Midterm Exam 1
An economist makes an assumption that each additional year of education causes future wages to rise by 12 percent. In this model, if a person with 12 years of education makes $24,500 per year, then a person with 4-year college degree would earn $___________ per year. (Round your intermediate calculations to two decimal places.)
38551
Given the information above, if the interest rate on your savings account was 3 percent a year, then the yearly opportunity cost of using this money for a down payment would be equal to $______________.
$1,200
Consider which row in the table below best describes how many hours you spend on social media each year. Hours on Social Media Per Year 122 hours (equivalent to 20 minutes per day) 365 hours (equivalent to 1 hour a day) 730 hours (equivalent to 2 hours per day) 1,095 hours (equivalent to 3 hours a day) 1,825 hours (equivalent to 5 hours a day) Using the hour amount that best reflected your social media use from the table above, estimate the opportunity cost of this time in dollars. (Assume you are employed outside of school and earn $15 an hour.) The opportunity cost of the time you spend on social media over the year is $___.
$10,950
Suppose the following table shows the relationship between revenue that the Girl Scouts generate and the number of cookie boxes that they sell. Number of Cookie Boxes/ Revenue ($) 200/ 400 400/ 800 600/ 1,200 800/ 1,600 1,000/ 2,000 1,200/ 2,400 Present the data in a scatter plot using the figure on the right. 1.) Using the point drawing tool, plot each data point. Carefully follow the instructions above and only draw the required objects. The two variables have a _______________ relationship because they move ____________________. The slope of the line is ______________, which implies a ________________ relationship. (Round your response to two decimal places.)
(Graph) positive; together 2; positive
You have decided that you are going to consume 800 calories of beer and snacks at a party Saturday night. A beer has 200 calories and a snack has 50 calories. Create a table that shows the various combinations of beer and snacks you can consume. To do this, calculate the number of snacks that you can consume for each amount of beer. (Round your responses to two decimal places.) Beer/ Snacks 0/ _____ 1/ ______ 2/ ______ 3/ _______ 4/ ______ This implies the opportunity cost of a beer is ___________ snack(s). (Round your response to two decimal places.)
16; 12; 8; 4; 0 4
Consider the following data that show the quantity of coffee produced in Brazil from 2004 to 2012. Year/ Production (in tons) 2004/ 2,465,710 2005/ 2,140,169 2006/ 2,573,368 2007/ 2,249,011 2008/ 2,796,927 2009/ 2,440,056 2010/ 2,907,265 2011/ 2,700,440 2012/ 3,037,534 This is illustrated in the time series graph on the right. The mean quantity of coffee that Brazil produced from 2009 to 2011 is __________ tons. (Round your response to two decimal places.) The 2012 crop has increased over the 2009-2011 mean by _____________ percent. (Round your response to two decimal places.)
2682587; 13.4
You are hired as a consultant for a local restaurant. It is considering whether to close at 9:00 p.m., stay open an extra hour (10:00 p.m.), or close earlier (8:00 p.m.). Based on wages and utility bills, the added cost (the marginal cost) of staying open for each additional hour is $347. If the additional revenue (the marginal revenue) during the last hour is $377, the profit earned during the last hour of operation will be $__________. If the additional revenue during the last hour is $247, the profit earned during the last hour of operation will be $_______. If the additional revenue (the marginal revenue) from staying open until 10.00 p.m. is $347, the profit earned during the last hour of operation will be $_______.
30 -100 0
The mean and the median are closely related concepts. The median is the numerical value separating the higher half of your data from the lower half. You can find the median by arranging all of the observations from lowest value to highest value and picking the middle value (assuming you have an odd number of observations). Although the mean and median are closely related, the difference between the mean and the median is sometimes of interest. Suppose country A has five families. Their incomes are $9,000, $19,000, $31,000, $40,000, and $50,000. Country A's median income is $_________, and its mean income is $_________. (Round your responses to the nearest dollar.) Suppose country B also has five families. Their incomes are $9,000, $19,000, $31,000, $40,000, and $151,000. Country B's median income is $_______, and its mean income is $__________. (Round your responses to the nearest dollar.) Country ____ has greater income inequality. uppose you thought income inequality in the United States had increased over time. Based on your answers to this question, would you expect the ratio of the mean income in the United States to the median income has risen or fallen? Explain. A. Risen, because means change more with extreme values. B. Risen, because means increase but medians decrease with income. C. Fallen, because means change less with standard deviation. D. Risen, because medians increase with variance but means do not.
