Econ Exam 1
If an alternative provides a benefit of $8 to an individual at a cost of $6, the net benefit of the alternative equals ________.
$2
Which of the following correctly defines the term "equilibrium"? 1) It refers to a situation in which all economic agents are simultaneously optimizing. 2) It refers to a situation in which an optimizing decision is made by an individual economic agent. 3) It refers to a situation in which data are used to arrive at conclusions. 4) It refers to a situation in which government intervention efficiently allocates scarce resources.
1) It refers to a situation in which all economic agents are simultaneously optimizing.
The end of the podcast updates developments in this market between 2015 and 2019. Which of the following was NOT a change which happened in this market? 1) The federal subsidy expired 2) Solar City went out of business 3) There was a tariff on panels from China 4) The price of solar technology continued to decline
1) The federal subsidy expired
Which of the following is NOT a key principle of economics? 1) Empiricism 2) Substitution 3) Optimization 4) Equilibrium
2) Substitution
Which of the following is NOT a determining factor of consumers' purchase decisions? 1) The market price of the finished goods 2) The cost of factor inputs 3) Consumers' income 4) Consumers' tastes and preferences
2) The cost of factor inputs
Which of the following statements correctly describes a competitive market? 1) Buyers and sellers negotiate prices before making exchanges. 2) The market price is determined by the interaction of demand and supply. 3) A single seller sometimes has the ability to dictate the market price. 4) The market price for the same good varies from seller to seller.
2) The market price is determined by the interaction of demand and supply.
Which of the following pairs of goods is most likely to have a positive cross-price elasticity? 1) Motorcycles and typewriters 2) Coffee and sugar 3) A privately-owned car and public transportation 4) Printers and ink cartridges
3) A privately-owned car and public transportation
Suppose Z is a normal good. The equilibrium price and quantity of Z in the year 2013 was $25 and 60 units, respectively. In 2017, the equilibrium price of Z had increased to $35 but the equilibrium quantity had decreased to 50 units. Other things remaining the same, which of the following could explain this change?
A leftward shift of the supply curve of Z
Which of the following statements best describes a normal good?
A normal good is a good whose demand increases with an increase in consumers' income.
A/B testing can be thought of as an example of
A randomized experiment
Based on what Betsey Stevenson reported getting, what was the inflation adjusted amount the tooth fairy should give?
About 3 dollars
Supply increased because of which country beginning to produce panels?
China
A fall in the price of flour, used in making cakes, is likely to ________ of cakes.
increase the supply
Two goods are said to be substitutes when a fall in the price of one good ________.
leads to a leftward shift in the demand for the other good
To calculate the ________ of an alternative, an individual needs to estimate ________ of the alternative.
net benefit; both the cost and the benefit
A shortage occurs in a market when ________.
price is lower than the equilibrium price
The quantity demanded of a good is ________.
the amount of the good that buyers are willing to purchase at a given market price
The slope of a consumer's budget constraint equals ________
the ratio of the price of the good measured along the horizontal axis to the price of the good measured along the vertical axis
To conduct a randomized experiment, researchers usually classify the participants into a ________.
treatment group and a control group
________ occurs when the direction of cause and effect is mixed up in a study.
Reverse causality
In terms of optimization, what was the key tradeoff?
Spend per table vs number of tables
What did the producers of the podcast A/B test?
The introduction to the podcast
Why was John installing solar?
To save on his electricity bill
Assume that a consumer can spend $20 on two goods-pens and pencils. If the price of one pen is $5 and the price of one pencil is $2, which of the following combinations of the two goods represents a point on the consumer's budget constraint? 1) 2 pens and 5 pencils 2) 2 pens and 3 pencils 3) 1 pens and 10 pencils 4) 3 pens and 2 pencils
1) 2 pens and 5 pencils
By approximately how much did the price of solar panels decrease between 2007 (8 years before the original airing of the podcast) and 2015 (at the time of the original podcast)
75
Justin Wolfers said that one explanation for the increase in tooth fairy payments was related to which concept that we covered in Chapter 5?
Income Elasticity of Demand
Other things remaining same, a rightward shift in the demand curve will lead to a(n) ________.
increase in the equilibrium price and the equilibrium quantity
Which idea did David Autor say was the most useful idea in Economics?
