Econ2 ch.1, Econ 2 ch.2
If Stephanie decides to buy 4 dresses, how many pairs of shoes can she afford?
2 pairs of shoes
Identify the positive statement among the following statements
College tuition is higher for out-of-state students than it is for in-state students.
Identify which of the following microeconomic topics can have an impact on macroeconomic topics
How do people decide how much to save for the future, or whether they should borrow to spend beyond their current means?
Which of the following statements reflects marginal decision-making?
If we double the order to a dozen doughnuts, we will pay only 20 percent more. *might be wrong
When creating a graph for your economics course, which axis is most commonly used to represent quantity (q)
Quantity is most commonly represented on the x-axis.
When creating a graph for your economics course, which axis is most commonly used to represent quantity (q)?
Quantity is most commonly represented on the x-axis.
Which of the following statements is normative?
Retired professionals should work less and get out more.
Every day, 500 airplanes in San Francisco incur an additional 30 minutes of airport delays when flying into or out of the airport. In Chicago, the delays amount to 15 minutes for 1,200 airplanes. If the price of time is $30/hour in San Francisco and $20/hour in Chicago, which airport incurs the largest opportunity cost?
San Francisco
What can be assumed if a model can accurately predict outcomes?
The assumptions of the model are generally accurate.
Imagine that a high school junior received a bonus check from his boss on the last day of his summer job. He decides to save all of that bonus check to pay for his senior trip coming up next year instead of purchasing a much needed new automobile. From an economist's perspective, which of the following statements about this decision is likely to be true?
The decision is rational in the sense that it reflects the junior's preference for a senior trip over new automobiles.
A local bank sponsors a charity run that raises funds for a non-profit building wells and schools in Mali, Africa. How would the use of the bank's funds for this fundraiser be justified when its goal is to maximize profit?
The money spent is worth the public relations boost it gives to the bank's image.
Which topic below best applies to microeconomics
The price that a farmer asks for her watermelons.
Which topic below best applies to microeconomics?
The price that a farmer asks for her watermelons.
How does a production possibilities model differ from a budget constraint model?
The production possibilities model demonstrates diminishing returns.
In figure 3, the unemployment rate ranges from a low of around 4% in the early 1970s to a high of around 10% in the late 2000s. Given this information, which of the following statements is likely to be true?
at any time beyond the late 200s, it is unlikely that the unemployment rate will fall out the 4-10% range
According to this graph, which age group will experience the greatest decline in population growth between 2000 and 2030?
between 20-64
A key feature of some economic models is linearity, or whether the variable of interest changes in constant proportion with another associated variable (meaning they exhibit a linear or constant straight line relationship) or whether the change in the variable is not a constant proportion but varies more or less depending on the level of the associated variable (meaning they have a non-linear or curved line relationship). Which of the following is the most effective way for an economist to support such a relationship?
conduct behavioral experiments and make quantitative observations that indicate the form of the relationship
Government expenditures on public schools is classified as ________ policy.
fiscal
in figure 6 Graphs a-c, the one that shows the relative progression of the US population in the over 65 category is ________.
graph c
Consider the Production Possibility Frontier below for the country Z producing 2 groups of goods, cell phones and clothing. The opportunity cost of one additional cell phone is ________.
greater at A than at B
Consider again the total cost curve shown above. Its shape indicates that total costs rise as quantity produced rises at an ________ rate.
increasing
If a graph data line indicates that there is a zero slope, this means there
is a constant relationship between x and y.
The theory of rational behavior
is an assumption that economists make to have a useful model for how decisions are made.
Now if the economy is currently producing 18 pieces of clothing and 2 cell phones (combination B), then
it could be reaching allocative efficient if combination B best meets the needs of country Z
The following statement given at a political rally: 'Poverty should be eliminated given the size of our economy; and that's a fact." This is normative because
it is expressing someone's values and opinions
What are the factors of production?
land, economic capital, labor, entrepreneurship
Macroeconomic policies that focus on banking and interest rates or controlling the money supply are called
monetary policies.