31000; 29800 31000; 50000 B A. Risen, because means change more with extreme values.
Your statistics professor reports that only seven students took the midterm exam. She reports all seven scores: 38, 46, 38, 34, 45, 40, and 12. The median score is _________. The mean score is ____________. (Round your answer to 2 decimal places as needed). Why is one of these numbers smaller than the other? A. The mean score is lower since the outlier pulls the mean downward but does not impact the median. B. The mean score is lower since means are always lower than medians. C. The median score is lower since the outlier pulls the median downward but does not impact the mean. D. The median score is lower since medians are always lower than means.
38; 36.14 A. The mean score is lower since the outlier pulls the mean downward but does not impact the median.
Maria can purchase shirts for $23.00 each. She considers the benefit of one shirt to be $45.00, but with each additional shirt she purchases the benefit decreases by $5. According to the Principle of Optimization at the Margin, Maria will purchase _________ shirts. (Enter your response as a whole number.)
5
In the second Evidence-Based Economic module, we discussed how Philip Oreo Poulos used a natural experiment involving compulsory schooling laws to infer that the return to one additional year of schooling is a 10 percent increase in earnings. For this question, let's assume that Oreo Poulos's 10 percent finding is correct and applies to all people in all circumstances. (These are strong assumptions that are made for illustrative purposes.) Compare two workers, one of whom has 12 years of schooling and one of whom has 18 years of schooling. Assume these workers are otherwise identical. In percentage terms, how much higher will the earnings of the second worker be? The second worker's earnings will be ________ percent higher. (round your response to the nearest integer) Suppose the first worker earns $50,000 per year. How much would the second worker earn in a year? The second worker would earn $______ in a year. (round your response to the nearest dollar)
77 $88,500.
Suppose 1,804 people bought popsicles on a hot summer day. If the average number of popsicles that each person bought is 5, the number of popsicles sold that day is ________.
9020
How does a natural experiment differ from a randomized one? A. A natural experiment uses existing variation, while a randomized experiment generates variation. B. Natural experiments are not influenced by omitted variables; randomized experiments contain omitted variables. C. A natural experiment generates variation, while a randomized experiment uses existing variation. D. A natural experiment is expensive, while a randomized experiment is cheap.
A. A natural experiment uses existing variation, while a randomized experiment generates variation.
Which of the following is not an item studied under macroeconomics? A. Individual preference. B. Firm profits. C. The money supply. D. The well−being of agents.
A. Individual preference.
What is the difference between marginal values and average values? A. Marginal values show the additional benefit or cost from consuming an additional unit of a good, while average values are the benefit or cost per unit of a good. B. Marginal values show the benefit or cost from consuming one unit of a good, while average values are the benefit or cost from consuming all units of a good. C. Marginal values show the benefit from consuming an additional unit of a good, while average values are the cost from consuming an additional unit of a good. D. Marginal values show the total benefit or cost from consuming a good, while average values are the total benefit or cost from consuming a good divided by the amount of the good consumed. E. Marginal values show the ordinal benefit or cost from consuming an additional unit of a good, while average values are the cardinal benefit or cost from consuming an additional unit of a good.
A. Marginal values show the additional benefit or cost from consuming an additional unit of a good, while average values are the benefit or cost per unit of a good.
Some people choose to live close to the city center; others choose to live away from the city center and take a longer commute to work every day. Does picking a location with a longer commute imply a failure to optimize? A. No, net benefit depends on several factors including the opportunity cost of time and personal preferences. B. No, as long as people are minimizing the cost of both the commute and housing, regardless of distance. C. Yes, optimization in this case requires people to minimize the time spent commuting to and from work. D. Yes, increasing commuting time increases direct costs and the opportunity cost of time, which lowers net benefit.
A. No, net benefit depends on several factors including the opportunity cost of time and personal preferences.
Which of the following areas are addressed in the study of economics? (Check all that apply.) A. Pollution reduction policies. B. Prices. C. Financial markets. D. The costs associated with a decision.
A. Pollution reduction policies. B. Prices. C. Financial markets. D. The costs associated with a decision.
What is meant by randomization in the context of an economic experiment? A. Subjects are assigned by chance, rather than by choice, to a group. B. Eonomic experiments are not arranged in a logical sequence. C. Subjects are assigned to control and test groups by noneconomic factors such as race. D. Group numbers are arranged in a nonsequential order.