Lump of Labor
The Principle of Optimization at the Margin states that ________.
moving toward the optimal alternative makes the decision maker better off and moving away from it makes him worse off
The market demand is the ________ of the individual demand of all the potential buyers
sum
Optimization using marginal analysis analyzes ________.
the change in the net benefits resulting from a shift from one alternative to another
Suppose the government imposes a tax on Good X. In order to estimate the effect of the tax on the quantity demanded Good Y, a related good, we can use the concept of ________.
the cross-price elasticity of demand
Consumer surplus is ________.
the difference between the willingness to pay for a good and the price paid for the good
Assume that an individual spends her income on sweaters and shirts. If the price of a sweater increases, ________.
the opportunity cost of buying sweaters increases
Elasticity is ________.
the ratio of the percentage changes in two variables
John has to choose between a camping holiday and a holiday in Las Vegas. If he evaluates the total net benefit of both alternatives before coming to a decision, he is using the technique of ________.
optimization using total value
When two variables move in the same direction, they are said to be ________.
positively correlated
If the net benefit of Project A is $20 and that of Project B is $15, switching from Project A to Project B ________.
reduces the net benefit by $5
In a perfectly competitive market, situations of surplus or shortage of a good ________.
self-correct due to the competitive nature of the market
Luxury goods have an income elasticity ________.
greater than one
Willingness to pay is the ________ for a unit of good. For a trade to take place, the willingnessto pay must be ________.
highest price that a buyer is willing to pay; higher than the price of the good.
Among a set of alternatives with the same total costs, an individual is said to optimize if she chooses an alternative that has the ________.
highest total benefit
A natural experiment is an empirical study ________.
in which some process, outside the control of the experimenter, has assigned subjects to the control and treatment groups in a random or nearly random way
A perfectly elastic demand curve ________.
is parallel to the quantity axis
At all points below the midpoint of a downward-sloping, linear demand curve for a good, the value of the price elasticity of demand for the good is ________.
less than one
Assume that a seller in a perfectly competitive market charges more than the equilibrium price. It is likely that this seller will ________.
lose almost all of his buyers
How much did the owner of the restaurant calculate that one seat was worth per year?
$16
________ economics prescribes what an individual or society ought to do.
Normative
A model refers to ________.
a simplified description, or representation, of reality.
Spending more time commuting in exchange for a lower monthly rent is an example of ________.
a trade-off
The quantity supplied of a good is ________.
determined irrespective of the market price
Which of the following is a key property of models? 1) All economic models begin with assumptions. 2) All models can be used for a limited time only. 3) Empiricism is not essential for testing models. 4) All models are consistent and do not make incorrect predictions.
1) All economic models begin with assumptions.
Which of the following is an example of a normative economic statement? 1) An increase in social security benefits will increase the welfare of all economic agents. 2) Relaxation of import duties will encourage imports. 3) An increase in subsidies to farmers will boost agricultural production. 4) A cut in the tax rate will lead to an increase in consumption.
1) An increase in social security benefits will increase the welfare of all economic agents.
Which of the following statements correctly describes perfectly competitive market equilibrium? 1) Competitive markets converge to the price at which quantity supplied and quantity demanded are equal. 2) Multiple equilibriums are possible for a given set of demand and supply curves in a competitive market. 3) Government intervention is necessary for the competitive market to reach equilibrium. 4) There is always excess supply or excess demand when the competitive market is in equilibrium.4)
1) Competitive markets converge to the price at which quantity supplied and quantity demanded are equal.
Which of the following best describes scarce resources? 1) Resources for which the quantity that people want exceeds the quantity that is freely available 2) Resources that most people cannot afford to buy 3) Resources for which the quantity demanded is the same for all economic agents 4) Resources that can only be distributed efficiently by the government
1) Resources for which the quantity that people want exceeds the quantity that is freely available
A supply schedule is a table that reports the ________.
different quantities of a good that producers are willing to sell at different prices
Which of the following factors will NOT cause a shift in the demand for a good? 1) A change in tastes and preferences 2) A change in the market price of the good 3) A change in consumer incomes 4) A change in the number of consumers
2) A change in the market price of the good
Which of the following statements is true? 1) Theories are statistics that describe the real world. 2) Hypotheses are predictions that can be tested with data. 3) Empirical evidence consists of facts, measurements, or statistics that describe the world. 4) Data are facts established by observation and measurement.
