Micro economics midterm

Percentage increase

%= increase(high number -original number)/ original number x 100

Which of the following is a normative economic statement? O A. With rising mortgage rates and rising unemployment rates, the number of unsold homes has increased. *B. Pharmaceutical manufacturers should not be allowed to patent their products: prescription drugs would be more affordable. c. Rising global demand for coal has led to increases in the price of coal. O D. The state of Texas is considering increasing funds for light-rail development promote the use of public transportation.

' .B. Pharmaceutical manufacturers should not be allowed to patent their products: prescription drugs would be more affordable.

Which of the following statements is false about positive economic analysis? There is much more disagreement among economists over positive economic analysis than over normative economic analysis. B. Positive analysis uses an economic model to estimate the costs and benefits of different course of actions. O C. Unlike normative economic analysis, positive economic analysis can be tested. O D. Positive analysis uses an economic model to estimate the costs and benefits of different course of actions.

'A

The extra cost associated with undertaking an activity is called

*A marginal cost.

How are the fundamental economic questions answered in a market economy?

*A. Households and firms interact in markets to decide the answers to these questions.

Which of the following statements is false? O A. A direct relationship has a positive slope value. *B. A straight line has a slope of zero. OC. A curved line has slope values that change at every point. XD. An inverse relationship has a negative slope value.

*B. A straight line has a slope of zero.

The distribution of income primarily determines which of the fundamental economic questions?

*B. Who will receive the goods and services produced?

If the marginal cost for Dinky's Donuts to advertise one additional day each week in the local newspaper is $200, then Dinky's Donuts should advertize that additional day

*B. as long as the marginal benefit the company receives each week is just equal to or greater than $200.

Microeconomics is the study of

*B. how households and firms make choices.

think we're on the Refer to the scenario above. Using marginal analysis terminology, what is another economic term for the incremental cost of producing the last 3,000 cell phones?

*B. marginal cost

Economists reason that the optimal decision is to continue any activity up to the point where the

*D. marginal benefit equals the marginal cost.

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

*c. Productive efficiency

Arlene quits her $125,000-a-year job of her ailing parents. What is the opportunity cost of her decision?

*c. at least $125,000

Which of the following statements about competition in a market is true? * A. Competition forces firms to produce and sell products as long as the marginal benefit consumers exceeds the marginal cost of production. O B. Competition forces firms to outsource the production of their labor - intensive products. *c. Competition forces firms to undercut their selling price, thus benefitting consumers who will be able to purchase products at the lowest price possible. O D. Competition forces firms to add only low profit margins to their costs of production.

A

a. Car owners purchase more gasoline from a gas station that sells gasoline at a lower price than other rival gas stations in the area. b. Banks do not take steps to increase security since they believe it is less costly to allow some bank robberies than to install expensive security monitoring equipment. c. Firms produce more of a particular DVD when its selling price rises. Which of the above statements demonstrates that economic agents respond to incentives?

A,b,c

What is the "omitted variable" problem in determining cause and effect?

A. It is a problem that arises when an economic variable that affects other variables is omitted from an analysis and its omission leads to false conclusions about cause and effect.

Suppose when the price of laptops fall, college students buy more laptops. This implies that

B. there is a negative relationship between laptop prices and quantities purchased by college students.

R

Edit

Suppose a cell - phone manufacturer currently sells 20,000 cell - phones per week and makes a profit of $5,000 per week. A manager at the plant observes, 'Although the last 3,000 cell phones we produced and sold increased our revenue by $6,000 and our costs by $6,700, we are still making an overall profit of $5,000 per week so I think we're on the right track. We are producing the optimal number of cell phones." Refer to the scenario above. Had the firm not produced and sold the last 3,000 cell phones, would its profit be higher or lower, and by how much?

Its profit will be $700 higher.

Which of the following motivated by an equity concern?

Some states have transferred funds to food bank programs in order to increase benefits to lower-income families

The three fundamental questions that any economy must address are

What goods and services to produce; how will these goods and services be produced; and who receives them?

The economic analysis of minimum wage involves both normative and positive analysis. Consider the following consequences of a minimum wage: a. The minimum wage law causes unemployment. b. A minimum wage law benefits some groups and hurts others. c. In some cities such as San Francisco and New York, it would be impossible for low - skilled workers to live comfortably in the city without minimum wage laws. d. The gains to winners of a minimum wage law should be valued more highly than the losses to losers because the latter primarily comprises businesses.

Which of the consequences above are positive statements and which are normative statements? O A,b positive -c,d normative

When production reflects consumer preferences, occurs.

allocative efficiency

Which of the following statements is true? O A. Any time you have to decide which action to take you are experiencing economic equity. B. Trade-offs do not apply when the consumers purchase a product for which there is excess supply, such as with a stock clearance sale. c. Every individual, no matter how rich or poor, is faced with making trade-offs. O D. Economics is a social science that studies the trade-offs we are forced to make because resources are unlimited.

c. Every individual, no matter how rich or poor, is faced with making trade-offs.

All of the following contributed to the downfall of the Soviet Union in 1991 except

c. lack of a strong dictator who could coordinate economic activities.

Allocative efficiency best explains_______ and productive efficiency best explains________

c. what will be produced; how something will be produced

Suppose a cell $6,000 - phone manufacturer currently sells 20,000 cell - an phones per week and makes a profit of $5,000 per week. A manager at the plant observes, 'Although the last 3,000 cell phones we produced and sold increased our revenue by and our costs by $6.700, we are still making overall profit of $5,000 per week so I think we're on the right track. We are producing the optimal number of cell phones. Refer to the scenario above. Using marginal analysis terminology, another economic term for the incremental revenue received sale of the last 3,000 cell phones?

marginal revenue

Economists assume that rational people do all of the following except

undertake activities that benefit others and hurt themselves.