Microeconomics Chapter 1

Economists use the phrase "ceteris paribus" to express the assumption

"all else equal"

You have decided that you want to attend a costume party as Ironman. You estimate that it will cost $40 to assemble your costume. After spending $40 on the costume, you realize that the additional piece you need will cost you $25 more. The marginal cost of completing the costume is

$25

If you can buy 9 DVDs for $126 or you could buy 10 DVDs for $130, then the marginal cost of the 10th DVD is

$4

Which of the following is NOT an opportunity cost of attending college? The income you could have earned if you didn't attend college The tuition you pay The alternative uses of the time you spend studying The cost of the food that you consume while you are attending college

*The cost of the food that you consume while you are attending college

If the value of X changes from 16 to 24 when the value of Y changes from 12 to​ 8, the slope of the line between those two points is

-0.5.

One of the scarce resources that constrain our behavior is time. Each of us has only 24 hours in a​ day, and we must allocate our time in a given day among competing alternatives. How do you go about allocating your time in a given day among competing​ alternatives? How do you go about weighing the​ alternatives? Once you choose a most important use of​ time, why do you not spend all your time on that​ activity?

As more and more time is spent on one​ activity, the opportunity cost of that activity in terms of other activities rises.

On the Forbes 2015 list of the​ World's Billionaires, Bill Gates ranks at the top with a net worth of ​$79.2 billion. Does this​ "richest man in the​ world" face​ scarcity, or does scarcity only affect those with more limited incomes and lower net​ worth?

Bill Gates faces scarcity because resources are limited.

Which field of economics deals primarily with the problems faced by​ low-income countries?

Economic development.

The Industrial Revolution refers to the rise of the modern factory system in​ ________ during the late eighteenth and early nineteenth centuries.

England

In​ economics, the concept of equity is rarely debated as most people agree as to what is and what is not equitable.

False

Macroeconomics deals with the functioning of individual industries and the behavior of firms and households.

False

On a time series​ graph, time is measured along the vertical scale.

False

Opportunity costs are another name for marginal costs.

False

T/F: Resources are unlimited in a wealthy society.

False

On the Forbes 2013 list of the World's Billionaires, Mexico's Carlos Slim Helu ranks at the top with a net worth of US $73 billion. Does this "richest man in the world" face scarcity, or does scarcity only affect those with more limited incomes and lower net worth?

He faces scarcity because resources are limited

The fundamental difference between microeconomics and macroeconomics is that microeconomics analyzes the decisions made by ____ ​, while macroeconomics deals primarily with ____.

Households and firms, the economy as a whole

Which of the following is a microeconomics​ question?

Is it sensible for a government to subsidize tobacco​ production?

People who eat kale on a regular basis are more likely to exercise every day than people who do not eat kale. Therefore, exercising daily causes people to eat kale

It confuses correlation and causation.

Which of the following statements uses the concept of equity to argue against the legalization of casino gambling?

Legalized casino gambling places an unfair burden on non gamblers, who must now tolerate the increased traffic that the activity necessarily produces

Which of the following statements uses the concept of equity to argue against the legalization of casino​ gambling?

Legalized casino gambling places an unfair burden on​ nongamblers, who must now tolerate the increased traffic that the activity necessarily produces.

Congress extends the maximum duration for the collection of unemployment benefits from 26 weeks to 52 weeks.

Macroeconomic

The president has proposed increasing the marginal tax rate for people whose annual earnings exceed​ $275,000 and lowering the marginal tax rate for those who earn less than​ $275,000.

Macroeconomic

Changes in the aggregate price level​ (inflation):

Macroeconomics

The unemployment​ rate:

Macroeconomics

Determine whether each of the following is covered by micro or macro economics Number of employees in the steel industry changes in the aggregate price level (inflation) The price of gasoline The unemployment rate

Micro Macro Micro Macro

The Federal Aviation Administration​ (FAA) is considering increasing the number of takeoff and landing slots available at Ronald Reagan Washington National Airport.

Microeconomic

Walmart announced that it will increase its starting wage for employees to​ $10 per hour by​ February, 2016.