The production possibilities model shows an inverse relationship between the amount of one thing and the amount of something else that can be produced because
production of different types will compete for limited resources
Society gains advantages through trade because of its ability to
specialize resources to the uses where opportunity cost is minimized
Suppose that there are only two types of output in a country: nuclear missiles and consumer goods. All else being constant, as the nation produces more missiles,
the greater the opportunity cost will be of satisfying consumer wants.
Because of ________ if a city government decides to spend money on beautifying its downtown and attracting tourism to its city when no money has been devoted to those efforts before, then gains in tourism may be significant.
the law of diminishing returns
The musician was known for multiple encore performances, but had limited stamina and a rational mind. Even she would eventually call it a night when, by her judgement
the marginal cost is greater than the marginal benefit of an additional encore
Budget constraints impose scarcity. They are based upon
the prices of the items purchased.
Peyton and Paul are brothers who own a manufacturing business and are considering opening a new distribution center. They estimate that the project would add $5 million in expenses and that their profit would increase by $1.5 million per year for the next 5 years (other things equal). Peyton and Paul decide
to go ahead with the project because the expected marginal benefit is greater than the estimated marginal cost of the project
When decisions need to be made, economists assume a decision will be influenced by its
trade-offs.
The very best models have an unusual combination of characteristics. They are both
useful and simple
What combination of model characteristics are frequently used in the most effective models?
useful and simple
A positive statement is always
without value judgments.
Let's consider again our example of Stephanie who is planning a cruise to the Caribbeans and has a budget for new evening wear of $500. The average price for a pair of shoes is $50 while the average price for an evening dress is $100. She found 6 pairs of shoes and 2 dresses she likes. She decides that she does need one more dress. What is the opportunity cost of buying a 3rd dress?
2 pairs of shoes
The country of Mambia produces cars and TVs as laid out in the Production Possibility schedule below. What would be the opportunity cost of producing a fourth car (increasing production from 3 to 4 cars)? Cars (daily production in thousands) 0 1 2 3 4 5 TVs (daily production in thousands) 20 18 15 11 6 0
5 tvs
Consider the Production Possibility Frontier for country X producing 2 groups of goods, MP3 players and watches. The opportunity cost of one additional watch is
Greater at B than at C
Because of our limited money, time, and effort, we are best off when we allocate things
by constantly assessing the opportunity costs of our choices.
Due to limits on our time, money, and effort, we are best off when we allocate things
by constantly assessing the opportunity costs of our choices.
Which of the following can be classified as a free good in the production process?
calculus
Making an economically rational decision requires
considering the prospective benefits and costs to oneself
Making an economically rational decision requires
considering the prospective benefits and costs to oneself.
In figure 2, the relationship between altitude and air density ________ at altitudes above 10,000 meters.
continues to fall
Assuming there are only two types of outputs in a country: consumer goods and nuclear missiles. All else being constant, as the nation produces more missiles
every additional missile will reduce consumer goods production by more and more.
If Stan's Shoemaker Shop practices the division of labor and employees concentrate on one step of the shoe-making process, this will likely result in
greater production output.
Khloe is the owner of a wellness center in Los Angeles. Her business has been growing over three years and she is now considering expanding her business by adding a healthy cafe in her center. Khloe is analyzing the estimated costs, projected potential revenue and costs and benefits of a cafe. Khloe is behaving rationally because
her decision will be based on her self interest.
The slope of a budget constraint line is influenced by
how much one product costs compared to the other
Economic policy decisions taken by individual states within the U.S. are classified as ________ decisions.
macroeconomic
The additional benefit that one more unit of something will provide is known as
marginal benefit
To make an economically rational decision, marginal cost should be compared to
marginal benefit.
In a world of scarcity, we will never
meet all of society's wants
The government should take measures to reduce inflation.
normative
The inflation should be kept at 0%
normative
A budget constraint model differs from production possibilities model in that, typically
only the production possibilities model demonstrates diminishing returns
The inflation has been above 5% per year for the last 5 years.
postive
The ability of a model to predict outcomes (accurately) is an indicator that
the assumptions of the model are generally accurate.
When choosing a college major in a rational way, Minty should consider
the cost of the degree and the benefit each degree would bring.
