Econ 110 (AlHamdi) HW1

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? a. 4 machine-made cigars b. one-quarter of a machine-made cigar c. $10.00 d. $2.50

a.

When every good or service is produced up to the point where the last unit provides a marginal benefit to society equal to the marginal cost of producing it, ________ occurs. a. allocative efficiency b. productive efficiency c. equity d. efficient central planning

a.

Which of the following is part of an economic model? a. assumptions b. norms c. opinions d. preferences of economic agents

a.

Economists assume that rational people a. never use all available information as they act to achieve their goals. b. undertake activities that benefit others and hurt themselves. c. only weigh the benefits and costs of the most desirable alternative actions. d. respond to economic incentives.

d.

"An increase in the price of oranges will increase the demand for grapefruits." This statement is an example of a normative economic statement. True False

false

As population declines, scarcity eventually disappears. True False

false

Examining the conditions that could lead to inflation in an economy is an example of a microeconomics topic. True False

false

Which of the following is a normative economic statement? a. Tobacco products should be banned in all public spaces. b. The increase in tobacco taxes has caused an increase in the price of cigarettes. c. Better awareness of health risks has decreased tobacco use. d. A reduction in tobacco subsidies has caused the price of tobacco to increase.

a.

Economics is the study of the ________ people make to attain their goals, given their ________ resources. a. purchases; unlimited b. choices; scarce c. income; available d. decisions; household

b.

In a market economy, those who are willing and able to buy what is produced a. receive what the government allows them to receive. b. receive the most of what is produced. c. receive no more than everyone else in the market. d. solely determine what is produced.

b.

Marginal cost is the ________ associated with a particular increase in an activity. a. total cost b. additional cost c. opportunity cost d. forgone cost

b.

Suppose the U.S. government encouraged new teachers to take jobs in underperforming schools by paying the new teachers a $20,000 bonus. These teachers would be exemplifying the economic idea that a. people are rational. b. people respond to economic incentives. c. optimal decisions are made at the margin. d. equity is more important than efficiency.

b.

The branch of economics which studies how households and firms make choices, interact in markets, and how government attempts to influence their choices is called a. macroeconomics. b. microeconomics. c. positive economics. d. normative economics.

b.

What does the term "marginal" mean in economics? a. the edge of a market b. an additional or extra c. illegal d. secondary

b.

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 below. Using marginal analysis, how many hours should Eva extend her bakery's hours of operations? Hours Open Total Revenue (dollars) 1 $35 2 60 3 80 4 92 5 100 6 105 a. 2 hours b. 3 hours c. 4 hours d. 5 hours

c.

Every society faces economic trade-offs. This means a. some people live better than others do. b. not everyone can have enough goods to survive. c. producing more of one good means less of another good can be produced. d. society's output cannot be made available to all.

c.

In a market economy, who decides what goods and services will be produced? a. only the producers b. only consumers c. consumers and producers d. the government

c.

Refer to below. Calculate the area of the triangle A. a. $8.4 million b. $6.3 million c. $3.15 million d. $2.1 million

c.

The processes used to produce goods and services describes a. innovation. b. entrepreneurship. c. technology. d. capital

c.

Optimal decisions are made at the point where marginal benefit is maximized. True False

false