Deck 1: Economics: Foundations and Models

Question 1

Since 1994,obesity rates in the United States

A)have been on a slow and steady decline.
B)have increased in all 50 states.
C)have primarily increased in the Southeast and remained constant or slightly decreased in the remainder of the country.
D)have remained fairly constant throughout the country.

Answer 1

have increased in all 50 states.

Question 2

Which of the following statements is true about scarcity?

A)Scarcity refers to the situation in which unlimited wants exceed limited resources.
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 arises when there is a wide disparity in income distribution.

Answer 2

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

Question 3

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.

Answer 3

people respond to economic incentives.

Question 4

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.

A)collective
B)cooperative
C)market
D)trade-off

Question 5

Suppose that some investors have decided that economic and financial uncertainty have made the prospect of investing in domestic stock markets more risky than investing in foreign stock markets,and therefore choose to invest in foreign markets.By using all available information as they act to achieve their goals,these investors are 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.

Question 6

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

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.

Question 7

Consider the following statements:
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)a only.
B)b only.
C)c only.
D)a and b.
E)a, b, and c.

Question 8

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

A)because irrational people do not make economic choices.
B)even though people may not behave rationally all the time.
C)because individuals act rationally all the time in all circumstances.
D)even though people rarely, if ever, behave in a rational manner.

Question 9

Economists assume that individuals

A)behave in unpredictable ways.
B)will never take actions to help others.
C)prefer to live in a society that values fairness above all else.
D)are rational and respond to incentives.

Question 10

Suppose that some teachers have decided that economic and financial uncertainty have made the prospect of retiring more risky,and therefore carry a higher cost than not retiring.By using all available information as they act to achieve their goals,these teachers are 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.

Question 11

By definition,economics is the study of

A)how to make money in the stock market.
B)how to make money in a market economy.
C)the choices people make to attain their goals, given their scarce resources.
D)supply and demand.

Question 12

Economists assume that rational people do all of the following except

A)use all available information as they act to achieve their goals.
B)undertake activities that benefit others and hurt themselves.
C)weigh the benefits and costs of all possible alternative actions.
D)respond to economic incentives.

Question 13

Holding all other personal characteristics-such as age,gender,and income-constant,economists would expect that

A)people with health insurance will be less likely to be overweight than people without health insurance.
B)people with health insurance will be more likely to be overweight than people without health insurance.
C)people with health insurance will be equally likely to be overweight as people without health insurance.
D)there is no correlation between having health insurance and being overweight.

Question 14

Recent changes occurring within the U.S.health care system,including lower insurance reimbursement rates,have resulted in

A)a growing number of doctor's choosing to open private practices.
B)more medical practices being owned by hospitals than by individual doctors.
C)a majority of hospitals closing routine medical practices in order to focus only on emergency care facilities.
D)a majority of doctors working directly for insurance companies.

Question 15

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)equitably
B)rationally
C)emotionally
D)selfishly

Question 16

The basic economic problem of ________ has always existed and will continue to exist.

A)scarcity
B)efficiency
C)inflation
D)recession

Question 17

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

A)market
B)trade-off
C)variable
D)model

Question 18

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

A)unemployment.
B)scarcity.
C)greed.
D)unlimited resources.

Question 19

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

A)allocative
B)marginal
C)equity
D)optimal

Question 20

Where do economic agents such as individuals,firms and nations,interact with each other?

A)in public locations monitored by the government
B)in any arena that brings together buyers and sellers
C)in any physical location people where people can physically get together for selling goods, such as shopping malls
D)in any location where transactions can be monitored by consumer groups and taxed by the government

Question 21

Marginal analysis involves undertaking an activity

A)until its marginal costs start declining.
B)only when its marginal benefits are positive.
C)until its marginal benefits equal marginal costs.
D)only if its marginal costs are greater than its marginal benefits.

Question 22

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 DeShawn's marginal benefit if he sells a basic detailing package?

A)$35
B)$75
C)He makes a marginal loss of $15, not a marginal benefit.
D)The marginal benefit cannot be determined.

