Econ202 Exam One (modules 1.1-5.6) and Problem Sets 2-5
john is ready to pay five dollars for an extra loaf of bread. due to an ongoing discount in the store, he gets a loaf for 2 dollars. john's consumer surplus from the purchase is
3 dollars
sandra mary and david constitute the whole market of wine. at 8 dollars, sandra demands 2 bottles and mary demands 10. the demand is 19. what is davids demand?
7 bottles
If you have a competitive equilibrium for a two market economy consisting of tacos and enchiladas, then.. a) the market equilibrium quantity of tacos is efficient b) the market equilibrium quantity of enchiladas is efficient c) the sellers of tacos have higher costs than other potential sellers d) all of the above e) A and B above
A and B
When trying to assess your economic well-being, you should:
Compare your situation to that of most people alive today.
The steps needed to evaluate the best way to organize an economy include
Determining what will be produced, how it will be produced, and who gets it, and then evaluating these outcomes.
which of the following statements is true of the scientific method
Empirical arguments are more credible when they are based on a large data set
When buyers and sellers operate in a competitive market, they are
Following their own self interest, doing whatever serves them best.
According to the video, is there enough bluebell?
No :P
What are the assumptions needed for simple arithmetic
Numbers exist & addition
The video describes the steps in simple arithmetic as proceeding from
Numbers to cardinal numbers to addition to subtraction to multiplication to division
In which of the following ways did the video NOT indicate you were rich compared to King George? a) power b) indoor plumbing c) travel d) music e) medical treatment
Power
Which of the following is a positive economic statement? a) raising the tax on gasoline raises the selling price of gas b) the government should revamp its immigration policies c) us citizens should only buy products which are produced in the us d) the government should ban the production and sale of incandescent light bulbs
Raising the tax on gasoline raises the selling price of gasoline
What did central control of economies imply
Regulating resources like land and water
What is an assumption of economics
Scarcity
Which of the following is NOT an economic question? a) should you eat healthy food? b) should seniors get the first pick of seats in the student section of Kyle field? c) should you study for a test or go to a party? d) Should TXA&M allocate seats in classes using a first-come, first-served approach? e) none of the above
Should you eat healthy food?
What can be derived from other assumptions about numbers
Subtraction, multiplication, and division
Adam smith's book, the wealth of nations, investigated
The role of markets in determining economic efficiency
When sellers sell goods in a market they are doing so because
They can make more money selling that good than doing something else
When buyers buy goods in a market they are doing so because
They prefer the good to the other good
the three fundamental questions that must be answered by any economy include
What to produce, how to produce goods, and who gets the goods
Scarcity generates which general questions in an economy:
What to produce, how to produce it, and who gets it?
Which of the following is NOT an economic question? a) Do we have enough medical care in the economy? b) Which type of music should we produce more of? c) Should we make hybrids or SUVs? d) Why do we need more bluebell ice cream?
Why do we need more bluebell ice cream?
Using basic assumptions you can determine
Why markets are efficient, when markets are efficient, and when government intervention helps or hurts economic preferences
Which of the following is NOT an economic question? a) how many iphones and droids should we produce? b) should we urbanize farmland? c) how much bluebell should be made? d) would people be better off if they wanted fewer goods? e) should we teach courses online?
Would people be better off if they wanted fewer goods?
a change in the slope of a budget constraint indicates
a change in the price of either good that causes a change in the opportunity cost
a budget constraint is a straight line bc
a consumer faces a fixed price of both goods that do not change with changes in consumption
a budget constraint is a straight line bc
a consumer faces a fixed price of both goods that do not change with changes in consumptions
what best describes the difference between a demand curve and a demand schedule
a demand curve is a graphical representation of the relationship between the quantity of a good and its price, whereas a demand schedule is a tabular representation
a model refers to
a simplified description or representation of reality
Which of the following will lead to a change in the opportunity cost of buying a pen and a pencil?
