Question : 11) Your roommate, Serafina, a psychology major, said, “The problem : 1388079

 

 

11) 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.

 

 

12) 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.

 

13) 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.

 

 

14) 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.

 

15) 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

 

 

16) 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

 

 

17) 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

 

18) 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.

 

 

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

A) Scarcity reduction

B) Central planning

C) Marginal analysis

D) Market intervention

 

 

20) 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.