Question 23

Table 1-2
$$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Hours } \\\text { Open }\end{array} & \begin{array} { c } \text { Tatal } \\\text { Revenue } \\\text { (dallars) }\end{array} \\\hline 1 & \$ 25 \\\hline 2 & 45 \\\hline 3 & 70 \\\hline 4 & 90 \\\hline 5 & 105 \\\hline 6 & 110 \\\hline\end{array}$$
Thuy Anh runs a small flower shop in the town of Florabunda.She is debating whether she should extend her hours of operation.Thuy Anh figures that her sales revenue will depend on the number of hours the flower shop is open as shown in the table above.She would have to hire a worker for those hours at a wage rate of $16 per hour.

-Refer to Table 1-2.Using marginal analysis,how many hours should Thuy Anh extend her flower shop's hours of operations?

A)2 hours
B)3 hours
C)4 hours
D)5 hours
E)6 hours

Question 24

Scenario 1-1
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 Scenario 1-1.Using marginal analysis terminology,what is another economic term for the incremental revenue received from the sale of the last 3,000 cell phones?

A)gross earnings
B)marginal revenue
C)sales revenue
D)gross profit

Question 25

Table 1-1
$$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Hours } \\\text { Open }\end{array} & \begin{array} { c } \text { Total } \\\text { Revenue } \\\text { (dollars) }\end{array} \\\hline 1 & \$ 50 \\\hline 2 & 75 \\\hline 3 & 95 \\\hline 4 & 110 \\\hline 5 & 120 \\\hline 6 & 125 \\\hline\end{array}$$
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?

A)$10
B)$20
C)$25
D)$40

Question 26

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

A)an additional unit
B)the total number of units
C)no units
D)only profitable units

Question 27

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

Question 28

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

A)marginal benefit is zero.
B)marginal benefit is greater than the marginal cost.
C)marginal cost is zero.
D)marginal benefit equals the marginal cost.

Question 29

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, he still makes a profit by selling the engine detailing service with the basic detailing package.
B)Yes, but only if he raises the price of 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.

Question 30

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?

A)marginal revenue
B)gross earnings
C)pure profit
D)marginal costs
E)net benefit

Question 31

Allison's Auto Art is a company that applies pinstripes to vehicles.Allison's cost for a basic 1-color pinstriping job is $35,and she charges $95 for this service.For a total price of $175,Allison will apply a fancier 3-color pinstripe application to an automobile,a service that adds an additional $40 to the total cost of the package.What is Allison's marginal benefit if she sells a basic 1-color job?

A)$35
B)$60
C)$95
D)The marginal benefit cannot be determined.

Question 32

Making "how much" decisions involve

A)calculating the total benefits of the activity and determining if you are satisfied with that amount.
B)calculating the total costs of the activity and determining if you can afford to incur that expenditure.
C)calculating the average benefit and the average cost of an activity to determine if it is worthwhile undertaking that activity.
D)determining the additional benefits and the additional costs of that activity.

Question 33

Table 1-1
$$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Hours } \\\text { Open }\end{array} & \begin{array} { c } \text { Total } \\\text { Revenue } \\\text { (dollars) }\end{array} \\\hline 1 & \$ 50 \\\hline 2 & 75 \\\hline 3 & 95 \\\hline 4 & 110 \\\hline 5 & 120 \\\hline 6 & 125 \\\hline\end{array}$$
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?

A)2 hours
B)3 hours
C)4 hours
D)5 hours
E)6 hours

Question 34

The extra cost associated with undertaking an activity is called

A)net loss.
B)marginal cost.
C)opportunity cost.
D)foregone cost.

Question 35

Allison's Auto Art is a company that applies pinstripes to vehicles.Allison's cost for a basic 1-color pinstriping job is $35,and she charges $95 for this service.For a total price of $175,Allison will apply a fancier 3-color pinstripe application to an automobile,a service that adds an additional $40 to the total cost of the package.Should Allison continue to offer the 3-color pinstripe application?

A)Yes, she still makes a profit by selling the 3-color application.
B)Yes, but only if she lowers the price of the 1-color application.
C)No, her marginal benefit is less than her marginal cost.
D)More information is needed for Allison to make this decision.

Question 36

Making optimal decisions "at the margin" requires

A)making decisions according to one's whims and fancies.
B)making consistently irrational decisions.
C)weighing the costs and benefits of a decision before deciding if it should be pursued.
D)making borderline decisions.

