This question overall looks good, but I'll analyze it more in depth. Let's start at the second line.
At the same time, the person starts moving away from the balloon at 5 ft/sec and the balloon starts rising into the air at 12 ft/sec. Is the distance between the person and the balloon increasing or decreasing 4 seconds after they start moving?
On the surface, this looks like a good question. However, there is only one problem (Mentioned by @Sue VanHattum):
Calculus allows you to find the rate at which that distance is increasing. Logic (no calculus needed) tells you that it's increasing. The scenario is fine. The question (increasing or decreasing) makes no sense to me.
Now, to understand if this would be viable for a Calculus 1 course (I assume this is a question for a test early in the year), try looking at it yourself from the perspective of one of your Calc 1 students seeing the question on the test. If there's anything that you find that they might find confusing (i.e., they should already know that the question is stupid, since obviously, as mentioned previously, it's going to be increasing), then try to edit that part specifically so that it makes sense. In fact, I would probably rewrite the question as follows:
A person is standing next to a hot air balloon. At the same time, the person starts moving away from the balloon at 5 ft/sec and the balloon starts rising into the air at 12 ft/sec. What is the rate at which the distance between the person and the balloon is going up?
I could probably write my rewrite of the question a bit better, although I'm not exactly sure how if that's the case.
So overall, if this is supposed to be a question on a test near the beginning of the year, then this is a good math question, however I would suggest wording the overall question a little better.