Econ chapter 1

Table 1-2 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 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 1-2. Using marginal analysis, determine how many hours should Julius extend his shop's hours of operations? A) 4 hours B) 2 hours C) 5 hours D) 6 hours E) 3 hours

2

An "omitted variable" is A) a variable that affects other variables and its omission from economic analysis can lead to false conclusions about cause and effect. B) a variable which is purposely omitted from an economic analysis. C) a variable that has no impact on other variables in an economic analysis. D) a variable which is inadvertently omitted from an economic analysis.

A

Holding all other personal characteristics-such as age, gender, and income-constant, economists would expect that A) people without health insurance will be less likely to be overweight than people with health insurance. Incorrect Response B) there is no correlation between not having health insurance and being overweight. C) people without health insurance will be equally likely to be overweight as people with health insurance. D) people without health insurance will be more likely to be overweight than people with health insurance.

A

Tabitha shares a flea market booth with her sister. Her share of the rent is $150 per month. She is considering moving to her own, larger booth which she will not have to share with anyone. The larger booth rents for $450 per month. Recently, you ran into Tabitha in the grocery store and she tells you that she has rented the larger booth. Tabitha is as rational as any other person. As an economics major, you rightly conclude that A) Tabitha figures that the additional benefit of having her own booth (as opposed to sharing) is at least $300. B) the cost of having one's own booth outweighs the benefits. C) Tabitha figures that the benefit of having her own booth (as opposed to sharing) is at least $450. D) Tabitha did not have a choice; her sister was overcharging her.

A

The U.S. Health Resources and Services Administration (HRSA) forecasts that in 2020 A) there will be a shortage of doctors in the United States. B) the number of doctors in the United States will decrease and the number of doctors needed will increase. C) the number of doctors in the United States will increase and the number of doctors needed will decrease. D) there will be a surplus of doctors in the United States.

A

The decision about what goods and services will be produced made in a centrally-planned economy is made by A) lawmakers in the government deciding on what will be produced. B) workers deciding to produce only what the boss says must be produced. C) consumers and firms choosing which goods and services to buy or produce. D) producers deciding what society wants most. E) consumers dictating to firms what they need most.

A

What does the term "marginal" mean in economics? A) an additional or extra B) illegal C) the edge of a market D) secondary E) trivial

A

Market

A group of a good or service and the institution or arrangement by which they come together to trade

Economics model

A simplified version of reality used to analyze real world economic situations

Productive efficiency

A situation in which a good or service is produced at the lowest possible cost

Scarcity

A situation in which unlimited wants exceed the limited resources avaible to fufill thoses wants

Voluntary exchange

A situation that occurs markets when both the buyer and the seller of a product are made better off by the transaction

Allocative efficiency

A state of the economy in which production is in accordance with consumer preference in particular every good pr 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

Market economy

An economy in which decisions of households and firm interacting in markets allocate economic resources

Mixed economy

An economy in which most economic decisions result from the interaction of buyers and sellers in market but in which the government plays a significant role in the allocation of resources

Centrally planed economy

An economy in which the government decides how economic resources will allocated

Positive analysis

Analysis concerned with what is

Normative analysis

Analysis concerned with what ought to be

Marginal analysis

Analysis that involves comparing marginal benefits and marginal coasts

Selling tickets to graduation ceremonies has long been a tradition among students at institutions that limit the number of guests. Suppose your classmate, Heidi purchased two tickets for $40 each. Is this transaction economically efficient? A) No, people should never be allowed to sell items they received for free. B) Yes, it was a voluntary exchange that benefited both parties. C) Yes, it is efficient only from the perspective of the seller and not from the perspective of the buyer. D) No, Heidi paid too much for the tickets.

B

Suppose when the price of hybrid automobiles rises, consumers buy fewer hybrid automobiles. This implies that A) there is a positive relationship between hybrid automobile prices and quantities purchased by consumers. Correct B) there is a negative relationship between hybrid automobile prices and quantities purchased by consumers. C) there is a one-to-one relationship between hybrid automobile prices and quantities purchased by consumers. D) there is a direct relationship between hybrid automobile prices and quantities purchased by consumers.