Raj and Annie, owners of a trucking company, are discussing opening a new distribution center and are analyzing the estimated cost and potential benefits of the project. Raj and Annie are behaving rationally because
the decision is based on self interest
Identify the normative statement(s) among the following statement(s).
the federal govt spends too much
Which assumption below best reflects a basic understanding economists have about the world?
the world has limited productive resources
When picking up a rental car at an airport car rental agency, some travelers stand in line waiting to sign paperwork and pick up car keys at the rental desk while other travelers can go right to their rental car by using their rental car loyalty club card. In this example, the travelers who move quickly through to the parking lot pick up their car are probably
travelers who value convenience more than those waiting in line and are willing to pay additional club fees for the option of avoiding them.
A graph in the xy plane with a single point at 4 on the x (horizontal) axis and a vertical line upwards from that point to infinity would be represented by the equation
x=4
Smith's theory of the division and specialization of labor implies that a worker skilled in engineering will
yield economic output that is sub0optimal if she were employed in something other than engineering-type function
The house that Jamalla inherited from her mother can rent for $2000/month, but Jeanne decides to allow her brother to stay there for only half of that. This decision carried with it a
zero monetary cost but a $1000 per month opportunity cost.
The house that Jeanne inherited from her mother can rent for $1500/month, but Jeanne decides to allow her brother to stay there for only $500 per month. This decision carried with it a
zero monetary cost but a $1000 per month opportunity cost.
Danielle is planning a cruise to Mexico and has a budget for new clothes of $300. The average price for a pair of shoes is $50 while the average price for a suit is $100. Danielle already has 4 pairs of shoes purchased for her cruise, what is the opportunity cost of buying two more pairs of shoes?
1 dress
Bianca, a small oil producer is talking to her chief engineer, Pete, about repairs and upgrades to an oil well. Pete: "...additional upgrades on the well would cost $5,000 but would allow increased production and revenue of more than $10,000 per year." Bianca: "I already spent $20,000 on this well, it is a money pit; we should not spend anymore on it." Based on the information given, what is the sunk cost?
$20,000 spent on prior repairs
Consider the Production Possibility Frontier for the country Z producing 2 groups of goods, cell phones and clothing. The opportunity cost of moving from the combination of cell phones and clothing B to D is
4 cell phones
Given X = 52+27-((3/15)*100), X is _____
59
Stephanie is planning a cruise to the Caribbeans and has a budget for new evening wear of $500. She plans to purchase new shoes and dresses. The average price for a pair of shoes is $50 while the average price for an evening dress is $100. What is a combination of dresses and shoes that Stephanie could afford?
6 pairs of shoes and 2 dresses
Lynn sat down to calculate the economic equation, y= 12+7x18, for her economics course. What should she remember to do in order to find y?
Follow the correct order of operations.
Macroeconomic topics can be impacted by which of the following microeconomic topics?
How do people decide how much to save for the future, or whether they should borrow to spend beyond their current means?
If Cece is trying to solve an equation, which step should she take first?
Multiply from left to right.
Which assumption below best reflects a basic understanding economists have about the world?
The world has limited productive resources.
An economy is composed entirely of two equally sized farms A and B producing both eggs and milk. Farm A is better at producing eggs than Farm B which is better at producing milk. Then in order to maximize output, Farm A should
abandon the production of milk to fully specialize in the production of eggs and then rate them with the farm B for milk
A combination of clothing and cell phones that would meet the allocative efficiency would be:
any combination on the production possibilities frontier that brings the highest level of satisfaction to the people in the economy
Consider the example presented above about Biana, a small oil producer, trying to decide about investing more money into an oil well. If upgrades cost $5,000 but increase revenue will be more than $10,000 a year, what should Bianca do (assuming the $5,000 is available to her)?
bianca should send 5,000 on the well with the expectation that the additional revenue would outweigh the additional spending
In economics, functions often describe cause and effect. In an economic function, the variable being described on the left-hand side represents a(n) ________?
effect
Use the information you just read in the text to think about the following scenario. The computer software industry is more likely to achieve economies of scale if it is located
in or close to large cities with large numbers of technology workers
To make an economically rational decision, marginal cost should be compared to
marginal benefit
What is NOT included in economic capital?
