Microeconomics Module 1

By definition, economics is the study of

the choices people make to attain their goals, given their scarce resources.

Table 1-1 Hours Open Total Revenue (dollars) 1 $50 2 75 3 95 4 110 5 120 6 125 Lydia runs a small nail salon in the town of New Hope. She is debating whether she should extend her hours of operation. Lydia figures that her sales revenue will depend on the number of hours the nail salon is open as shown in the table above. She would have to hire a worker for those hours at a wage rate of $10 per hour. Refer to Table 1-1. What is Lydia's marginal cost if she decides to stay open for two hours instead of one hour?

$10

Figure 1-2 Refer to Figure 1-2. Calculate the area of the triangle A.

$2.6 million

Table 1-1 Hours Open Total Revenue (dollars) 1 $50 2 75 3 95 4 110 5 120 6 125 Lydia runs a small nail salon in the town of New Hope. She is debating whether she should extend her hours of operation. Lydia figures that her sales revenue will depend on the number of hours the nail salon is open as shown in the table above. She would have to hire a worker for those hours at a wage rate of $10 per hour. Refer to Table 1-1. What is Lydia's marginal benefit if she decides to stay open for two hours instead of one hour?

$25

Figure 1-3 Refer to Figure 1-3. Calculate the area of the trapezoid X.

$810

At a recent faculty meeting, Lorraine Waverly, president of Skywalker College, announced that enrollment is up by 12 percent over the previous semester. If enrollment the previous semester was 3,250 students, what is the student enrollment this semester?

3,640

If the price of milk was $2.50 a gallon and it is now $3.25 a gallon, what is the percentage change in price?

30 percent

Figure 1-1 Refer to Figure 1-1. Using the information in the figure above, calculate the percentage change in sales of alcoholic beverages between 2008 and 2011.

42.9%

Table 1-1 Hours Open Total Revenue (dollars) 1 $50 2 75 3 95 4 110 5 120 6 125 Lydia runs a small nail salon in the town of New Hope. She is debating whether she should extend her hours of operation. Lydia figures that her sales revenue will depend on the number of hours the nail salon is open as shown in the table above. She would have to hire a worker for those hours at a wage rate of $10 per hour. Refer to Table 1-1. Using marginal analysis, how many hours should Lydia extend her nail salon's hours of operations?

5 hours

Macroeconomics is the study of

The economy as a whole

Model

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

Which of the following is a positive economic statement?

If the price of iPhones falls, a larger quantity of iPhones will be purchased.

Which of the following statements is true about scarcity?

Scarcity refers to the situation in which unlimited wants exceed limited resources.

Which of the following is a normative economic statement?

The price of gasoline is too high. (no statement that can be proven)

Market

The term ________ in economics refers to a group of buyers and sellers of a product and the arrangement by which they come together to trade.

________ have a horizontal and a vertical axis and are used in economics to illustrate relationships between two economic variables.

Two-dimensional graphs

The revenue received from the sale of ________ of a product is a marginal benefit to the firm.

an additional unit

Economists assume that individuals

are rational and respond to incentives.

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

at least $125,000

Economists assume that rational behavior is useful in explaining choices people make

even though people may not behave rationally all the time.

Microeconomics is the study of

how households and firms make choices.

In economics, the term ________ means "additional" or "extra."

marginal

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

marginal benefit equals the marginal cost.

The extra cost associated with undertaking an activity is called

marginal cost.

A grocery store sells a bag of potatoes at a fixed price of $2.30. Which of the following is a term used by economists to describe the money received from the sale of an additional bag of potatoes?

marginal revenue

If a straight line passes through the point x = 14 and y = 3 and also through the point x = 4 and y = 10, the slope of this line is

negative seven tenths.

The highest valued alternative that must be given up to engage in an activity is the definition of

opportunity cost.

Suppose the U.S. government encouraged consumers to trade in their old automobiles for more efficient, new models by paying up to $5,000 for the old automobiles. These consumers would be exemplifying the economic idea that

people respond to economic incentives.

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.

rationally

In economics, choices must be made because we live in a world of

scarcity

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

trade-off

Marginal analysis involves undertaking an activity

until its marginal benefits equal marginal costs.

Making optimal decisions "at the margin" requires

weighing the costs and benefits of a decision before deciding if it should be pursued.