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
