micro chapter 1

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

Economics promotes which of the following as the way to make the best decision?

Continue an enjoyable activity up to the point where its marginal benefit equals its marginal cost.

Which of the following is a normative economic statement?

Fashion designers should be allowed to copyright designs to promote innovation.

Which of the following is motivated by an efficiency concern?

Following a six-month drought, a city banned homeowners from watering their lawns in an effort to conserve water.

Which of the following is a microeconomics question?

How will Apple decide on a selling price for the iPad?

Your roommate, Serafina, a psychology major, said, "The problem with economics is that it assumes that consumers and firms always make the correct decision. But we know that everyone's human, and we all make mistakes." Do you agree with her comment?

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

Which of the following is a positive economic statement?

If the price of gasoline rises, a smaller quantity of it will be bought

What is an economic model?

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

Which of the following contributes to the efficiency of markets?

Markets promote competition and voluntary exchange.

Which of the following statements is true about revenue?

Revenue is the total amount received for selling a good or service

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.

Which of the following is a macroeconomics question?

What determines the unemployment rate?

The term "market" in economics refers to

a group of buyers and sellers of a product and the arrangement by which they come together to trade.

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.

allocative efficiency

What does the term "marginal" mean in economics?

an additional or extra

Which of the following is part of an economic model?

assumptions

Voluntary exchange increases economic efficiency

because neither the buyer nor the seller would agree to a trade unless they both benefit.

Economics is the study of the ________ people make to attain their goals, given their ________ resources.

choices; scarce

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

consumers and producers

There is often a trade-off between

efficiency and equity

________ occurs when economic benefits are distributed fairly.

equity

Allocative efficiency is achieved when

firms produce the goods and services that consumers value most

The branch of economics which studies the behavior of entire economies and policies that affect the economy as a whole is called

macroeconomics.

Competition forces firms to produce and sell products as long as the ________ to consumers exceeds the ________ of production.

marginal benefit; marginal cost

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

microeconomics

If a straight line passes through the point x = 12 and y = 4 and also through the point x = 4 and y = 8, the slope of this line is

negative one half.

In 2010, Smileytown consumed 50,000 tubes of toothpaste. In 2011, toothpaste consumption rose to 62,000 tubes. Calculate the percentage change in toothpaste consumption.

new- old then divided by old 24%

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

productive efficency

Competition among sellers generates

productive efficiency

Economists assume that rational people

respond to economic incentives.

Which of the following is an example of an activity undertaken by an entrepreneur?

starting your own snow cone business

The processes used to produce goods and services describes

technology

Human capital refers to

the accumulated skills and training workers have

Which of the following is counted as "capital" in economics?

the machines workers have to work with

scarcity

unlimited wants and exceed limited resources