Question 37

Scenario 1-1
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 Scenario 1-1.Had the firm not produced and sold the last 3,000 cell phones,would its profit be higher or lower,and if so by how much?

A)Its profit will be $6,700 higher.
B)Its profit will be $700 higher.
C)Its profit will be $700 lower.
D)Its profit will be $6,000 lower.

Question 38

Scenario 1-1
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 Scenario 1-1.Using marginal analysis terminology,what is another economic term for the incremental cost of producing the last 3,000 cell phones?

A)marginal cost
B)operating cost
C)explicit cost
D)Any of the above terms are correct.

Question 39

Table 1-1
$$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Hours } \\\text { Open }\end{array} & \begin{array} { c } \text { Total } \\\text { Revenue } \\\text { (dollars) }\end{array} \\\hline 1 & \$ 50 \\\hline 2 & 75 \\\hline 3 & 95 \\\hline 4 & 110 \\\hline 5 & 120 \\\hline 6 & 125 \\\hline\end{array}$$
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?

A)$25
B)$50
C)$75
D)$125

Question 40

Allison's Auto Art is a company that applies pinstripes to vehicles.Allison's cost for a basic 1-color pinstriping job is $35,and she charges $95 for this service.For a total price of $175,Allison will apply a fancier 3-color pinstripe application to an automobile,a service that adds an additional $40 to the total cost of the package.What is the marginal cost of moving up from the 1-color application to the 3-color application?

A)$35
B)$40
C)$80
D)$175

Question 41

A restaurant sells a large soft drink at a fixed price of $1.79.A term used by economists to describe the money received from the sale of an additional large soft drink is

A)marginal revenue.
B)gross earnings.
C)pure profit.
D)net benefit.

Question 42

Pookie's Pinball Palace restores old Pinball machines.Pookie has just spent $300 purchasing and cleaning a 1960s-era machine which he expects to sell for $2,000 once he is finished with the restoration.After having spent $300,Pookie discovers that he will need to rewire the entire machine at a cost of $1,100 in order to finish the restoration.Alternatively,he can sell the machine "as is" now for $1,000.What should he do?

A)He should sell the machine now to make the most profit.
B)It does not matter what he does; he is going to take a loss on his project.
C)He should rewire the machine, complete the task and then sell the machine.
D)He should have never purchased the machine because he has already spent too much time on it and has not been paid for that time.

Question 43

Scenario 1-2
Suppose a hat manufacturer currently sells 2,000 hats per week and makes a profit of $5,000 per week.The plant owner observes, "Although the last 300 hats we produced and sold increased our revenue by $1,000 and our costs by $1,100, 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 hats."
Refer to Scenario 1-2.Using marginal analysis terminology,another economic term for the incremental cost of producing the last 300 hats is

A)marginal cost.
B)operating cost.
C)explicit cost.
D)Any of the above terms are correct.

Question 44

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 major,you rightly conclude that

A)Soo Jin did not have a choice; her roommate was a slob.
B)Soo Jin figures that the additional benefit of having her own place (as opposed to sharing)is at least $250.
C)Soo Jin figures that the benefit of having her own place (as opposed to sharing)is at least $950.
D)the cost of having one's own space outweighs the benefits.

Question 45

As recently as 2000,________ percent of doctors were in private practice and by 2013,________ percent of doctors were in private practice.

A)only 20; more than 70
B)nearly 60; less than 40
C)about 50; about 50
D)over 80; less than 15

Question 46

The study of economics arises due to

A)money.
B)scarcity.
C)greed.
D)resources.

Question 47

Damian shares a small food truck with his sister.His share of the expenses is $500 per month.He has decided to get his own,newer food truck which he will not have to share with anyone.His expenses for the newer truck are $1,400 per month.Damian is as rational as any other person.As an economics major,you rightly conclude that

A)Damian cannot afford the newer truck and will have to go back to sharing a truck with his sister.
B)Damian figures that the additional benefit of having his own truck (as opposed to sharing)is at least $900.
C)Damian figures that the benefit of having his own truck (as opposed to sharing)is at least $1,400.
D)the cost of having one's own truck outweighs the benefits.

