Macroeconomics problem set 1

Suppose you're 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...

Last person from the longer line switches to the shorter line.

Assume that all the shoppers are optimizing and the situation is in equilibrium. Given this information you can infer that the behavior of the... Is most informative.

Last person in the five person line

A policy such as those limiting a firms monopoly powers would be studied under... since it deals with...

Microeconomics, a small part of the overall economy

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

Suppose that you allocate $20 each week for your entertainment budget. This money is spent on two items: either renting movies for one dollar each at Redbox or downloading songs from iTunes at one dollar each. Given this information which of the following would represent your budget constraint for entertainment?

Amount spent on ITunes + amount spent at redbox = $20

Positive statement

An objective statement about the world that can be confirmed or tested with data

When making your decision about which activity to choose you should consider the monetary costs... The opportunity cost of the activities. The goal is to choose the option that offers the greatest... Benefit.

As well as... net

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

B. Use of streetlights is more susceptible since even those who don't pay taxes still benefit, all state parks can charge for admission, so that everyone who goes pays their share

And economist observes that many students spend $100,000 to go to college. She could ask whether such spending is worth it, or she could assume that it is worth it. In other words, she could assume that students are optimizing and that the education system is in equilibrium. Her analysis also assumes that there are no other benefits to college besides higher income and there are no other cost besides monetary costs. Which of the following, if true, supports the economists conclusion? A. A college education has no impact on an individuals earnings over his or her lifetime. B. The opportunity cost of spending on college education is negative. C. The opportunity cost of spending on college education is zero. D. A college education increases the earnings of an individual by at least $100,000 over his or her lifetime.

D. A college education increases the earnings of an individual by at least $100,000 over his or her lifetime

In which of the following areas will taking an economics course help benefit you throughout your life? A. It will help you analyze and predict human behavior in a variety of situations. B. It will give you the logic behind using cost benefit analysis when evaluating decisions. C. It will instill the concept that what activity is giving up by a decision plays an important role when making choices. D. All of the above

D. All of the above

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. All of the above.

Suppose your new year resolution is to get back in shape. You are considering various ways of doing this: you can sign up for a gym membership, walk to work, take the stairs instead of the elevator, or watch your diet. How would you evaluate these options and choose an optimal one?

Do a cost benefit analysis to compare the alternatives

For a market to be in equilibrium, three conditions must hold. Fill in the blanks below to complete these conditions. 1. The amount produced by sellers must be ______ The amount purchases by buyers. 2. The costs of making a product must be ______ The final price at which the product sells. 3. Buyers must place a value on the uses of the product that is ______ The cost of buying the product

Equal to, less than, greater than

The ethical implications of a hotly debated government policy would best be considered a...

Normative question, since it deals with a subjective issue based on personal preferences.

The statement that the United States has an unemployment rate that is too high is a ... statement since it describes what people...

Normative... ought to do

Economics differs from anthropology psychology sociology and political science because it also addresses these three concepts:

Optimization, empiricism, equilibrium

The statement that the United States saw the unemployment rate peak at 10% in 2009 is a ... statement since it describes what people ...

Positive, actually do

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 inferred that the shorter line will move... than the longer line.

Slower

Normative statement

Subjective statement that depends on, at least in part, in personal preferences, tastes, attitudes, feelings, or ethical judgements.

Let's say that you were trying to decide what to do on Friday at 11 AM 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?

The opportunity cost would be sleeping in late, since it was the next best option

Your budget constraint for entertainment illustrates the concept of... Since you increase your purchase of one item, you...

Trade offs, must decrease your purchases of the other item.

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

What is given up

Microeconomics studies

a small piece of the overall economy

The definition of economics states that it is the study of how...

agents choose to allocate scarce resources and the impact of those choices on society.

A surge in cocoa prices is _____ and a pest attack on the cocoa crop is _____

an effect; the cause

Lower infant mortality is ______ and an improvement in nutrition is _______.

an effect; the cause

Policy decisions made by the government are analyzed by...

both microeconomics and macroeconomics.

Comparing a set of feasible alternatives and picking the best one is an optimization process called​ _________.

cost-benefit analysis

Empiricism describes a situation where...

economists use data to analyze what is happening in the world

Equilibrium describes a situation where...

no one would benefit from changing his or her behavior

Macroeconomics studies

the economy as a whole