Microeconomic

Number of employees in the steel​ industry:

Microeconomics

The price of​ gasoline:

Microeconomics

As a public safety​ measure, the state of Texas should not pass legislation that allows people with concealed handgun permits to carry concealed weapons on college​ campuses:

Normative

Florida should devote all revenues from its state lottery to improving public​ education:

Normative

Indicate whether the following statements are examples of positive economic analysis or normative economic analysis: The inheritance tax should be replaced because it is unfair Allowing Chile to join NAFTA would cause wine prices in the US to drop The first priorities of the new regime in the Republic of South Sudan should be to rebuild schools and highways and to provide basic health care

Normative Positive Normative

The principle that irrelevant detail should not be included in a model is known as

Ockham's razor

The best alternative given up when we make a decision is called the​ ________ of that decision.

Opportunity cost

The most common method for graphing the relationship between two variables is by drawing two ____ ​lines,where the _____ is a horizontal line and the_____ is a vertical line.

Perpendicular, x-axis, y axis,

A devaluation of the U.S. dollar would increase exports from the United​ States:

Positive

Eliminating the trade embargo with Cuba would increase the number of Cuban cigars available in the United​ States:

Positive

Increasing the federal tax on gasoline would cause shipping costs in the United States to​ increase:

Positive

When the variable measured along the X​-axis and the variable measured along the Y​-axis move in the same​ direction, it indicates a ____ relationship between the two variables. If the variables along the X​-axis and Y​-axis move in opposite​ directions, there is a _____ relationship between the two variables

Positive, negative

What type of relationship exists between the two​ variables, average income before taxes and average consumption​ expenditures? Will the slope of the line used to graph this information be positive or​ negative?

Positive​ relationship; positive slope.

All of the following are criteria frequently applied in judging economic outcomes except

Profitability

Which of the following is a macroeconomics​ question?

Should we have a constitutional amendment to balance the federal​ budget?

The graph to the right is a ____ graph, which measures how a single variable changes over time.

Time series

If price is increasing as quantity​ increases, the slope of the line representing different prices and their corresponding quantities will be positive.

True

Resources are limited in both wealthy and poor societies.

True

The collection and use of data to test economic theory is called empirical economics.

True

The phrase​ "there's no such thing as a free​ lunch" is a common way of expressing the concept of efficient markets.

True

The process of analyzing the additional costs or benefits which arise from a decision is known as marginalism.

True

When graphing two​ variables, the point at which the graph intersects the horizontal axis is called the

X​-intercept.

Health insurance should be provided to every citizen in a wealthy nation such as the US. This statement is best described as

a normative statment

To analyze the relationship between two variables while holding the values of other variables unchanged is a device known as

ceteris paribus.

Economics is best defined as the study of

choices made by people faced with scarcity.

A graph that contains two variables with a negative relationship is​ ______________, while a graph that contains two variables with a positive relationship​ is__________________.

downward​ sloping; upward sloping

Which field of economics deals primarily with the problems faced by low-income countries?

economic development

The four criteria that are frequently used in judging the outcome of economic policy are

efficiency equity stability economic growth

An economist wants to understand the relationship between minimum wages and the level of teen age unemployment. The economist collects data on the values of the minimum wage and the levels of teenage unemployment over time. The economist concludes that 1% increase in minimum wage causes a 0.2% increase in teenage unemployment. From this information he concludes that the minimum wage is harmful to teenagers and should be reduced or eliminated to increase employment among teenagers. The collection and use of the data on minimum wage and teenage unemployment over time is an example of

empirical economics

Rent control laws are imposed when city officials believe landlords have been exploiting tenants. Which of the following criteria are they using to guide their actions? stability growth equity efficiency

equity

I have lived in a house on the Mississippi River for many years and have never seen a flood. Therefore, there is no reason for anyone to buy flood insurance. This statement is an example of

fallacy of composition

Statistics tells us that ice cream sales increase during the summer months. It is also the case that reported burglaries increase during the same period. We can conclude, therefore that increased ice cream sales cause an increase in burglaries. The conclusion of this statment

falls victim to "post hoc, ergo propter hoc"

Consider the following​ statement: ​"Statistics tell us that ice cream sales increase during the summer months. It is also the case that reported burglaries increase during the same period. We can​ conclude, therefore, that increased ice cream sales cause an increase in​ burglaries." The conclusion of this​ statement:

falls victim to ​"post hoc, ergo propter​ hoc."