a twofold increase in the price of pens and a threefold increase in the price of pencils
which of the following will lead to a change in the opportunity cost of buying a pen and pencil
a twofold increase in the price of pens and a threefold increase in the price of pencils
The key advantage of market exchange compared to one-on-one (barter) trade is that a) markets allow for greater specialization b) markets allow trading to occur to a larger extent c) markets are more efficient d) all of the above
all of the above
Which of the following methods have been used to govern economic activity? a) customs b) apprenticeships c) markets d) central control e) all of the above
all of the above
Which of the following is NOT an example of central economic control? a) family or clan leaders b) warlords c) dictators d) tribal chieftains e) all of the above are examples of central control
all of the above are examples of central control
Consider the following statements: a. Car owners purchase more gasoline from a gas station that sells gas at a lower price than other rival gas stations in the area b. banks do not take steps to increase security since they believe it a less costly to allow some bank robberies than to install expensive security monitoring equipment c. firms produce more of a particular DVD when it's selling price rises which of the statements demonstrate that economic agents respond to incentives?
all of them
economists assume that individuals
are rational and respond to incentives
if a consumer purchases any combo of goods and services on his ____________, he will exhaust his income completely
budget constraint
the ________________ plots the relationship between prices and the quantity that buyers are willing to purchase
demand curve
Making "how much" decisions involves
determining the additional benefits and the additional costs of that activity
consumer surplus
difference between willingness to pay and the price paid for a good
the opportunity cost of going to an outdoor music festival is
equal to the highest value of an alternative use of the time and money spent on the festival
economists assume that rational behavior is useful in explaining choices people make
even though people may not behave rationally all the time
marginal utility is the
extra satisfaction received from consuming one more unit of a product
positive analysis is concerned with "what ought to be" while normative analysis is concerned with "what is" t/f
false
Which of the following is a normative economic statement a) farmers should not be allowed to grow and self genetically-modified crops b) the federal government is considering increasing regulations on the use of fossil fuels to promote the use of wind power c) rising corn prices have increased the price of corn-based ethanol d) with rising home prices and falling mortgage interest rates, the amount of home foreclosures has decreased
farmers should not be allowed to grow and sell genetically-modified crops
an item has utility for a consumer if it
generates enjoyment or satisfaction
the buyers of a good will want to purchase it as long as their willingness to pay for the good is
greater than or equal to the price
`suppose that when the price of hamburgers decrease, the landry fam decrease their purchases of chicken nuggets. to the landry family
hamburgers and chicken nuggets are substitutes
trade
has been a feature of nearly all economies
Which of the following is a positive economic statement a) the standard of living in the us is too low b) the government should implement a national consumption tax c) the us government should increase regulations on the banking industry d) if the price of beef falls, a larger quantity of it will be bough
if the price of beef falls, a larger quantity of it will be bought
willingness to pay
is the highest price that a buyer is willing and able to pay for a unit of a good
the demand schedule for a commodity illustrates how the consumption of a commodity changes with changes in
its price
Are you richer than a) king george iii of england b) queen elizabeth ii of england c) most ppl in the world today d) all of these e) a&c
king george iii and most ppl in the world today
scarcity in an economy emerges from
limited resources and infinite wants
economists assume that the goal of consumers is to
make themselves as well off as possible
the extra cost associated with undertaking an activity is called
marginal cost
the demand by all consumers if a given good or service is the _____ for the good or service
market demand
As early societies became more complex, economies started to rely
on custom on centralized control of resources on markets and trade
the best alternative use of resource is referred to as its
opportunity cost
Suppose that some investors have decided that economic and financial uncertainty have made the prospect of investing in domestic stock markets more risky than investing in foreign stock market and therefore choose to invest in foreign markets. By using all available info as they act to achieve their goals, there investors are exemplifying the economic idea that
people are rational
holding all other personal characteristics- such as age, gender, and income-constant, economists would expect that
people with health insurance are more likely to be overweight than people without health insurance
which of the following is a normative economic statement a) rising global demand for coal has led to increases in the price of coal b) pharmaceutical manufacturers should not be allowed to patent their products so prescription drugs would be more affordable c) the state of texas is considering increasing funds for light-rail development to promote the use of public transportation d) with rising mortgage rates and rising unemployment rates, the number of unsold homes has increased