B

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

B

You explain to your friend Haslina, who runs a catering service called "Meals in a Zip," about an economic theory which asserts that consumers will purchase less of a product at higher prices than they will at lower prices. She contends that the theory is incorrect because over the past two years she has raised the price of her catered meals and yet has seen a brisk increase in sales. How would you respond to Haslina? A) I will explain to her that she is making the error of reverse causality: it is the increase in demand that has enabled her to raise her prices. B) I will explain to her that there are some omitted variables that have contributed to an increase in her sales such as changes in income. C) Haslina is making the mistake of assuming that correlation implies causation. D) Haslina is right; she has evidence to back her claim. The theory must be erroneous.

B

Allocative efficiency is achieved when A) goods and services are fairly distributed among consumers in an economy. B) firms produce goods and services at the lowest cost. C) firms produce the goods and services that consumers value most. D) there are no shortages or surpluses in the market.

C

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 the marginal cost of completing the task? A) $1,000 B) $1,000 plus the value of her time C) $200 D) $500

C

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

C

In economics, tangible merchandise is referred to as A) human capital. B) services. C) goods. D) invention.

C

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 ________. A) increase; valued more than others B) reduce; valued more than others C) reduce; not as highly valued as others D) increase; not as highly valued as others

C

Which of the following contributed to the downfall of the Soviet Union in 1991? A) the lack of a strong dictator who can coordinate economic activities B) an overabundance of high-quality goods and services C) an inability to produce low-cost consumer goods that households wanted D) government dissatisfaction with high living standards and political freedom

C

According to the Centers for Disease Control and Prevention, ________ in 2013 in which less than 20 percent of the population was considered obese. A) Colorado was the only state B) there were only 5 states C) there were more than 25 states D) there were no states

D

How does a market system prevent people from getting as many goods and services as they wish? A) Governments interfere with the market mechanism to influence the allocation of goods and services. B) The government imposes taxes on those who earn beyond a certain amount of income. Incorrect Response C) In a market system, firms can charge any price they want, thus preventing poor people from getting as many goods and services as they wish. D) The market system allocates goods and services to those who are able to pay for those products and therefore income is a limiting factor.

D

Which of the following is a problem inherent in centrally planned economies? A) Unemployment is too high. B) There is too much production of low-cost, high-quality goods and services. C) There are no problems and everyone, including consumers, is satisfied. D) Production managers are more concerned with satisfying government's orders than with satisfying consumer wants.

D

Which of the following is not an example of an efficiency-equity trade-off faced by economic agents? A) Some U.S. colleges cut back on merit scholarships since these programs siphon money from need-based programs, thus harming lower-income students with greater financial need. Incorrect Response B) 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. C) The growing demand for corn by ethanol producers has led to a surge in the price of tortillas, a staple in the Mexican diet. To quell public outcry over rising tortilla prices, the Mexican government released government corn stocks at prices well below the market, and pressured states to impose price ceilings on tortillas. D) 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.

D

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 is his marginal cost to complete the restoration? A) $125 B) $75 C) $300 D) $200

D

f the price of pineapple juice was $4.50 a gallon and it is now $5.75 a gallon, what is the percentage change in price? A) 57.5 percent B) 12.5 percent C) 7.8 percent D) 27.7 percent

D

Microeconomics

Focuses on individual parts of the economy. Aldo The study of how households and firms make choices how they interact in markets and how the government attempts to influence their choices

Marginal dose

Is the reduction in your test score form having studied it less.

Marginal benefit of watching tv

Marginal benefit of watching tvMarginal benefit of watching tv

What are the 3 basic economic illustrations

Production, markets, simple market economy

Marginal benefit

The extra (additional ) benefit of consuming 1 or more unit of some good or service

Marginal cost

The extra (additional) cost of producing 1 more unit of output

Trade off

The idea that because of scarcity producing more of one good or service means producing less of another good or service

Utility

The pleasure happiness or satisfaction one gets an economic decisions

Equity

The process of distributing scarce resources fairly among members affected by economic decisions

Efficiency

The process of getting the most utility from scarce resources in an economic decision

Economics

The study of the choices people make to attain their goals given their scarce resources

Macroeconomic

The study of the economy as a whole including topics such as inflation unemployment and economic growth

Opportunity cost

the higher valved alternative that must be given up to engage in an activity