money
If trade between nations is prohibited,
nations will be able to specialize in what thy are good at and therefore end up consuming less
One important use of algebraic modeling of economic behavior is to determine the direction of the relationship between two economic variables—say the quantity of X that is purchased and the price paid for X. If, as the price of X rises, the quantity of purchases fall, the relationship can be said to be ________.
negative
You read about a traveling situation in which some airport passengers seem to get a "fastpass" through security and move seamlessly through the boarding process, while others wait in long lines. In this example, the travelers who move quickly through the boarding process are probably
people who value their time and convince more than those waiting in ling lines and are therefore willing to pay additional fees for the privilege of avoiding them
the production possibilities model illustrates an inverse relationship between two goods or services because
production of different types will compete for limited resources
Raising public transportation fares ________.
reduces the opportunity cost of driving one's car
In order to satisfy as many wants as possible, it is necessary to achieve allocative efficiency,
since otherwise output may go to where it is less valued
The advantages that society gains through trade lie in the ability to
specialize resources to the uses where opportunity cost is minimized.
The ________ shows the interaction between household and firms in the goods and services market as well as in the labor market. This simplifies a complex economy, enabling economists to better observe and understand behavior
the circular flow diagram
Suppose that a family decides to spend all of their available money on a fancy vacation instead of purchasing a much needed new automobile. From an economist's perspective, which of the following statements about this decision is likely to be true?
the decision is rational in the sense that it reflects the family's preference for vacations over new car
Scarcity is imposed on individual households in the form of income and
the prices of the goods that a person may purchase
Juan has a monthly budget of $100 to spend on entertainment. A concert ticket costs $20 while a movie ticket costs $10. This month Juan has attended one concert and 5 movies so far. If Juan decides to only go to movies for the rest of the month. How many movie tickets can he afford to purchase and stay within his budget?
three tickets
In order to calculate an economic equation to understand its economic implications, what must one remember to do?
Follow the correct order of operations.
The town of Chester has an economy composed entirely of two equally sized food companies. Both company Q and company R produce peanut butter and jam. Company Q is better at producing jam than Company R which is better at producing peanut butter. In order to maximize output, Company R should
abandon the production of jam to fully specialize in the production of peanut butter and then trade with Company Q for jam.
Functions are often described as cause and effect in economics. In an economics function, if the variable is on the right-hand side and is doing the explaining, it represents a(n) ________?
cause
The ________ simplifies the economy into two groups, firms and households, and allows us to make predictions about economic behavior.
the circular flow diagram
Indi and Indrani are sisters who own a software development company. Demand has been increasing for their products and services and the sisters are contemplating whether to open up a satellite office in Austin. They estimate it would add $7 million in expenses and a profit of $12.5 million in total over the next 5 years (all other things equal). Indi and Indrani decide
to open a new office because the expected marginal benefit is greater than the estimated marginal cost
According to this graph, which age group will make up most of the population in the United States in 2030?
between 20-64
If all else remains constant and the values of two variables move in the same direction it indicates a
positive slope relationship.
shows that in 1970, people 19 and under made up 77.2 million or 37.6% of the population; people between ages 20 and 64 made up 107.7 million or 52.5% of the population; and people 65 or older made up 20.1 million or 9.8% of the population. Image (b) shows that in 2000, people 19 and under made up 78.4 million or 28.5% of the population; people between ages 20 and 64 made up 162.2 million or 58.9% of the population; and people 65 or older made up 34.8 million or 12.6% of the population. Image (c) projects that in 2030, people 19 and under will make up 92.6 million or 26.4% of the population; people between ages 20 and 64 made up 188.2 million or 53.6% of the population; and people 65 or older made up 70.3 million or 20% of the population.) According to this pie chart, which age group population has been continually shrinking since 1970?
19 and under
Suppose that the equation given above applies to you and that you currently study 2 hours per week and attend class on average 3 out of 3 possible hours per week. Your previous semester's GPA is 2.0. If you are intent on getting a 4.0, how many more hours per week do you need to study?
3.5 hrs
How would the equation x=0 and y=5 be represented in a XY graph, and what does it say about the relationship between X and Y?
A single point y=5 on the Y-axis has a horizontal line to the right from that point. This graph indicates that y is not dependent upon x.