Question 48

If the marginal cost of keeping a doctor's office open one additional hour per day is $200,then the doctor should keep the office open for one extra hour

A)only if the marginal benefit she receives is greater than $200 plus an acceptable profit margin.
B)as long as the marginal benefit she receives is just equal to or greater than $200.
C)as long as the marginal cost does not rise.
D)until the marginal benefit she receives reaches zero.

Question 49

Table 1-3
$$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Hours } \\\text { Open }\end{array} & \begin{array} { c } \text { Total } \\\text { Revenue } \\\text { (dollars) }\end{array} \\\hline 1 & \$ 70 \\\hline 2 & 120 \\\hline 3 & 160 \\\hline 4 & 184 \\\hline 5 & 200 \\\hline 6 & 210 \\\hline\end{array}$$
Santiago runs a comic book store in the town of East Arbor.He is debating whether he should extend his hours of operation.Santiago figures that his sales revenue will depend on the number of hours the store 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 1-3.What is Santiago's marginal benefit if he decides to stay open for two hours instead of one hour?

A)$40
B)$50
C)$120
D)$190

Question 50

Table 1-2
$$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Hours } \\\text { Open }\end{array} & \begin{array} { c } \text { Tatal } \\\text { Revenue } \\\text { (dallars) }\end{array} \\\hline 1 & \$ 25 \\\hline 2 & 45 \\\hline 3 & 70 \\\hline 4 & 90 \\\hline 5 & 105 \\\hline 6 & 110 \\\hline\end{array}$$
Thuy Anh runs a small flower shop in the town of Florabunda.She is debating whether she should extend her hours of operation.Thuy Anh figures that her sales revenue will depend on the number of hours the flower shop is open as shown in the table above.She would have to hire a worker for those hours at a wage rate of $16 per hour.

-Refer to Table 1-2.What is Thuy Anh's marginal cost if she decides to stay open for three hours instead of two hours?

A)$0
B)$16
C)$25
D)$32
E)$45

Question 51

Scenario 1-2
Suppose a hat manufacturer currently sells 2,000 hats per week and makes a profit of $5,000 per week.The plant owner observes, "Although the last 300 hats we produced and sold increased our revenue by $1,000 and our costs by $1,100, 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 hats."
Refer to Scenario 1-2.Using marginal analysis terminology,another economic term for the incremental revenue received from the sale of the last 300 hats is

A)gross earnings.
B)marginal revenue.
C)sales revenue.
D)gross profit.

Question 52

Pookie's Pinball Palace restores old Pinball machines.Pookie has just spent $300 purchasing and cleaning a 1960s-era machine which he expects to sell for $2,000 once he is finished with the restoration.After having spent $300,Pookie discovers that he will need to rewire the entire machine at a cost of $1,100 in order to finish the restoration.Alternatively,he can sell the machine "as is" now for $1,000.What is the marginal cost of completing the task?

A)$300
B)$800
C)$1,100
D)$1,400

Question 53

Table 1-2
$$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Hours } \\\text { Open }\end{array} & \begin{array} { c } \text { Tatal } \\\text { Revenue } \\\text { (dallars) }\end{array} \\\hline 1 & \$ 25 \\\hline 2 & 45 \\\hline 3 & 70 \\\hline 4 & 90 \\\hline 5 & 105 \\\hline 6 & 110 \\\hline\end{array}$$
Thuy Anh runs a small flower shop in the town of Florabunda.She is debating whether she should extend her hours of operation.Thuy Anh figures that her sales revenue will depend on the number of hours the flower shop is open as shown in the table above.She would have to hire a worker for those hours at a wage rate of $16 per hour.

-Refer to Table 1-2.What is Thuy Anh's marginal benefit if she decides to stay open for three hours instead of two hours?

A)$0
B)$20
C)$25
D)$45
E)$70

Question 54

Pookie's Pinball Palace restores old Pinball machines.Pookie has just spent $300 purchasing and cleaning a 1960s-era machine which he expects to sell for $2,000 once he is finished with the restoration.After having spent $300,Pookie discovers that he will need to rewire the entire machine at a cost of $1,100 in order to finish the restoration.Alternatively,he can sell the machine "as is" now for $1,000.What is his marginal benefit if he sells the machine "as is" now?