A. Subjects are assigned by chance, rather than by choice, to a group.
Which of the following is more susceptible to the free-rider problem: government−funded symphonies or street lights? A. Use of street lights is more susceptible since even those who don't pay taxes still benefit, while government−funded symphonies can charge for admission, so that everyone who goes pays their share. B. Government−funded symphonies, since admission 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. Use of street lights is more susceptible since even those who don't pay taxes still benefit, while government−funded symphonies can charge for admission, so that everyone who goes pays their share.
Does the principle of optimization imply that people always make the best choices? A. Yes, it is a good approximation for the decisions people make. B. Yes, because people make perfect calculations. C. No, because people are irrational. D. No, because people do not have full information. E. It cannot be tested without more data.
A. Yes, it is a good approximation for the decisions people make.
All of the following would fall under the study of microeconomics except: A. the stock market's response to an interest rate increase. B. an international trade dispute. C. a labor union strike. D. a factory polluting a lake used for fishing.
A. the stock market's response to an interest rate increase.
If Jay's Fruit Stand is able to charge considerably higher prices than other fruit stands with the same produce, it is likely that A. there are no fruit stands in close proximity to Jay's. B. Jay's is a price taker. C. there are a lot of fruit stands in close proximity to Jay's. D. Jay's accepts the market prices.
A. there are no fruit stands in close proximity to Jay's.
Your firm has a marginal revenue given by the equation MR=20−Q. This means that the third unit of output brings in 20−3=$17 of additional revenue. The marginal cost for your firm is MC=2+Q; thus, the third unit increases cost by 2+3=$5. If you are currently producing two units, is it a good idea to increase production so that you produce a third unit? A. Yes, the third unit provides more revenue than it costs to produce since marginal revenue is greater than marginal cost. B. Yes, the difference between marginal revenue and marginal cost for the third unit is greater than it is for the second unit. C. No, you get less additional benefit from the third unit than the second so you should not produce the third. D. No, the third unit costs more to produce than the benefit received from producing it since marginal revenue is less than marginal cost. As a preview of upcoming chapters, find a value for Q such that MR equals MC. MR equals MC when Q = __________ units. Why is profit maximized at the quantity you found above, where MR equals MC? A. For lower quantities MR is greater than MC and you should produce fewer units, and for larger quanitities MR is less than MC and you should produce more units. B. For lower quantities MR is less than MC and you should produce more units, and for larger quanitities MR is greater than MC and you should produce fewer units. C. For lower quantities MR is greater than MC and you should produce more units, and for larger quanitities MR is less than MC and you should produce fewer units. D. For lower quantities MR is less than MC and you should produce fewer units, and for larger quanitities MR is greater than MC and you should produce more units.
A. Yes, the third unit provides more revenue than it costs to produce since marginal revenue is greater than marginal cost. Q=9 C. For lower quantities MR is greater than MC and you should produce more units, and for larger quanitities MR is less than MC and you should produce fewer units.
Recall from the Evidence-Based Economics section that governments can raise or lower the domestic price of gasoline by respectively taxing or subsidizing its sale. Using the Law of Demand, let's analyze what happens to your gasoline demand under different government policy regimes. All of the price data are from 2020 and calculated by Bloomberg. You move from the United States, where the price of gasoline is $2.40 per gallon, to Kuwait, where the government subsidizes gasoline so the price is only $1.27 per gallon. Will your quantity demanded rise or fall? A.Rise B. Fall You then move from Kuwait to the Netherlands, where the government heavily taxes gasoline so the price is $6.46 per gallon. Rank your quantity of gasoline demanded across the three countries from highest to lowest: A. Kuwait, United States, Netherlands B. United States, Kuwait, Netherlands C. Netherlands, United States, Kuwait D. Kuwait, Netherlands, United States Given the information provided in this question, what do you need to assume to rank the quantity of gasoline demanded across the three countries? A. The price of gasoline stayed the same but taste and preferences have changed. B. Only the price of gasoline has changed and all other factors are constant, including tastes, preferences, household income, availability and prices of related goods, and beliefs about the future. C. Both the price of gasoline and household income have changed. All other factors have remained constant, including tastes, perferences, household income, availability and prices of related goods, and beliefs about the future. D. The price of gasoline stayed the same but prices of related goods have changed. When you move from Kuwait to the Netherlands, is the change in your gasoline consumption a movement along your demand curve or a shift of your demand curve? A. Shift in demand curve. B. Movement along demand curve. Wherever you live, you have recently gained a new interest in rock climbing, which leads you to take long road trips, increasing the number of gallons of gasoline you demand per year (holding the price of gasoline fixed). Is this a movement along your demand curve or a shift in your demand curve? A. Movement along demand curve. B. Shift in demand curve.
