ECON 1

The goal of a business is:

Maximize profit or minimize loss

What is every business in business for?

Provide a product or service

A supplier should price a product based on:

Whatever the customer will pay

What is the difference between disagreeing about a positive statement and disagreeing about a normative statement? Disagreeing about a positive statement means: Disagreeing about a normative statement means:

disputing a fact not agreeing with someone's opinion.

The single most costly item for most businesses is

employees

It is important for a good economic model to predict cause and effect so that it can:

explain events that have occurred and help anticipate future events.

You may have seen TV advertisements for products or programs that claim to teach a surefire way to make millions on the stock market. Applying the Why isn't someone already doing it? test to this situation

if there was a way to do this, everyone would be rich

Individuals or firms usually provide the goods and services people want because:

if they didn't produce goods that people want, no one would buy their goods.

The U.S. government places a subsidy on growing corn. This policy provides: This policy is designed to:

an incentive for farmers to switch their farms over to growing corn. get more corn produced so that it can be used for ethanol production.

You have an 8:30 class this morning but you are feeling extremely tired. You decide whether to get some extra sleep or go to class by:

comparing the benefit of feeling rested to the cost of missing your class.

It's Friday night. You already have a ticket to a concert, which cost you $30. A friend invites you to go out for a game of paintball instead. Admission would cost you $25, and you think you'd get $25 worth of enjoyment out of it. Your concert ticket is nonrefundable. Your opportunity cost (in dollars) of playing paintball is:

the enjoyment of the concert (since the $30 cannot be recovered)

An innovation in technology, business, or culture that had a major economic impact in your lifetime is

the internet

It is important for a good economic model to make clear assumptions so that:

the limitations of the model are clear.

Consider the events that change prices as shown in the table below. For each one, say whether the opportunity cost of consuming the affected good increases or decreases

A local movie theater offers a student discount.Movie tickets Decreases b. A tax on soft drinks passes in your state. Soft drinks Increases c. Subsidies on corn are cut in half. Corn Increases d. Your student health center begins offering flu shots for free.Flu shots Decreases

The most fundamental financial principle for any business is:​

Cash in must exceed cash out

Your boss decides to pair workers in teams and offer bonuses to the most productive team. Your boss might offer team bonuses instead of individual bonuses because:

the pressure of the team will make people work harder.

Your former neighbors gave you their lawnmower when he moved. You are thinking of using this gift to mow lawns in your neighborhood this summer for extra cash. As you think about what to charge your neighbors and whether this idea is worth your effort, the opportunity costs you need to consider include:

the sales value of the mower, the cost of gas and oil to run the mower, and what you could earn doing something else. Correct

The most valuable asset for most (if not all) businesses is

their employees

You are a student with a demanding schedule of classes. You also work part time and your supervisor allows you to determine your schedule. In this situation, your scarce resource is: In this situation, you will work:

time enough to earn some money but not too much to jeopardize your grades.

When shopping for your interview clothes, some trade-offs you face include: The opportunity cost of buying new clothes is: The benefit of buying new clothes is: You balance the two by:

time and money that could be used on other things. money that could be spend elsewhere. feeling better and having more confidence accepting costs that are less than, or no greater than, the benefits they provide.

The way a business continues to succeed over an extended period is

to differentiate the product

People confuse correlation with causation because correlation means that:

two events occur together. Since the two often occur together, people often believe that one causes the other. Correct

Your best friend has an idea for a long-distance car service to drive people across the country. Indicate the best explanation for why others have not taken advantage of her idea.

unprofitable

A good economic model is more likely to address a:

positive statement because a good model can be tested with evidence.

You and another volunteer are in charge of a bake sale for a local charity, at which you are planning to sell cookies and cupcakes a. If one of you has an absolute advantage at baking cookies or cupcakes, it means that: -one of you can produce more cupcakes (or cookies) in total with the same amount of resources than the other person. Could one of you have an absolute advantage at baking both items? -Yes, if one of you is more productive in both goods than the other. b. If one of you has a comparative advantage at baking cookies, it means that one of you: -gives up fewer cupcakes for each cookie baked. Could one of you have an comparative advantage at baking both items? -No, because each person can have a comparative advantage in only one task.

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You just received your midterm exam results and your professor wrote the following note: "You received a 70 on this exam, the average score. If you want to improve your grade, you should study more." Evaluate your professor's note. a. The first sentence is positive Correct. b. The second sentence is normative Correct.

