Econ HW1

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Which of the following areas of economics studies issues such as whether government intervention is capable of reducing the severity of​ recessions?

Macroeconomics

Which of the following statements about microeconomics and macroeconomics is​ correct?

Macroeconomics is the study of the economy as a whole.

Which of the following areas of economics studies issues such as ways to reduce teenage​ smoking?

Microeconomics

Which of the following statements about microeconomics and macroeconomics is​ correct?

Microeconomics involves the study of how households and firms make choices.

Productive efficiency occurs when a good or service​ (such as the distribution of​ tickets) is produced at the lowest possible cost. Is this an efficient way to distribute the​ tickets?

NO

What type of economic analysis is concerned with the way things ought to​ be?

Normative Analysis

Suppose that your local police department recovers 100 tickets to a big NASCAR race in a drug raid. It decides to distribute these to residents and announces that tickets will be given away at 10 A.M. Monday morning at City Hall. Suppose that your college decides to give away​ 1,000 tickets to the football game against your​ school's biggest rival. The athletic department elects to distribute the tickets by giving them away to the first​ 1,000 students who show up at the​ department's office at 10 a.m. the following Monday. a. The groups of people that are most likely to get the tickets will be those for whom the expected marginal benefits of going to the​ department's office on Monday morning are greater than the expected marginal costs. b. What is the actual cost and also the opportunity cost of distributing the tickets this​ way?

The cost of travel to the​ department's office. B. The cost of people blocking traffic in and around the​ department's office building. C. The activities that cannot be done​ (such as earning money at​ work) when one is standing in line. D. ALL OF THE ABOVE . Your answer is correct. E. A and B only.

Which of the following best describes​ scarcity?

Unlimited wants exceed the limited resources available

The three economic questions that every society must answer are

What goods will be​ produced, how will they be​ produced, and who will receive the​ goods? Your answer is correct.

Indicate whether each of the following is primarily a microeconomic issue or a macroeconomic issue.

a. The effect of higher cigarette taxes on the quantity of cigarettes sold. This is a microeconomic issue. b. The effect of higher income taxes on the total amount of consumer spending. This is a macroeconomic issue. c. The reasons for the economies of East Asian countries growing faster than the economies of​ sub-Saharan African countries. This is a macroeconomic issue. d. The reasons for low rates of profit in the airline industry. This is a microeconomic issue.

Scarcity is central to the study of economics because it implies that

every choice involves an opportunity cost.

What do economists mean by the word​ "marginal"?

extra or additional

Centrally planned economies allocate resources based on decisions by

government

while market economies answer these questions through decisions made by

households and firms

Positive analysis

is concerned with what is

normative analysis

is concerned with what ought to be

Economics

is the study of the choices people make to attain their​goals, given their scarce resources

Economists use the word marginal to mean an extra or additional benefit or cost of a decision. An optimal decision occurs when

marginal benefit equals marginal cost

This is

not an equitable way to distribute the tickets because some students who really want them may be unable to go and get them

When economists develop models designed to explain the choices people​ make, they generally assume that

people are rational.

Economics is about

positive analysis: which measures the costs and benefits of different courses of action.

Equity is

the fair distribution of economic benefits.

Opportunity cost is

the highest valued alternative that must be given up to engage in an activity.

Economists believe that an activity should be continued up to the point where

the marginal benefit from the activity is equal to the marginal cost

Economists assume that people are rational in the sense that

they use all available information as they take actions intended to achieve their goals

Macroeconomics is most likely to include the study of

unemployment


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