All of the following are examples of topics examined in macroeconomics except

household income.

The fundamental difference between microeconomics and macroeconomics is that micro analyzes the decisions made by _____________, while macro deals primarily with ________.

households and firms the economy as a whole

An efficient market is a market

in which profit opportunities are eliminated almost instantaneously

The study of economics

is a way of analyzing​ decision-making processes caused by scarcity.

You own the video game Grand Theft Auto V. The opportunity cost of playing this game for the second time

is the value of the alternative use of the time you spend of playing this game.

You own the Star Wars six DVD set. The opportunity cost of watching these DVDs for the second time

is the value of the alternative use of the time you spend watching the DVDs

The importance of the ceteris paribus assumption when using models is​ that:

it allows researcher to isolate the effect of one event on another without the influence of outside variables.

The importance of the ceteris paribus assumption when using models is that

it allows researcher to isolate the effect of one event on anther without the influence of outside variables

The field of economics that deals primarily with the factors that determine wage rates, employment, and unemployment is called:

labor economics

The field of economics that deals primarily with the factors that determine wage​ rates, employment, and unemployment is​ called:

labor economics.

indicate whether the following statement is an example of a macroeconomic concern or a microeconomic concern. The Federal Reserve announces it is increasing the discount rate in an attempt to slow the rate of inflation. This is an example of a ________ concern

macroeconomic

If information is less costly and more easily available, then usually this

makes markets more efficinet

A formal statement of theory, usually a mathematical statement of a presumed relationship between two or more variables, is called a _______. A ________ can change over time or across observations.

model variable

A formal statement of​ theory, usually a mathematical statement of a presumed relationship between two or more​ variables, is called a _____ . A _____ can change over time or across observations.

model, variable

An economist wants to understand the relationship between minimum wages and the level of teen age unemployment. The economist collects data on the values of the minimum wage and the levels of teenage unemployment over time. The economist concludes that 1% increase in minimum wage causes a 0.2% increase in teenage unemployment. From this information he concludes that the minimum wage is harmful to teenagers and should be reduced or eliminated to increase employment among teenagers. The statement, "the minimum wage is harmful to teenagers and should be reduced or eliminated to increase employment among teenagers," is an example of

normative economics

An economist wants to understand the relationship between minimum wages and the level of teen age unemployment. The economist collects data on the values of the minimum wage and the levels of teenage unemployment over time. The economist concludes that 1% increase in minimum wage causes a 0.2% increase in teenage unemployment. From this information he concludes that the minimum wage is harmful to teenagers and should be reduced or eliminated to increase employment among teenagers. The statement that a !% increase in the minimum wage causes a 0.2% increase in teenage unemployment is an example of

positive economics

Better insurance benefits increase the incentive of some individuals to work. This statement is best described as a

positive statement

It always rains about an hour after you finish washing your car. Concluding that washing your car caused it to rain is an example of the

post hoc, ergo propter hoc fallacy

An efficient market is a market in which

profit opportunities are eliminated almost instantaneously.

The reason that opportunity costs arise is that

resources are scarce

Positive economics is an approach to economics that

seeks to understand behavior and the operation of systems without making judgements

An efficient economy is an economy

that produces what consumers demand and does so at the least possible cost

Opportunity cost is

the cost involved when choosing between alternatives.

Which of the following is not an opportunity cost of attending​ college?

the cost of the food that you consume while you are attending college

Definition of economics

the study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided

If you own a building and you decide to use that building to open a book store,

there is an opportunity cost of using this building for a book store because it could have been used in other ways

Which of the following is not listed in the book as a reason to study​ economics?

to learn how to make lots of money

Is the relationship between the price of turkeys and the number of turkeys sold by​ Godfrey's Free-Range Gobblers a positive relationship or a negative​ relationship?

​Positive, since the quantity sold increases as the price increases.