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Determine whether each of the following statements is best explained by coincidence, an omitted variable, or reverse causation. a. In cities that have more police, crime rates are higher: Reverse causation b. Many retired people live in states where everyone uses air conditioning during the summer: An omitted variable c. More people come down with the flu during the Winter Olympics than during the Summer Olympics: An omitted variable d. For the last five years, Punxsutawney Phil has seen his shadow on Groundhog Day, and spring has come late: Coincidence .

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Determine whether each of the following statements is positive or normative. (Remember that a positive statement isn't necessarily correct; it just makes a factual claim rather than a moral judgment.) a. People who pay their bills on time are less likely than others to get into debt: Positive Correct. b. Hard work is a virtue: Normative Correct. c. Everyone should pay his or her bills on time: Normative Correct. d. China has a bigger population than any other country in the world: Positive Correct. e. China's one-child policy (which limits families to one child each) helped to spur the country's rapid economic growth: Positive Correct. f. Lower taxes are good for the country: Normative

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Each statement below is part of an economic model. Indicate whether the statement is a prediction of cause and effect or an assumption. a. People behave rationally: Assumption Correct. b. If the price of a good falls, people will consume more of that good: Prediction of cause and effect Correct. c. Mass starvation will occur as population outgrows the food supply: Prediction of cause and effect Correct. d. Firms want to maximize profits: Assumption Correct.

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For each of the pairs below, determine whether they are positively correlated, negatively correlated, or uncorrelated. a. Time spent studying and test scores: Positively correlated . b. Vaccination and illness: Negatively correlated . c. Soft drink preference and music preference: Uncorrelated . d. Income and education: Positively correlated .

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1. Suppose you are shopping for new clothes to wear to job interviews, but you're on a tight budget. In this situation, your wants are: 2. In the face of this scarcity, behaving rationally means:

1. new clothes and your constraints are limited funds. 2. buying the nicest clothing that can be afforded.

Suppose you have two job offers and are considering the trade-offs between them. Job A pays $45,000 per year and includes health insurance with two weeks of paid vacation. Job B pays $30,000 per year and includes four weeks of paid vacation but no health insurance. Which statement is true

The benefits of Job A are the extra pay and health insurance, and the benefit of Job B is two extra weeks of vacation The opportunity cost of Job A is losing out on the extra two weeks of vacation. The opportunity cost of Job B is $15,000 in lower salary, and health insurance.

A product is a quality product if it

The product satisfies the consumer for the price of they paid

Last year, you estimated you would earn $5 million in sales revenues from developing a new product. So far, you have spent $3 million developing the product, but it is not yet complete. Meanwhile, this year you have new sales projections that show expected revenues from the new product will actually be only $4 million.How much should you be willing to spend to complete the product development?

Up to $4 million

Think about how and why goods and resources are scarce. Goods and resources can be inherently scarce at all times, can be scarce on occasion due to temporary or seasonal issues, or can be artificially scarce when access to the resource is restricted. For each of the following goods and resources, indicate whether the good is artificially scarce, inherently scarce, or not scarce. a. Air regardless of quality: b. Land: c. Patented goods: d. Original Picasso paintings:

a. not scarce b. inherently scarce c. artificially scarce d. inherently scarce

Consider the following examples. For each one, say whether the incentive is positive or negative. a. Bosses who offer time-and-a-half for working on national holidays: b. Mandatory minimum sentencing for drug offenses: c. Fines for littering: d. Parents who offer their children extra allowance money for good grades:

a. positive b. negative c. negative d. positive

Two things that are positively correlated are: Two things that are negatively correlated are:

age and weight in babies. number of failing grades and likelihood of graduation

You've been put in charge of a bake sale for a local charity, at which you are planning to sell cookies and cupcakes. A production possibilities graph of this situation would show:

all of the combinations of cookies and cupcakes you are able to produce with your time and resources.

The most difficult thing a business has to do is to

convince a customer to buy the product

Your best friend has an idea for a drive-through bar. Indicate the best explanation for why others have not taken advantage of her idea.

government intervention

You manage two employees at a pet salon. Your employees perform two tasks: giving flea baths and grooming animals. If you constructed a single production possibilities frontier for flea baths and grooming that combined both of your employees' work efforts, you would expect the production possibilities frontier to be:

non-linear (not a straight line) because each worker would likely differ in her relative skills at grooming and giving flea baths and would therefore differ in the opportunity cost for performing each task.

You supervise a team of salespeople. Your employees already receive a company discount. A _________ incentive would include a reward such as a bonus, a gift certificate, or an extra discount on company merchandise to the most productive employee of the month. A _________ incentive would include an announcement that employees who fail to meet targets will lose their company discount.

positive negative

Cultures around the world use food to convey social values. This is a ________ statement. Food is the best way to understand the social values of a culture. This is a ____________ statement.

positive normative