A.Rise A. Kuwait, United States, Netherlands B. Only the price of gasoline has changed and all other factors are constant, including tastes, preferences, household income, availability and prices of related goods, and beliefs about the future. B. Movement along demand curve. B. Shift in demand curve.
Which of the following statements would imply positive correlation? A. Countries with higher tax rates have lower productivity. B. Countries with higher tax rates have more government services. C. Countries with lower tax rates have superior government services. D. Countries with lower tax rates have higher productivity.
B. Countries with higher tax rates have more government services.
Suppose your New Year resolution is to get back in shape. How would you evaluate your options and choose an optimal one? A. You should choose an activity randomly to avoid regretting your decision later. B. Do a cost-benefit analysis to compare the alternatives. C. It makes the most sense to do the action that costs the least amount of money. D. You should do the activity that gives you the greatest personal benefit, regardless of the cost.
B. Do a cost-benefit analysis to compare the alternatives.
You are an apartment hunter looking for housing in the Portland, Oregon, area. You would like to pay about $950 per month, so you search for apartments near the ring of highways around the city center. You've found two apartments—one apartment to the east of Portland (apartment East) and another apartment to the west of Portland (apartment West)—that both rent for $950 per month and have the same commuting time to your workplace in the city center. Aside from the following differences, all other aspects of these apartments are the same. East has a great view of Mt. Hood, and West does not. You value this view at $25 per month. Which apartment should you rent? A. You prefer them equally. The addition of the view does not change your preference. B. East, since it has an added $25 per month value that West does not. Upon closer examination, you realize that West is 30 minutes nearer to the airport than East. You fly twice a month for work (which involves driving between your house and the airport four times a month), and you value your time at $20 an hour. Given this new information, which apartment should you rent? A. West, the $40 value you receive each month from the shorter drive time is greater than the value you place on the view that the East apartment provides, $25 a month. B. East, you value the view from the East at $25 dollars per month while you only place a $20 per month value on the shorter drive time to the airport from the West. C. You prefer them equally. The added value of the view from the East exactly matches the added value from the shorter airport drive time from the West. D. You prefer them equally. The additions of the view and the shorter drive time do not change your preferences. Right before renting the apartment, you find out that your job responsibilities have changed and you will only travel once a month. Given this new information, which apartment should you rent? A. West, the $40 value you receive each month from the shorter drive time is greater than the value you place on the view that the East apartment provides, $25 a month. B. East, you value the view from the East at $25 dollars per month while you now only place a $20 per month value on the shorter drive time to the airport from the West. C. You prefer them equally. The added value of the view from the East exactly matches the added value from the shorter airport drive time from the West. D. You prefer them equally. The additions of the view and the shorter drive time do not change your preferences. ou also receive a raise at work, which increases your value of time to $23 an hour. Given this new information, which apartment should you rent? A. West, the raise at work makes the savings on the drive time outweigh the benefits from the view that the East provides. B. East, the value of the view still outweighs the value of the time saved from the shorter trip to the airport that the West provides. C. East, the raise at work is irrelevant since it has the same impact on renting the East as it does on renting the West. D. You prefer them equally. The added value of the view from the East now exactly matches the added value from the shorter airport drive time from the West.
B. East, since it has an added $25 per month value that West does not. A. West, the $40 value you receive each month from the shorter drive time is greater than the value you place on the view that the East apartment provides, $25 a month. B. East, you value the view from the East at $25 dollars per month while you now only place a $20 per month value on the shorter drive time to the airport from the West. B. East, the value of the view still outweighs the value of the time saved from the shorter trip to the airport that the West provides.
Which of the following is not an example of a causal claim? A. Exercising daily will lead to weight loss. B. It rains more often on days you wash your car. C. Heavy drinking will lead to liver disease. D. All of the above are examples of causal claims.
B. It rains more often on days you wash your car.
You are thinking about buying a house. You find one you like that costs $200,000. You learn that your bank will give you a mortgage for $160,000 and that you would have to use all of your savings to make the down payment of $40,000. You calculate that the mortgage payments, property taxes, insurance, maintenance, and utilities would total $ 960 per month. Which of the following is true regarding your calculation of the cost of owning the house? A. It should not include property taxes, since that is money that goes directly to the government and is no longer in the market. B. It should include the opportunity cost of the money used to make the down payment. This money could be earning interest in a bank. C. It should not include maintenance, since homeowners often use their own time to fix things around the house instead of calling a professional. D. It should include your monthly income, since you must know the source of the money when trying to calculate costs.
