Question 1

An economic model is a simplified version of reality used to analyze real-world economic situations.

Accepted Answer

An economic model is indeed a simplified version of reality that helps economists understand and predict economic behaviors and outcomes.

Question 2

The term "market" refers to trading arrangements by which buyers and sellers come together.

Accepted Answer

This is the definition of a market.

Question 3

What is meant by the statement that "optimal decisions are made at the margin"?

Accepted Answer

The answer of What is meant by the statement that...

Question 4

Suppose a used car dealer can earn an additional $25,000 in revenue per year by increasing advertising on a local radio station from 3 times a day to 5 times a day.At what additional cost would this increase in advertising not be considered economically rational?

Accepted Answer

The answer of Suppose a used car dealer can earn...

Question 5

What is an economic model?

Accepted Answer

The answer of What is an economic model?...

Question 6

Marginal benefit refers to the additional benefit that your activity provides to you.

Accepted Answer

Marginal benefit is the additional benefit gained from a specific activity or action.

Question 7

Even if the population declines, scarcity will still exist.

Accepted Answer

Scarcity exists when there is a limited supply of resources compared to the demand for those resources. Even if the population declines, the demand for certain resources may still outweigh the supply, leading to scarcity.

Question 8

Explain the economic assumption that "people are rational."

Accepted Answer

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Question 9

Suppose the extra cost to a pet store of advertising one additional day each week in the local newspaper is $450.Then, the pet store should advertize that one additional day each week if doing so brings in additional revenue of $450 or more each week.

Accepted Answer

If the extra cost of advertising is $450 and the additional revenue from advertising is $450 or more, then the pet store will break even or make a profit by advertising one additional day each week. Therefore, it is true that the pet store should advertise that one additional day each week if it brings in additional revenue of $450 or more each week.

Question 10

Optimal decisions are made at the point where marginal cost equals zero.

Accepted Answer

The answer of Optimal decisions are made at the point...

Question 11

Suppose the extra cost for a company to advertise for one extra day each week in the local newspaper is $200.Then, the company should advertise on that additional day if it can generate additional revenue of $200 each week.

Accepted Answer

Since the extra cost and additional revenue are equal at $200, it makes sense for the company to advertise on the additional day as long as it can generate at least $200 in additional revenue. Therefore, the statement is true.

Question 12

The additional cost to a producer of hiring an additional unit of labor is called the marginal cost.

Accepted Answer

This statement is true. Marginal cost is the additional cost a producer incurs when they hire one more unit of labor, or produce one more unit of output.

Question 13

The sales revenue a seller receives from the sale of an additional unit of goods is called the marginal benefit.

Accepted Answer

Marginal benefit refers to the additional benefit a seller receives from selling one more unit of goods, which is typically represented by the increase in revenue from that sale.

Question 14

If it costs Danitra $225 to create 4 necklaces and $275 to create 5 necklaces, then the marginal cost of producing the 5th necklace is $50.

Accepted Answer

To find the marginal cost of producing the 5th necklace, we need to calculate the cost of producing just the 5th necklace.

To do this, we can subtract the total cost of producing 4 necklaces from the total cost of producing 5 necklaces.

Total cost of producing 5 necklaces: $275
Total cost of producing 4 necklaces: $225

Marginal cost of producing the 5th necklace:
$275 - $225 = $50

Therefore, the statement is true and the answer is A.

Question 15

What is a marginal benefit?

Accepted Answer

The answer of What is a marginal benefit?...

Question 16

All economic questions arise from the fact that resources are unlimited.

Accepted Answer

Economic questions arise because resources are scarce and limited, which means that we need to make choices on how to allocate them efficiently to fulfill our unlimited wants and needs.

Question 17

Explain the economic idea that "people respond to incentives."

Accepted Answer

The answer of Explain the economic idea that "people respond...

Question 18

Assume that a florist can earn an additional $20,000 of revenue each year from advertising once a week on a local television station.What must the additional cost of this once-a-week advertising be to make this advertising economically rational?

Accepted Answer

The answer of Assume that a florist can earn an...

Question 19

If it costs Sinclair $300 to produce 3 suede jackets and $420 to produce 4 suede jackets, then the difference of $120 is the marginal cost of producing the 4th suede jacket.

Accepted Answer

The marginal cost is the additional cost incurred to produce one more unit of a good. In this case, producing the 4th suede jacket incurred an additional cost of $120 ($420 - $300). Therefore, the statement is true.

Question 20

What is a marginal cost?

Accepted Answer

The answer of What is a marginal cost?...

Quiz 1: Economics: Foundations and Models