1st Chapter Review
DeShawn's Detailing is a service that details cars at the customers' homes or places of work.DeShawn's cost for a basic detailing package is $40, and he charges $75 for this service. For a total price of $90, DeShawn will also detail the car's engine, a service that adds an additional $20 to the total cost of the package. What is the marginal cost of adding the engine detailing to the basic detailing package? A)$20 B)$30 C)$60 D)$60 plus the value of his time
A) $20
In economics, the term ________ means "additional" or "extra." A)marginal B)allocative C)equity D)optimal
A) Marginal
One reason some manufacturing companies have moved production from China to other overseas locations is because of the tariffs implemented by the Trump administration on Chinese imports. Company managers using all available information, including the tariffs on Chinese imports, when making the decision to move production out of China and into other foreign nations exemplifies which key economic idea? A)People are rational. B)The market system relies on the principle of voluntary exchange. C)Optimal decisions are made at the margin. D)People respond to economic incentives.
A) People are rational
In 2018, two members of Congress introduced the Stop Bad Employers by Zeroing Out SubsidiesAct, which would tax firms whose employees receive government assistance. These members of Congress thought this legislation would give firms a reason to raise employee wages so fewer employees would receive government assistance. These members of Congress were counting on firms reacting to which key economic idea? A)People respond to economic incentives. B)Optimal decisions are made at the margin. C)The market system relies on the principle of voluntary exchange. D)People are allocatively efficient.
A) People respond to economic incentives
The highest-valued alternative that must be given up to engage in an activity is the definition of A)marginal benefit. B)opportunity cost. C)economic equity. D)marginal cost.
B) Opportunity Cost
In economics, the term "equity" means A)only elected officials have high standards of living. B)everyone has an equal standard of living. C)economic benefits are distributed fairly. D)the hardest working individuals consume all they want.
C) Economic benefits are distributed fairly
All of the following questions or statements regarding tariffs are positive statements except: A)Economic models can be used to estimate the dollar amounts lost by the losers from the imposition of a tariff. B)Economic models can be used to estimate the dollar amounts gained by the winners from the imposition of a tariff. C)Economic analysis can show the size of the loss of economic efficiency from the imposition of a tariff. D)Economic analysis can, by itself, decide whether a tariff proposal should be enacted.
D) Economic analysis can, by itself, decide whether a tariff proposal should be enacted
The Coffee Nook, a small cafe near campus, sells cappuccinos for $2.50 and Russian tea cakes for$1.00 each. What is the opportunity cost of buying a Russian tea cake? A)2/5 of a cappuccino B)$1.00 C)$2.50 D)2 1/2 cappuccinos
A) 2/5 of a cappuccino
Which of the following is a positive economic statement? A)If the price of iPhones falls, a larger quantity of iPhones will be purchased. B)The standard of living in the United States should be higher. C)The government should revamp the health care system. D)The U.S. government should not have bailed out U.S. auto manufacturers.
A) If the price of iPhones falls, a larger quantity of iPhones will be purchased
Economists reason that the optimal decision is to continue any activity up to the point where the A)marginal benefit equals the marginal cost. B)marginal benefit is greater than the marginal cost. C)marginal benefit is zero. D)marginal cost is zero.
A) Marginal Benefit equals the marginal cost
In economics, the term ________ refers to a group of buyers and sellers of a product and the arrangement by which they come together to trade. A)market B)collective C)cooperative D)trade-off
A) Market
An economic ________ is a simplified version of some aspect of economic life used to analyze aneconomic issue. A)model B)variable C)market D)trade-off
A) Model
Soo Jin shares a one-bedroom apartment with her classmate. Her share of the rent is $700 per month. She is considering moving to a studio apartment which she will not have to share with anyone. The studio apartment rents for $950 per month. Recently, you ran into Soo Jin on campus and she tells you that she has moved into the studio apartment. Soo Jin is as rational as any other person. As an economics student, you rightly conclude that A)Soo Jin figures that the additional benefit of having her own place (as opposed to sharing) is at least $250. B)Soo Jin figures that the additional benefit of having her own place (as opposed to sharing) is at least $950. C)Soo Jin did not have a choice; her roommate was a slob. D)the cost of having one's own space outweighs the benefits.
A) Soo Jin figures that the additional benefit of having her own place (as opposed to sharing) is at least $250
The idea that because of scarcity, producing more of one good or service means producing less of another good or service refers to the economic concept of A)a trade-off. B)equity. C)efficiency. D)optimization.
A) Trade-Off
The three fundamental questions that any economy must address are: A)What goods and services to produce; how will these goods and services be produced; and who receives them? B)Who gets jobs; what wages do workers earn; and who owns what property? C)What will be the prices of goods and services; how will these goods and services be produced; and who will receive them? D)How much will be saved; what will be produced; and how can these goods and services be fairly distributed?
