ECO 2013 Quiz One

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?

$200

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 additional 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, how many hours should Julius extend his shop's hours of operations?

5 hours? *not 3 hours

The study of economics arises due to

Scarcity

In economics, the difference between a firm's revenues and its costs is referred to as

Profit

Lionel's Lawn Care is a company that maintains residential yards. Lionel's cost for his standard package of mowing, edging, and trimming is $15, and he charges $25 for this service. For a total price of $40, Lionel will also trim shrubs, a service that adds an additional $10 to the total cost of the standard package. What is Lionel's marginal cost of adding the shrub-trimming service to the standard package?

$10

Ivan runs a custom jewelry shop in Sparkle City. He is debating whether he should extend his hours of operation. Ivan figures that his sales revenue will depend on the number of additional hours the jewelry shop is open as shown in the table above. He would have to hire a worker for those hours at a wage rate of $25 per hour. Refer to Table 1-3. What is Ivan's marginal cost if he decides to stay open for six hours instead of five hours?

$25

At a recent company meeting, Geraldine Erwin, sales manager of Dastoria, a flavored-beverage producer announced, "We have increased our sales by 8 percent in just six months." Suppose six months ago, its sales amounted to $452,000, what is the value of its sales today?

$488,160

Mrs. Lovejoy decides to invest in companies which she believes are producing its goods based on the preferences of consumers. Mrs. Lovejoy is investing in companies that are

Allocatively Efficient

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

Consumers and Producers

Fiona shares an office with her ex-husband. Her share of the rent and utilities is $625 per month. She is considering moving to a home office which she will not have to share with anyone. The home office will not cost her anything as far as extra rent or utilities. Recently, you ran into Fiona at the gym and she tells you that she has moved into her home office. Fiona is as rational as any other person. As an economics major, you rightly conclude that

Fiona figures that the additional benefit of having her own office (as opposed to sharing) is at least $625.

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 should he do?

He should finish the restoration and then sell the weather vane.

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

Marginal Benefit; Marginal Cost

________ involves undertaking an activity until its marginal benefits equal marginal costs.

Marginal analysis

All of the following questions or statements regarding medical school are positive except:

Medical students who enter specialized fields make a larger contribution to society than do student who enter primary care.

Two-dimensional graphs have a horizontal and a vertical axis and are used in economics to illustrate

Relationships between two economic variables.

Which of the following is an example of a "how much" decision?

The Pleasantville movie theatre is open only in the evenings. The theatre's manager is debating whether to add daily matinee shows.

In the first six months of 2003, branches of Commerce Bank in New York City were robbed 14 times. The New York City Police recommended steps the bank could take to deter robberies, including the installation of plastic barriers called "bandit barriers." The police were surprised the bank did not take their advice. According to a deputy commissioner of police, "Commerce does very little of what we recommend. They've told our detectives they have no interest in ever putting in the barriers." It would seem that Commerce Bank would have a strong incentive to install "bandit barriers" to deter robberies. Why wouldn't they do it?

The banks must have weighed the cost of installing bandit barriers against the benefits and decided that they have "no interest in ever putting in the barriers."

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

The money people have

Lionel's Lawn Care is a company that maintains residential yards. Lionel's cost for his standard package of mowing, edging, and trimming is $15, and he charges $25 for this service. For a total price of $40, Lionel will also trim shrubs, a service that adds an additional $10 to the total cost of the standard package. Should Lionel continue to offer the shrub-trimming service?

Yes, his marginal benefit is greater than his marginal cost.

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?

Yes, it was a voluntary exchange that benefited both parties.

An "omitted variable" is

a variable that affects other variables and its omission from economic analysis can lead to false conclusions about cause and effect.

If the marginal cost of producing a television is constant at $200, then a firm should produce this item

as long as the marginal benefit it receives is just equal to or greater than $200.

Voluntary exchange increases economic efficiency

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

Which of the following contributed to the downfall of the Soviet Union in 1991?

public dissatisfaction with low living standards and political repression

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 ________.

reduce; not as highly valued as others