Answer

The answer of Which of the following are primarily macroeconomic...

Question 12

Making "how much" decisions involves

Accepted Answer

A)  calculating the total benefits of the activity and determining if you are satisfied with that amount. 
B)  calculating the total costs of the activity and determining if you can afford to incur that expenditure. 
C)  calculating the average benefit and the average cost of an activity to determine if it is worthwhile undertaking that activity. 
D)  determining the additional benefits and the additional costs of that activity.

Question 13

Which of the following is an example of an efficiency-equity trade-off faced by economic agents?

Accepted Answer

A)  According to an article by in the American Journal of Public Health by Edward Kaplan and Michael Merson of Yale University School of Medicine, the federal government's current method of allocating HIV-prevention resources is not cost-effective. Instead of allocating resources to states in proportion to reported AIDS cases, resources should flow first to those activities that prevent more infections per dollar and then to less and less effective combinations of programs and populations until funds are exhausted, even if it means that some populations would be left without any prevention services. 
B)  Concerned about the falling birth rate, the French government has pledged more money for families with three children, in an effort to encourage working women to have more babies. 
C)  Some U.S. colleges are actively recruiting foreign students for their technology-based programs. 
D)  All New York City art museums are considering adopting a free-admission policy for local residents one weekend per month.

Question 14

The idea that because of scarcity,producing more of one good or service means producing less of another good or service refers to the economic concept of

Accepted Answer

A)  optimization. 
B)  efficiency. 
C)  a trade-off. 
D)  equity.

Question 15

Which of the following statements about the economic decisions consumers,firms,and the government have to make is false?

Accepted Answer

A)  Governments face the problem of scarcity in making economic decisions. 
B)  Only individuals face scarcity; firms and the government do not. 
C)  Both firms and individuals face scarcity. 
D)  Each faces the problem of scarcity which necessitates trade-offs in making economic decisions.

Question 16

The branch of economics which studies the behavior of entire economies and policies that affect the economy as a whole is called

Accepted Answer

A)  public economics. 
B)  microeconomics. 
C)  macroeconomics. 
D)  normative economics.

Question 17

Zane's Vanes is a service that restores old weather vanes.Zane has just spent $125 purchasing a 1920s-era weather vane which he expects to restore and sell for $500 once the work is completed.After having spent $125,Zane realizes that he will need to spend an additional $200 on materials to complete the restoration.Alternatively,he can sell the weather vane without restoring it for $200.What should he do?

Accepted Answer

A)  He should sell the weather vane now to make the most profit. 
B)  It does not matter what he does; he is going to take a loss on the project. 
C)  He should finish the restoration and then sell the weather vane. 
D)  He should sell the weather vane back to the party he purchased it from and cut his losses.

Question 18

When voluntary exchange takes place,only one party gains from the exchange.

Accepted Answer

A) True 
 B)False

Question 19

Figure 1-5
 
-Refer to Figure 1-5.Calculate the area of the triangle A.

Accepted Answer

A)  $8.4 million 
B)  $6.3 million 
C)  $3.15 million 
D)  $2.1 million

Question 20

Which of the following is a positive economic statement?

Accepted Answer

A)  Everyone should live at the same standard of living. 
B)  If the price of gasoline rises, a smaller quantity of it will be bought. 
C)  The government should close income tax loopholes. 
D)  U.S. firms should not be allowed to outsource production of goods and services.

Exam 1: Economics: Foundations and Models

Which of the following is a microeconomic question?

If the price of gasoline was $3.25 a gallon and it is now $3.75 a gallon,what is the percentage change in price?

All economic questions arise from the fact that resources are unlimited.

Of the following examples,which would most likely be performed by an economist working for the Federal Reserve Bank of San Francisco?

Which of the following is an example of a "how much" decision?

If it costs Hobie $900 to produce 5 lamps and $1,200 to produce 6 lamps,then the difference of $300 is the marginal cost of producing the 5th lamp.

A college must decide if it wants to offer more evening and weekend classes.This decision involves answering the economic question of "for whom to produce."

If a graph has a line that shows the quantity of flat-screen televisions sold in the last five years,it is known as

Which of the following are primarily macroeconomic topics and which are primarily microeconomic topics? a.college tuition rates b.farm subsidies c.national income d.automobile prices e.air traffic congestion f.economic recession

Making "how much" decisions involves

Which of the following is an example of an efficiency-equity trade-off faced by economic agents?

The idea that because of scarcity,producing more of one good or service means producing less of another good or service refers to the economic concept of

Which of the following statements about the economic decisions consumers,firms,and the government have to make is false?

The branch of economics which studies the behavior of entire economies and policies that affect the economy as a whole is called

When voluntary exchange takes place,only one party gains from the exchange.

Figure 1-5 -Refer to Figure 1-5.Calculate the area of the triangle A.

Which of the following is a positive economic statement?