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Exam 1: The Scope and Method of Economics

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Question 31

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You have decided that you want to attend a costume party as Iron Man. You estimate that it will cost $40 to assemble your costume. After spending $40 on the costume, you realize that the additional pieces you need will cost you $25 more. The marginal cost of completing the costume is

A) $15.
B) $25.
C) $40.
D) $65.

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Question 32

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Economists use the phrase ceteris paribus to express the assumption

A) "all else equal."
B) "everything affects everything else."
C) "scarcity is a fact of life."
D) "there is no such thing as a free lunch."

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Question 33

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The fallacy of composition is

An efficient market is characterized by the fact that

The study of economics

Opportunity costs arise due to scarce resources.

Refer to Scenario 1.1 below to answer the questions that follow. SCENARIO 1.1: An economist wants to understand the relationship between minimum wages and the level of teenage unemployment. The economist collects data on the values of the minimum wage and the levels of teenage unemployment over time. The economist concludes that a 1% increase in minimum wage causes a 0.2% increase in teenage unemployment. From this information he concludes that the minimum wage is harmful to teenagers and should be reduced or eliminated to increase employment among teenagers. -Refer to Scenario 1.1. The statement that an increase in the minimum wage causes an increase in teenage unemployment is an example of

Refer to the information provided in Figure 1.3 below to answer the questions that follow. Figure 1.3 -Refer to Figure 1.3. At Point A the slope of the line is 3, so at Point D the slope would be

Redistribution of income from the rich to the poor is achieved from a tax system that requires taxes to rise with income. Which of the following criteria best explains the goal of this tax system?

Refer to the information provided in Figure 1.4 below to answer the questions that follow. Figure 1.4 -Refer to Figure 1.4. At Point E in panel A, the slope is

If you observe that Event A happens before Event B happens, and you conclude that Event A caused Event B, you would be guilty of an error called the

The four criteria that are frequently used in judging the outcome of economic policy are

Which of the following is NOT one of the three fundamental concepts of economics?

Refer to the information provided in Figure 1.5 below to answer the questions that follow. Figure 1.5 -Refer to Figure 1.5. In many industries, as firms produce additional units, average costs of production decline as the firm produces an additional unit, but average costs declines by a smaller and smaller amount as production continues to increase. If output is graphed on the horizontal axis and average costs are graphed on the vertical axis, the relationship between average costs and output would be like which of the following panels?

The slope of a straight line is not constant unless the line is vertical or horizontal.

If your tuition is $25,000 this semester, your books cost $1,500, you can only work 20 rather than 40 hours per week during the 15 weeks you are taking classes and you make $15 per hour, and your room and board is $7,500 this semester (same as if not attending college) , then your opportunity cost of attending college this semester is

An efficient economy is an economy

An efficient market is a market

Refer to the information provided in Figure 1.1 below to answer the questions that follow. Figure 1.1 -Refer to Figure 1.1. There is ________ relationship between the daily temperature and the number of gallons of ice cream purchased.

Related to the Economics in Practice on page 10: Prior to joining a fraternity, James spent most of his evenings and weekends studying for his classes. Once he joined the fraternity, James spent a majority of his evenings and weekends going to parties. This change in behavior is best described by