Macro First Homework (Final)

Positive Economics

-Consist of objective statements about the world -includes predictions about the future, presuming they can eventually be measured.

Normative Economics

-consist of statements about what should be done -based off of subjective judgements

The opportunity cost of an activity is a measure of ___________ when you do that activity.

what is given up

Assume every semester after finals you fly back to your hometown using a​ $300 ticket you buy online. You have​ 40,000 frequent flier miles. You could exchange your miles for a​ round-trip ticket to Bermuda over spring break. If you choose to exchange your airline miles for a free trip to Bermuda over spring​ break, then your trip​ _________. A. cost​ $300, since your​ next-best alternative for your miles was to use them to fly home at the end of the semester. B. equals the sum of the costs of all your previous flights​ home, since accumulating those miles cost you money. C. is​ free, since you used airline miles that you accumulated flying somewhere you needed to go. D. is​ free, since you had planned to pay for the​ $300 ticket home at the end of the semester with cash anyway.

A

During the process of optimization economists believe that people are considering​ _________. A. the benefits of their choices for others more than the benefits to themselves. B. only the decisions that will result in the least cost to the individual. C. what they would do if they had no money or time constraints of any kind. D. the feasibility of a​ choice, given the information available at the time.

D

Economics is divided into two broad fields of​ study: microeconomics and macroeconomics. Microeconomics studies​ _________, while macroeconomics studies​ _________. A. issues relating to​ businesses; choices made by individuals and consumers. B. ​economy-wide phenomena; decisions made by the government. C. ​money; policy. D. a small piece of the overall​ economy; the economy as a whole.

D

Policy decisions made by the government are analyzed by​ _________. A. neither microeconomics nor macroeconomics. B. only microeconomics. C. only macroeconomics. D. both microeconomics and macroeconomics.

D

Suppose a total of​ 2,500 students are allowed in the engineering programs at all of the colleges in a particular city. From the previous three​ years' record, it shows that the number of students who enroll in the entrance exam for the engineering program increases if there is an increase in the number of IT recruiters the previous year.This year there is a total of​ 3,200 students who have enrolled to take the entrance exam of which only up to​ 2,500 of those who passed would get in. Based on either the​ students' perspective or the college​ perspective, what combination of economic key concepts does the situation​ follow? A. Optimization and equilibrium B. Optimization and empiricism C. Equilibrium and empiricism D. ​Optimization, equilibrium, and empiricism

D

Which of the following is subject to the​ free-rider problem? A. A neighborhood watch. B. Public libraries. C. National security. D. All of the above.

D

Which of the following statements would not be considered a positive​ statement? A. In 2013-2014 comma tuition at 4 minus year colleges grew at its slowest rate in 30 years. B. U.S. automobile sales increased by 13 percent in 2012 comma compared to 2011. C. The highest annual unemployment rate in the last 10 years was 9.6 percent. D. Production in the automobile industry is still low and should be subsidized by the government.

D

Equilibrium

everyone is behaving optimally, given everyone else's choices

Economics is all about making choices. The reason we have to choose one thing over another​ is: A. economic choices are unlimited. B. economic resources are scarce. C. economic agents are scarce. D. economic wants are limited.

B

Which of the following statements explain positive​ economics? ​(Check all that apply​.) A. The predictions are testable. B. It can be rejected or amended depending on the evidence available. C. It depends upon value judgements. D. It is not factual.

A,B

the statement that the U.S. government should increase carbon taxes to reduce carbon emissions that cause global warming is​ ___________. A. neither a positive nor a normative​ statement, since it discusses the broad topic of global warming instead of a specific issue within the country. B. a normative​ statement, since it is an incorrect statement. Most economists believe that carbon taxes should be lowered to control emissions. C. a positive​ statement, since most studies have found that global warming does exist and most economists do believe that carbon taxes are an effective way to control emissions. D. a normative​ statement, since it describes what ought to be done and is therefore not possible to confirm with data.

D

Economists study ______________​; ​therefore, the unifying feature of economics is a focus on __________.

all human behavior; choice

Suppose you are ready to check out and see two​ lines: Line A has three​ people, while Line B has five people. Assume people choose lines at random and have not yet had a chance to switch lines. The situation will move toward equilibrium if the _________. Assume that all eight shoppers are optimizing​ (i.e., they had a chance to switch​ lines) and the situation is in equilibrium. Given this​ information, you could infer that the shorter line will move _________. Assume that all eight shoppers are optimizing​ (i.e., they had a chance to switch​ lines) and the situation is in equilibrium. Given this​ information, you could infer that the behavior of the _________ is most informative.

last person from the longer line switches to the shorter line; slower than the longer line; last person in the five-person line

A policy such as those limiting a firm's monopoly powers would be studied under ________​, since it deals with a __________.

microeconomics; small part of the overall economy

Equilibrium describes a situation where ___________.

no one would benefit from changing his or her behavior

The statement that the United States should legalize same minus sex marriage is a ________ since it describes what people ________.

normative statement; ought to do

The goal of optimization for an individual is to maximize ___________.

overall well-being

Optimization describes a situation where _________.

people weigh costs and benefits when making a decision.

Free riding occurs when _________ are out of sync with __________.

people's private benefits; the public interest

The statement that the United States has an average annual inflation rate of 2.1 percent is a ___________ statement since it describes what people ________.

positive; actually do

In which of the following examples is prescriptive economic analysis​ necessary? A. Jay chooses to go to Europe rather than China because of the huge discounts. B. The government is right to introduce a ban on smoking in public places. C. Higher interest rates will reduce home prices. D. If the government raises the tax on​ beer, this will lead to a fall in profits of the brewers.