A)$300
B)$900
C)$1,000
D)The marginal benefit cannot be determined.

Question 55

Consider the following statements:
a.Consumers buy more MP3 players from an electronics store that sells MP3 players at a lower price than other rival electronics stores in the area.
b.Schools take steps to increase security since they believe it is more costly to allow vandalism than to hire additional security guards.
c.Citrus growers produce more oranges when the selling price of oranges falls.
Which of the above statements demonstrates that economic agents respond to incentives?

A)a only.
B)b only.
C)c only.
D)a and b.
E)a, b, and c.

Question 56

Table 1-3
$$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Hours } \\\text { Open }\end{array} & \begin{array} { c } \text { Total } \\\text { Revenue } \\\text { (dollars) }\end{array} \\\hline 1 & \$ 70 \\\hline 2 & 120 \\\hline 3 & 160 \\\hline 4 & 184 \\\hline 5 & 200 \\\hline 6 & 210 \\\hline\end{array}$$
Santiago runs a comic book store in the town of East Arbor.He is debating whether he should extend his hours of operation.Santiago figures that his sales revenue will depend on the number of hours the store 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 1-3.Using marginal analysis,determine how many hours should Santiago extend his store's hours of operations?

A)2 hours
B)3 hours
C)4 hours
D)5 hours
E)6 hours

Question 57

Scenario 1-2
Suppose a hat manufacturer currently sells 2,000 hats per week and makes a profit of $5,000 per week.The plant owner observes, "Although the last 300 hats we produced and sold increased our revenue by $1,000 and our costs by $1,100, 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 hats."
Refer to Scenario 1-2.Had the firm not produced and sold the last 300 hats,would its profit be higher or lower,and if so by how much?

A)Its profit will be $1,100 higher.
B)Its profit will be $100 higher.
C)Its profit will be $100 lower.
D)Its profit will be $1,000 lower.

Question 58

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

A)Dinah's Diner is only open for breakfast and lunch.Dinah is trying to decide whether to open for dinner as well..
B)Zander has torn up his front yard and is debating whether to plant grass or install a rock garden..
C)You received a nice birthday check from your grandmother and are deciding on whether to spend it on a trip to New York or a trip to San Francisco.
D)Sergio quit his job to go back to school full time.

Question 59

Table 1-3
$$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Hours } \\\text { Open }\end{array} & \begin{array} { c } \text { Total } \\\text { Revenue } \\\text { (dollars) }\end{array} \\\hline 1 & \$ 70 \\\hline 2 & 120 \\\hline 3 & 160 \\\hline 4 & 184 \\\hline 5 & 200 \\\hline 6 & 210 \\\hline\end{array}$$
Santiago runs a comic book store in the town of East Arbor.He is debating whether he should extend his hours of operation.Santiago figures that his sales revenue will depend on the number of hours the store 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 1-3.What is Santiago's marginal cost if he decides to stay open for two hours instead of one hour?

A)$18
B)$36
C)$38
D)$102

Question 60

The ________ the sale of an additional unit of a product is a marginal benefit to the firm.

A)revenue received from
B)extra cost of
C)total value of
D)sales tax on

Question 61

Holding all other personal characteristics-such as age,gender,and income-constant,economists would expect that

A)people without health insurance will be less likely to be overweight than people with health insurance.
B)people without health insurance will be more likely to be overweight than people with health insurance.
C)people without health insurance will be equally likely to be overweight as people with health insurance.
D)there is no correlation between not having health insurance and being overweight.

Question 62

The basic economic problem of scarcity

A)has always existed and will continue to exist.
B)will eventually disappear as technology continues to advance.
C)is a problem only in developing economies.
D)does not apply to the wealthy in society.

Question 63

The revenue received from the sale of an additional unit of a product

A)is a marginal benefit to the firm.
B)is called profit.
C)is called gross sales.
D)is called a net gain.

Question 64

The term "market" in economics refers to

A)a place where money changes hands.
B)a legal institution where exchange can take place.
C)a group of buyers and sellers of a product and the arrangement by which they come together to trade.
D)an organization which sells goods and services.