A) What goods and services to produce; how will these goods and services be produced; and who receives them?
When production reflects consumer preferences, ________ occurs. A)equity B)allocative efficiency C)efficient central planning D)productive efficiency
B) Allocative Efficiency
Suppose the U.S. government encouraged new medical school graduates to take over existing practices from doctors wishing to retire by paying both the new and retiring doctors $100,000.These doctors 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) People respond to economic incentives
Apple assembles most iPhones in China because the lower wages earned by Chinese workers and their experience in electronics manufacturing reduce the costs of assembling iPhones. This is an example of Apple reacting to which of the three key economic ideas? A)Optimal decisions are made at the margin. B)People respond to economic incentives. C)Firms attempt to maximize revenues. D)People are rational.
B) People respond to economic incentives.
How are the fundamental economic decisions determined in North Korea? A)Individuals, firms, and the government interact in a market to make these economic decisions. B)The government decides because North Korea is a centrally planned economy. C)The United Nations decides because North Korea is a developing economy. D)These decisions are made by the country's elders who have had much experience in answering these questions.
B) The government decides because North Korea is a centrally planned economy
Which of the following is a normative economic statement? A)The current low price of wheat is the result of increased worldwide supply. B)The price of wheat is too low. C)When the price of wheat falls, the cost of wheat-based products falls. D)When the price of wheat falls, the quantity of wheat purchased rises.
B) The price of wheat is too low
Which of the following is a microeconomic question? A)What will the level of economic growth be in the entire economy? B)What factors determine the price of carrots? C)What determines the average price level and inflation? D)How much will be saved and how much will be produced in the entire economy?
B) What factors determine the price of carrots?
Which of the following is a microeconomic question? A)Will Federal Reserve intervention lower the inflation rate? B)Will the merger of American Airlines and US Airways increase or decrease airfares? C)Why do economies experience periods of high inflation? D)Why has growth in the economy increased since the end of the recession?
B) Will the merger of American Airlines and US Airways increase or decrease airfares?
The Coffee Nook, a small cafe near campus, sells cappuccinos for $2.50 and Russian tea cakes for$1.00 each. What is the opportunity cost of buying a cappuccino? A)$2.50 B)$1.00 C)2 1/2 Russian tea cakes D)2/5 of a Russian tea cake
C) 2 1/2 Russian Tea Cakes
DeShawn's Detailing is a service that details cars at the customers' homes or places of work.DeShawn's cost for a basic detailing package is $40, and he charges $75 for this service. For a total price of $90, DeShawn will also detail the car's engine, a service that adds an additional $20 to the total cost of the package. Should DeShawn continue to offer the engine detailing service? A)yes, but only if he raises the price of the basic detailing package B)Yes, he still makes a profit by selling the engine detailing service with the basic detailing package. C)No, his marginal benefit is less than his marginal cost. D)More information is needed for DeShawn to make this decision.
C) No, his marginal benefit is less than his marginal cost
Which of the following is a normative economic statement? A)With rising mortgage rates and rising unemployment rates, the number of unsold homes has increased. B)The state of Texas is considering increasing funds for light-rail development to promote the use of public transportation. C)Pharmaceutical manufacturers should not be allowed to patent their products so prescription drugs would be more affordable. D)Rising global demand for coal has led to increases in the price of coal.
C) Pharmaceutical manufacturers should not be allowed to patent their products so prescription drugs would be more affordable
Economics does not study correct or incorrect behaviors but rather it assumes that economic agents behave ________, meaning they make the best decisions given their knowledge of the costs and benefits. A)selfishly B)equitably C)emotionally D)rationally
D) Rationally
In economics, choices must be made because we live in a world of A)greed. B)unemployment. C)unlimited resources. D)scarcity.
D) Scarcity
Which of the following is a macroeconomic question? A)What determines the production of DVDs? B)What determines the wage of auto workers? C)What factors determine the price of carrots? D)What determines the inflation rate?
D) What determines the inflation rate?
Which of the following statements about scarcity is true? A)Scarcity only arises when there is a wide disparity in income distribution. B)Scarcity is not a problem for the wealthy. C)Scarcity is only a problem when a country has too large a population. D)Scarcity refers to the situation in which unlimited wants exceed limited resources.
D)Scarcity refers to the situation in which unlimited wants exceed limited resources.
Making optimal decisions "at the margin" requires A)making consistently irrational decisions. B)making decisions according to one's whims and fancies. C)making borderline decisions. D)weighing the costs and benefits of a decision before deciding if it should be pursued.
D)Weighing the costs and benefits of a decision before deciding if it should be pursued.