A

Statement 2​: Your friend tells you that he expects many people to stand at football games. What does this deal with? A. ​equilibrium, because your friend presumes everyone is behaving optimally. B. ​optimization, because you will need this information to identify your best feasible option. C. ​empiricism, because your​ friend's prediction can be tested using data. D. ​equilibrium, because it is a prediction rather than an observation.

A

The ethical implications of a hotly debated government policy would best be considered a​ _________. A. normative​ question, since it deals with a subjective issue based on personal preferences. B. positive​ question, since it deals with an objective issue based on factual evidence. C. normative​ question, since it deals with an objective issue based on factual evidence. D. positive​ question, since it deals with a subjective issue based on personal preferences.

A

Which of the following is more susceptible to the​ free-rider problem: fishing in public lakes or street lights​? A. Use of street lights is more susceptible since even those who​ don't pay taxes still​ benefit, while fishing in public lakes can charge for a fishing license​, so that everyone who goes pays their share. B. Fishing in public lakes​, since a fishing license cannot be denied to anyone so everyone​ benefits, while street lights only benefit a small number of people at any given time. C. Both are equally susceptible to the​ free-rider problem. D. Neither are susceptible to the​ free-rider problem.

A

Which of the following is not one of the three key principles of​ economics? A. Resource allocation. B. Empiricism. C. Equilibrium. D. Optimization.

A

Which of the following statements about the principles of economics is​ false? A. An investor selecting and investing in a stock or a combination of stocks that always earns him​ 15% returns on his investment is an example of optimization. B. Five mobile operators selling mobile phones at the same price in a city is an example of equilibrium. C. Based on the sales of last three​ years, a shopkeeper infers that the higher the discount offered on goods the higher will be its demand. This is an example of empiricism. D. A chess player selecting his best moves to win the chess tournament is an example of optimization.

A

Which of the following does not support the concept of an economic​ agent? ​(Check all that apply​.) A. All economic agents are individuals. B. Groups are considered as a single decision maker. C. They make decisions by solving choice problems. D. Their decisions do not have an effect on the economy of a country.

A,D

Let's say that you are trying to decide what to do on Friday at 11 a.m. You rank your possible options from the one you value the most to the one that you value the least in the following​ order: going to​ class, sleeping in​ late, going to work​ early, getting​ lunch, going to the gym to​ exercise, and watching television. If you decide to go to​ class, then what do we know about the opportunity cost of your​ decision? A. The opportunity cost would be sleeping in​ late, since it was your​ next-best option. B. The opportunity cost would be​ working, since it is the only option that can be put in a dollar amount. C. The opportunity cost would include sleeping in​ late, going to work​ early, getting​ lunch, going to the gym to​ exercise, and watching television. D. There would be no opportunity cost in this example.

B

The costs of many environmental regulations can be calculated in​ dollars, but the benefits often are in terms of lives saved​ (mortality) or decreases in the incidence of a particular diesase ​(morbidity). What does this imply about the​ cost-benefit analysis of environmental ​regulations? A. Since these are government​ regulations, a​ cost-benefit analysis is not needed because the government acts independent of such analysis. B. We must first translate the mortality and morbidity data into dollars in order to compare it to the costs of the regulations. C. Since the benefits of these regulations are not in dollar​ terms, a​ cost-benefit analysis cannot be done. D. Since the costs are incurred by the government and the benefits are enjoyed by the​ consumer, such an analysis is meaningless.

B

One reason​ free-riders exist could be​ that: A. people often act in the best interest of others. B. the social cost ensures a​ strong, enforceable penalty. C. the private benefit exceeds the private cost. D. the social cost exceeds the private benefit.

C

Statement​ 1: You can either stand during a college football game or you can sit. You believe that you will see the game very well if you stand and others sit but that you will not be able to see at all if you sit and others stand. You therefore decide to stand. What does this deal with? A. ​empiricism, because you believe you know what the other fans will do. B. ​optimization, because other fans are maximizing their​ well-being. C. ​optimization, because you are choosing your best feasible option. D. ​equilibrium, because other fans may change their behavior.

C

Statement​ 3: An economist studies photos of many college football games and estimates that 75 percent of all fans stand and 25 percent sit. what does this deal with? A. ​empiricism, because it evaluates whether people maximize their​ well-being. B. ​optimization, because it predicts how​ people's behavior will change. C. ​empiricism, because it describes behavior using​ real-world data. D. ​empiricism, because it illustrates people optimizing using​ cost-benefit analysis.

C

Which of the following areas are addressed in the study of​ economics? ​(Check all that apply.​)

Prices, The costs associated with a decision, Money, Optimal tax policies.

prescriptive economics

a type of normative economic that uses economic analysis to help individual economic agents choose what is in their person best interest

Identify the cause and effect in the following​ examples: Lower infant mortality is ___________ and an improvement in nutrition is __________. A surge in cocoa prices is ________ and a pest attack on the cocoa crop is _________.

an effect: the cause; an effect: the cause

Empiricism

economics needs to be checked against actual results

Empiricism describes a situation where __________.

economists use data to analyze what is happening in the world.

You have already purchased​ (non-refundable and​ unsellable) tickets to a concert on Friday night. A friend also invites you to her birthday party on Friday. While you like your​ friend, you politely decline because you really want to go to the concert. Suppose you learn that your friend is serving flank steak at her​ party; all-you-can eat and at no charge. Flank steak is your favorite food. Your opportunity cost of going to the concert is now ___________ than you had previously thought. Suppose instead that you notice that the concert ticket cost you​ $10; previously, you had mistakenly believed the price was​ $100. Should learning this information affect your decision to go to the​ concert?

higher; no