pharmaceutical manufacturers should not be allowed to patent their products so prescription drugs would be more affordable
If the price of the good measured along the vertical axis increases without a change in the price of the good measured along the horizontal axis, the consumers budget constraint
pivot leftward (pivot in) without a change in the intercept on the horizontal axis
if quantity of tea is measured on the horizontal axis and quantity of coffee is measured on the vertical axis, an increase in the price of coffee will cause the budget constraint to
pivot leftward along the vertical axis (in)
a decrease in the price of either one or the other good will cause a consumers budget constraint to
pivot rightward (pivot out)
a decrease in the price of either one ore the other good will cause a consumer's budget constraint to
pivot rightward (pivot out)
if quantity of milk is measured on the horizontal axis and quantity of juice is measured on the vertical axis, a decrease in the price of milk will cause the budget constraint to
pivot rightward (pivot out) along the horizontal axis
if the price of the good measured along the vertical axis increases without a change in the price of the good measured along the horizontal axis, the consumers budget constraint
pivots leftward (pivot in) without a change in the intercept on the horizontal axis
as the _______ increases, ___________
price of a good; its quantity demanded decreases
economics does not study correct or incorrect behaviors but rather it assumes that economic agents behave _____, meaning they make the best decisions given their knowledge of the cost and benefites
rationally
a budget constraint
refers to the limited amount of income available to consumers to spend on goods and services
________ occurs when the direction of cause and effect is mixed up in a study
reverse casuality
economics is the study of
scarcity and how societies deal with it
Which of the following is a positive economic statement a) people should not buy SUV's b) foreign workers should not be allowed to work for lower wages than the citizens of a country c) scarcity necessitates that ppl make trade offs d) the gov should mandate electric automobiles
scarcity necessitates that ppl should make trade off
economics studies
scarcity, the social institutions used to address scarcity, & what to produce, how to produce, & who gets it
economic models
simplify some aspect of economic life answer economic questions make economic ideas explicit and concrete for use by decision makers
the restriction that a consumer's total expenditure on goods and services purchased cannot exceed the income available is referred to as
the budget constraint
by definition, economics is the study of
the choices people make to attain their goals
if the price of a good increases,
the consumer surplus decreases
the principle of opportunity cost is that
the economic cost of using a factor of production is the alternative use of that factor that is given up
a change in price of good has two effects on the quantity consumed. what are these effects?
the income effect and the substitution effect
assume that an individual spends his income on sweaters and shirts. If the price of a sweater increases,
the opportunity cost of buying sweaters increases
assume that an individual spends his income on sweaters and shirts. if the price of a sweater increases,
the opportunity cost of buying sweaters increases
the slope of a budget constraint represents
the opportunity cost of one good in terms of another
Which of the following is a normative economic statement a) when the price of gas rises, transportation costs rise b) when the price of gas rises, the quantity of gas purchased falls c) the current high price of gasoline is the result of strong worldwide demand d) the price of gas is too high
the price of gas is too high
which of the following is a normative economic statement? a) the current low price of wheat is the result of increased worldwide supply b) when the price of wheat falls, the quantity of wheat purchased rises c) the price of wheat is too low d) when the price of wheat falls, the cost of the wheat-based products falls.
the price of wheat is too low
the law of demand implies, holding everything else constant, that as the price of bagels increases,
the quantity of bagels demanded will decrease
a correlation between two variable implies that
there is a mutual relationship between both the variables
"an increase in the price of gas will increase the demand for hybrid vehicles". this statement is an example of a positive economic statement.
true
t/f? The additional cost to a producer of hiring an additional unit of labor is called the marginal cost
true
when voluntary exchange takes place, both parties gain from the exchange t/f
true
economists assume the rational people do all of the following except
undertake activities that benefit others and hurt themselves
Making optimal decisions "at the margin" requires
weighing the costs and benefits of a decision before deciding it it should be pursued
A major question that faced societies 250 years ago was
what would happen if your organized more of the economy with markets
which of the following examples best describes the Law of Demand
when the price of bread doubles, john's consumption of bread halves
which of the following examples best describes the law of demand
when the price of tea increased, the quantity demanded of tea decreased