Charlie searched for a model and discovered one on which to base his theory. For his model he used the circular flow diagram, applied math functions to predict economic actions, and identified the economic aspects and associations used in the model. All of his actions are in line, but what has Charlie forgotten to do with his model?
Charlie forgot to explain assumptions he used to simplify the model.
In this time series graph, the unemployment rate fluctuates from around 4% to 10%. Given this information, 1987 had an unemployment rate of around 6%. Look at the year 2015 and compare whether it was easier or harder to find employment with 1986 and why?
Finding work was equally as effortful in 2015 as it was in 1986 because both of those years had economic conditions where unemployment was around 6%.
How would the equation where x=3 and y=4 be represented in a XY graph, and what does it say about the relationship between X and Y?
The beginning point y=4 on the Y axis has a horizontal line straight to the right, X-axis has a vertical line straight up from x=3. With the two points on the graph, there is an intersection point where the x and y will cross each other.
An equation where Y=6 could be represented on a graph where Y is on the vertical axis and X is on the horizontal axis as
a single point (Y=6) and a horizontal line rightwards from that point.
In figure 1, the slope of the line indicates that for every 1" increase in length for American children, weight rises
by 0.68 pds
When tasks involved with producing a good or service are divided, workers and businesses
can produce a greater quantity of those goods or services
Land, or natural resources, include(s) the fertility of the land, minerals below it, and
climate
Natural resources, or land, can include the fertility of the land, minerals below it, and what other aspects?
climate
Some highways have commuter or express pass lanes. During rush hour lanes on the highway move slowly or often are stop and go, but the express lanes continue to move at a faster pace. Express pass users pay for a transponder and monthly fees to have express lane access even with no other people in their cars. In this example, the drivers who purchase these express passes are probably
drivers who value speed and convenience more than those in the stop and go lanes and are willing to pay additional express pass fees for the option of avoiding traffic jams.
The distinguishing feature of economic capital (as opposed to financial capital, like money) is that it
is productive
Suppose two countries A and B possess the exact same amount and quality of land, labor, capital and entrepreneurship. Can we say that each country therefore produces the exact same level of output?
it cannot be determined with the given info
A bill was introduced into Congress last year suggesting changes to the income tax code. Congress now passed this new tax reform act in the last session and over the next few years the new laws will begin to impact the nation. This is an example of what type of policy?
macroeconomic fiscal policy
If an economist is trying to predict the outcome from particular causes and effects, what is the best tool(s) for her to use in order to test out her economic model?
mathematical functions
The best way to determine the direction and magnitude of the relationship between the price of some good and the demand for it is ________.
mathematically
Take a stab at this question (you'll need to do some multiplication). Every day, 500,000 drivers in Los Angeles incur an additional 30 minutes of traffic delays when commuting by car to their jobs. In Boston, the delays amount to 45 minutes for 200,000 drivers. If the price of time is $15/hour in Los Angeles and $25/hour in Boston, which city incurs the largest opportunity cost?
neither
Consider a new Production Possibility Frontier for the country Z that produces 2 groups of goods, cell phones and clothing. If the economy is currently producing the 10 clothing and 4 cell phones (combination D),
the economy is not reaching productive efficient because it could produce more phones without having to give up clothing
Suppose that there are only two types of output in a country: nuclear missiles and consumer goods. All else being constant, as the nation produces more missiles,
the greater the opportunity cost will be satisfying consumer wants
If a data line on a graph slopes upward as it goes to the right, it is depicting that
the relationship between the variables on the axes is direct.
Suppose you have determined that the quantity demanded of eggs depends on their price and the income of consumers. Prior to quantifying these relationships using a mathematical model you want to be sure of their directional relationships. Which statement is likely to be true?
the sale of eegs falls when prices rise but increase when consumer income rises
Scarcity is a condition that is everywhere and always, since it is based upon two assumptions that reflect permanent universal conditions. The assumptions are that more output will satisfy more wants and
the world has limited productive resources.
What combination of model characteristics are frequently used in the most effective models
useful and simple.
Given that total spending for a certain household will always include a base amount of $1000/month, and that additional spending is equal to half of any income earned, we can predict total household spending with a model y=b+mx, where
y represents total spending.