Question 65

Consider the following statements:
a.Consumers rent more DVDs from a video store that rents DVDs at a lower price than other rival video stores in the area.
b.Department stores take steps to increase security since they believe it is more costly to allow shoplifting than to install expensive security monitoring equipment.
c.Farmers produce more cotton when its selling price falls.
Which of the above statements demonstrates that economic agents respond to incentives?

A)a only.
B)b only.
C)c only.
D)a and b.
E)a, b, and c.

Question 66

Scarcity refers to the situation in which

A)unlimited wants exceed limited resources.
B)unlimited resources exceed limited wants.
C)a country's population is larger than its resource base.
D)a nation's poverty level increases faster than its population.

Question 67

Economists assume that

A)individuals behave in unpredictable ways.
B)consumer behavior is explained by the existence of unlimited resources.
C)people put other people's interests ahead of their own.
D)optimal decisions are made at the margin.

Question 68

Economics promotes which of the following as the way to make the best decision?

A)Continue an enjoyable activity as long as you do not have to pay for it.
B)Continue an enjoyable activity until it is no longer enjoyable.
C)Continue an enjoyable activity until you cannot afford to pursue it.
D)Continue an enjoyable activity up to the point where its marginal benefit equals its marginal cost.

Question 69

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?

A)Yes, I agree with her.One cannot make predictions about economic behavior because in reality people make incorrect choices in many situations.
B)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.
C)Yes, I agree with her.Economic theory should allow for irrational behavior so that we can have more reliable predictions.
D)I disagree with her.If we cannot assume that decisions are correct, then we will not be able to examine the moral implications of these decisions.

Question 70

According to the Centers for Disease Control and Prevention,________ in 2013 in which less than 20 percent of the population was considered obese.

A)Colorado was the only state
B)there were only 5 states
C)there were more than 25 states
D)there were no states

Question 71

What does the term "marginal" mean in economics?

A)the edge of a market
B)an additional or extra
C)illegal
D)secondary
E)trivial

Question 72

The cost incurred from the production of an additional unit of a product

A)is a marginal cost to the firm.
B)is called a loss.
C)is called opportunity cost.
D)must be zero for a firm to be efficient.

Question 73

Before a doctor decides to keep her office open on Saturdays,she should

A)make sure that the marginal cost of doing so will exceed the marginal benefit.
B)only consider the increase in total profit from doing so.
C)weigh the costs and benefits of staying open on Saturdays before deciding if she should go through with this idea.
D)only look at the marginal benefit of doing so, because marginal cost will not change.

Question 74

Economists assume that rational people

A)never use all available information as they act to achieve their goals.
B)undertake activities that benefit others and hurt themselves.
C)only weigh the benefits and costs of the most desirable alternative actions.
D)respond to economic incentives.

Question 75

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?

A)The banks would rather delay installation of any theft deterring equipment in anticipation of new lower cost innovations in the security devices market.
B)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."
C)The banks are concerned that "bandit barriers" would send the wrong message to customers -- that the bank is unsafe.
D)The banks probably resent any interference from the police department.

Question 76

What is an economic model?

A)It is a description of an economic issue that includes all possible related information.
B)It is a description of an economic issue based on official government information.
C)It is a detailed version of some aspect of economic life used to analyze an economic issue.
D)It is a simplified version of some aspect of economic life used to analyze an economic issue.

Question 77

Economics is the study of the ________ people make to attain their goals,given their ________ resources.

A)purchases; unlimited
B)choices; scarce
C)income; available
D)decisions; household

Question 78

An office supply store sells a ream of printer paper at a fixed price of $4.50.Which of the following is a term used by economists to describe the money received from the sale of an additional ream of paper?

A)marginal revenue
B)gross earnings
C)pure profit
D)marginal costs
E)net benefit

Question 79

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

A)Scarcity reduction
B)Central planning
C)Marginal analysis
D)Market intervention

Question 80

Which of the following best describes an assumption economists make about human behavior?

A)They assume that individuals act rationally all the time in all circumstances.
B)They assume that rational behavior is useful in explaining choices people make even though people may not behave rationally all the time.
C)They assume that people take into account the question of fairness in all decisions they make.
D)They assume that individuals act randomly.