Econ 202

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?

Sell for 200

Refer to Table 1-2. What is Julius's marginal cost if he decides to stay open for three hours instead of two hours?

$18

The Stogie Shop, a cigar store in the mall, sells hand-rolled cigars for $10.00 and machine-made cigars for $2.50 each. What is the opportunity cost of buying a hand-rolled cigar?

4 machine made cigars

The decision about what goods and services will be produced in a centrally planned economy is made by

Government

Scarcity refers to the situation in which

unlimited wants exceed limited resources

Refer to Table 1-3. Using marginal analysis, how many hours should Ivan extend his hours of operations?

5 hours

Which of the following is a macroeconomic question?

What determines the unemployment rate?

Lionel's Lawn Care is a company that maintains residential yards. Lionel's cost for his standard package of mowing, edging, and trimming is $15, and he charges $25 for this service. For a total price of $40, Lionel will also trim shrubs, a service that adds an additional $10 to the total cost of the standard package. What is Lionel's marginal cost of adding the shrub-trimming service to the standard package?

$10

Cassie's Quilts alters, reconstructs, and restores heirloom quilts. Cassie has just spent $800 purchasing, cleaning, and reconstructing an antique quilt which she expects to sell for $1,500 once she is finished. After having spent $800, Cassie discovers that she would need some special period fabric that would cost her $200 in material and time in order to complete the task. Alternatively, she can sell the quilt "as is" now for $900. What is her marginal benefit if she sells the quilt "as is" now?

$900

Which of the above statements demonstrates that economic agents respond to incentives? a. Soda drinkers purchase more soda from a grocery store that sells soda at a lower price than other rival grocery stores in the area. b. Homeowners do not take steps to increase security even though they believe it is more costly to allow burglaries than to install security monitoring equipment. c. Manufacturers produce less of a particular cell phone when its selling price rises.

A and C ?

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

Diana is trying to decide if she should open her pet shop on Sundays.

All of the following questions or statements regarding tariffs are positive except

Economic analysis can show the size of the loss of economic efficiency from the imposition of a tariff

________ occurs when economic benefits are distributed fairly.

Equity

What is an economic model?

It is a simplified version of some aspect of economic life used to analyze an economic issue.

Refer to Scenario 1-1. 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?

Its profit will be $800 higher.

Which of the following is motivated by an equity concern?

Some U.S. colleges have cut back on merit scholarships since these programs siphon money from need-based programs, thus harming lower-income students with greater financial need.

How are the fundamental economic decisions determined in Cuba?

The government decides because Cuba is a centrally planned economy.

How does a market system prevent people from getting as many goods and services as they wish?

The market system allocates goods and services to those who are able to pay for those products and therefore income is a limiting factor.

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

They assume that rational behavior is useful in explaining choices people make even though people may not behave rationally all the time.

Lionel's Lawn Care is a company that maintains residential yards. Lionel's cost for his standard package of mowing, edging, and trimming is $15, and he charges $25 for this service. For a total price of $40, Lionel will also trim shrubs, a service that adds an additional $10 to the total cost of the standard package. Should Lionel continue to offer the shrub-trimming service?

Yes, his marginal benefit is greater than his marginal cost

A primary role of ________ is to describe how choices are made, analyze the results of those choices, and advise on how better decisions can be made.

a market economy

Productive efficiency is achieved when firms produce goods and services

at the lowest cost

Dr. Goldfinger decides to invest in companies which he believes can "improve the productivity and efficiency" of health care services. How can Dr. Goldfinger strive to achieve this productive efficiency?

by investing in companies that produce goods and services at the lowest possible cost

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

consumers and producers

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

forecasting production trends in the Pacific Northwest

Dr. Goldfinger decides to invest in companies which he believes can "improve the productivity and efficiency" of health care services. What would Dr. Goldfinger need to do to try to achieve allocative efficiency?

invest in companies that produce goods and services based on consumer preferences

An office supply store sells a ream of printer paper at a fixed price of $4.50. Which of the following is a term used by economists to describe the money received from the sale of an additional ream of paper?

marginal revenue

One reason some manufacturing companies began moving production to China in the early 2000s was due to lower wages that could be paid to Chinese workers. Moving manufacturing to China to take advantage of lower wages so goods could be produced at a lower cost than if produced in the United States exemplifies which key economic idea?

people respond to economic incentives

When goods and services are produced at the lowest possible cost, ________ occurs.

productive efficiency

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

public dissatisfaction with low living standards and political repression

In a market economy, those who are willing and able to buy what is produced

receive the most of what is produced.

It is necessary for all economic systems to provide people with goods and services and also restrict them from getting as much of these goods and services as they wish, because failure to do this could ________ the efficiency of the system by producing some goods and services that are ________.

reduce; not as highly valued as other

Economists assume that rational people

respond to economic incentives