2) Hypotheses are predictions that can be tested with data.
Which of the following goods is likely to have the highest price elasticity of demand? 1) Life-saving drugs 2) Ketchup 3) Gasoline 4)Salt
2) Ketchup
Which of the following statements is true? 1) Optimization using total value calculates the change in net benefits when a person switches from one alternative to another. 2) Marginal analysis is a key component in the process of optimization using total value. 3) In both the techniques of optimization, all costs have to be converted to the same unit of measurement. 4) Only direct costs are considered when the net benefits of the alternatives are calculated.
2) Marginal analysis is a key component in the process of optimization using total value.
Which of the following statements is true of the price elasticity of demand? 1) If a consumer's budget share of a good increases, the price elasticity of demand for that good is likely to decrease. 2) As the number of substitutes for a good increases, the price elasticity of demand for that good decreases. 3) The price elasticity of demand for a good is generally higher in the long run than in the short run. 4) If the price elasticity of demand for a good equals zero, the demand for the good is likely to be highly responsive to price changes.
3) The price elasticity of demand for a good is generally higher in the long run than in the short run.
Which of the following is most likely to be an example of causation? 1) A student wins money by scratching a ticket with a particular coin. He decides to scratch all tickets with the same coin in the future. 2) A soccer player scores four goals when he wears red socks. He concludes that the red socks helped him score the goals. 3) The crime rate is high in a country. The literacy rate is high as well. 4) A firm producing compact fluorescent light bulbs installs new machinery. Their per-day production of light bulbs increases.
4) A firm producing compact fluorescent light bulbs installs new machinery. Their per-day production of light bulbs increases.
What was the median amount of money given by the tooth fairy according to the Delta Dental survey?
4.66
How many solar panels was John from Long Island having installed on his house?
41
What did Betsey Stevenson say that she used to get from the tooth fairy as a kid?
50 cents
Which idea did Scott Cunningham say was the most useful idea in Economics?
Causal Inference
Which idea did Emily Oster say was the most useful idea in Economics?
Comparative Advantage
The price of solar panels decreased in part because installers found ways to install them more quickly, for example using the "zep tool". The installer said that the installation time decreased from 2 days to about four hours between 2010 and 2015. How does this relate to an increase in supply?
It is an improvement in technology
Relying upon data from a large number of listeners, rather than the opinion of one of the producers, to decide which introduction to the podcast would be more effective is an example of
Empiricism
The consultant ended up changing the seats in one area from 8 to 7. She and the owner then focused on how much revenue would changed with this different number of seats. This can be seen as an example of what?
Marginal Analysis
________ is the study of how individuals, households, governments, and firms make choices and how those choices affect prices, the allocation of resources, and the well-being of other agents.
Microeconomics
According to what Wolfers said about the income elasticity, we can conclude that (given our definitions from class), the amount of money parents give to their kids through the tooth fairy) is what kind of good?
Normal and Luxury
Which idea did Lisa Cook say was the most useful idea in Economics?
Opportunity Cost
What was the end result from the changes in the restaurant?
Overall, revenue went up
How did the subsidies discussed in the podcast affect this market?
They increased demand
Which idea did Betsey Stevenson say was the most useful idea in Economics?
Thinking on the Margin
Suppose Apple raises the cost of downloading a song from iTunes from $0.99 per song to $1.49 per song. This price increase will cause a(n) ________.
decrease in quantity demanded
Assume that the supply curve for a commodity shifts to the right and the demand curve shifts to the left, and the shift in demand is greater than the shift in supply. Then in comparison to the initial equilibrium, the new equilibrium will be characterized by ________.
a lower price and quantity
Data show that in 2012, the college enrollment in Lithasia increased. In the same year, the sale of hot dogs in Lithasia also increased. The relationship between college enrollment and the sale of hot dogs exhibits ________.
a positive correlation
Economics is primarily the study of ________.
agents' choices and their impact on society
In a perfectly competitive market, the market clearing price is ________ the equilibrium price.
always equal to
The ________ plots the relationship between prices and the quantity that buyers are willing to purchase.
demand curve
If the price of a good increases, ________.
consumer surplus decreases
Empiricism is analysis that uses ________ to test theories.
data
