Question 1

Explain the difference between a firm's revenue and its profit.

Accepted Answer

The answer of Explain the difference between a firm's revenue...

Question 2

Which of the following statements about economic resources is false?

Accepted Answer

A) Economic resources include financial capital and money. 
B) Economic resources are also called factors of production. 
C) Economic resources are used to produce goods and services. 
D) Some economic resources are human-made while others are found in nature.

Question 3

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 increase to assure that inflation does not go up.

Accepted Answer

The answer of Which of the following are positive economic...

Question 4

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

Accepted Answer

A) equitably 
B) rationally 
C) emotionally 
D) selfishly

Question 5

The cost incurred from the production of an additional unit of a product

Accepted Answer

A) is a marginal cost to the firm. 
B) is called a loss. 
C) is called opportunity cost. 
D) must be zero for a firm to be efficient.

Question 6

The branch of economics which studies how households and firms interact in markets is called

Accepted Answer

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

Question 7

In the United States in 2012,the number of new,diagnosed diabetes cases was highest for people in the age range of ________,and the rate of new diabetes cases per 1,000 people was highest for people in the age range of ________.

Accepted Answer

A) 20-44;45-64 
B) 45-64;65 and older 
C) 45-64;45 - 64 
D) 65 and older;20-44

Question 8

What is the difference between physical capital and human capital?

Accepted Answer

The answer of What is the difference between physical capital...

Question 9

Productive efficiency is achieved when

Accepted Answer

A) firms add a low profit margin to the goods and services they produce. 
B) firms produce the goods and services that consumers value most. 
C) firms produce goods and services at the lowest cost. 
D) there are no shortages or surpluses in the market.

Question 10

In the market for factors of production,firms earn income by selling goods and services to households.

Accepted Answer

A) True 
 B)False

Question 11

Skeeter's Skeeball Castle has seen its business slow down ever since Kerrie's Off-Key Karaoke opened up next door.Since the opening of Kerrie's Off-Key Karaoke,the opportunity cost of playing skeeball at Skeeter's has

Accepted Answer

A) decreased. 
B) increased. 
C) fallen to zero. 
D) not changed.

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

________ 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.

Accepted Answer

A) The omitted variable 
B) The positive-to-negative relationship 
C) Reverse causality 
D) Nonlinear slope

Question 14

In economics,the total amount received for selling a good or service is referred to as

Accepted Answer

A) revenue. 
B) profit. 
C) capital gains. 
D) factor payments.

Question 15

What is technology and what factors does it depend on?

Accepted Answer

The answer of What is technology and what factors does...

Question 16

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.Using marginal analysis terminology,another economic term for the incremental cost of producing the last 300 hats is

Accepted Answer

A) marginal cost. 
B) operating cost. 
C) explicit cost. 
D) Any of the above terms are correct.

Question 17

Table 1-5
 $$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Hours } \
\text { Open }
\end{array} & \begin{array} { c } 
\text { Total Revenue } \
\text { (dollars) }
\end{array} \
\hline 1 & \$ 40 \
\hline 2 & 65 \
\hline 3 & 80 \
\hline 4 & 90 \
\hline 5 & 95 \
\hline 6 & 98 \
\hline
\end{array}$$ Julius runs a small tailor shop in the city of Bloomfield.He is debating whether he should extend his hours of operation.Julius figures that his sales revenue will depend on the number of additional hours the tailor shop is open as shown in the table above.He would have to hire a worker for those hours at a wage rate of $18 per hour.
-Refer to Table 1-5.What is Julius's marginal benefit if he decides to stay open for three hours instead of two hours?

Accepted Answer

A) $15 
B) $25 
C) $65 
D) $80

Question 18

What is the difference between accounting profit and economic profit?

Accepted Answer

The answer of What is the difference between accounting profit...

Question 19

Scenario 1-3
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 1-3.Had the firm not produced and sold the last 400 t-shirts,would its profit be higher or lower,and if so by how much?

Accepted Answer

A) Its profit would be $4,800 higher. 
B) Its profit would be $800 higher. 
C) Its profit would be $800 lower. 
D) Its profit would be $4,000 lower.

Question 20

The extra cost associated with undertaking an activity is called

Accepted Answer

A) net loss. 
B) marginal cost. 
C) opportunity cost. 
D) foregone cost.

Exam 1: Economics: Foundations and Models