B. It should include the opportunity cost of the money used to make the down payment. This money could be earning interest in a bank.
Some people choose to live close to the city center; others choose to live away from the city center and take a longer commute to work every day. Does this mean that those who stay away from the city center are being irrational? A. No, because people face the same living costs in and away from the city. B. No, because their opportunity cost of commuting must be lower. C. Yes, because people face direct and indirect commuting costs. D. Yes, because their direct commuting costs must be higher. E. Yes, because people have different preferences.
B. No, because their opportunity cost of commuting must be lower.
An article in a medical journal reports that among all patients admitted to the hospital with COVID-19, those who were put on a ventilator (a device that helps people breathe) are far more likely to end up dying relative to those who were merely given additional oxygen. Does this show that ventilators are actually harmful? A. Yes, this is clearly causation since being on a ventilator increased the likelihood of death. B. No, this is likely correlation not causation since only the highest risk patients wer put on ventilators. C. No, there is no correlation between being on a ventilator and dying. D. Yes, a strong correlation between two events, such as these, proves there is causation.
B. No, this is likely correlation not causation since only the highest risk patients wer put on ventilators.
Let's return to our examination of whether workers with 4-year college degrees earn more than workers with high school degrees. In the first Evidence-Based Economics module, we provided data about earnings for U.S. workers. We showed that the median earnings of full-time workers with a college degree was 56 percent higher than the median earnings of full-time workers with a high school degree, holding age fixed. From these data alone, can we infer that going to college causes higher wages? Choose one of the four answers below. A. Not necessarily. Higher earnings for college-educated workers might be due to preexisting characteristics that caused those workers to go to college and also cause those workers to earn more. This is called reverse causality. B. Not necessarily. Higher earnings for college-educated workers might be due to preexisting characteristics that caused those workers to go to college and also cause those workers to earn more. This is called an omitted variable problem. C. Yes. Being a college graduate is positively correlated with earnings. D. Yes. Being a college graduate is positively correlated with earnings, and this is true even when we compare workers of the same age.
B. Not necessarily. Higher earnings for college-educated workers might be due to preexisting characteristics that caused those workers to go to college and also cause those workers to earn more. This is called an omitted variable problem.
Determine whether the following statements better describe optimization using total value or optimization using marginal analysis. John is attempting to decide on a movie. (All movies have the same ticket price and play at the same time/location.) He determines that the new Batman movie is preferred to the new Spider-Man movie and that both the Batman and Spider-Man movies are preferred to the new Superman movie. A. Optimization using total value, since he is not making marginal comparisons. B. Optimization using marginal analysis, since he is calculating the change in net benefits between alternatives. C. Optimization using total value, since he is comparing the net benefits between alternatives. D. Neither type of optimization, since he is not considering the net benefits of alternatives. E. Both types of optimization, since he is considering the total benefits of alternatives.
B. Optimization using marginal analysis, since he is calculating the change in net benefits between alternatives.
Nikki decided to jog 3 miles for exercise by reasoning that a 3-mile jog was better than either a 2-mile jog or a 4-mile jog. A. Neither type of optimization, since she is considering the net benefits of alternatives. B. Optimization using marginal analysis, since she is calculating the difference in net benefits between alternatives. C. Optimization using total value, since she is making marginal comparisons. D. Both types of optimization, since she is not considering the total benefits of alternatives. E. Optimization using total value, since she is comparing the net benefits between alternatives.
B. Optimization using marginal analysis, since she is calculating the difference in net benefits between alternatives.
At a yard sale, Reagan calculated that she was willing to pay $200 for a queen bed that was being sold for $100 (generating net benefit of $100) and that she was willing to pay $220 for a king bed that was being sold for $300 (generating net benefit of $80). A. Optimization using marginal analysis, since she is comparing total benefits between alternatives. B. Optimization using total value, since she is comparing the net benefits between alternatives. C. Both types of optimization, since she is considering the total benefits of alternatives. D. Neither type of optimization, since she is not considering the net benefits of alternatives. E. Optimization using total value, since she is making marginal comparisons.
B. Optimization using total value, since she is comparing the net benefits between alternatives.
Which of the following statements would not be considered a positive statement? A. In 2020−2021, tuition at 4−year colleges grew at its slowest rate in 30 years. B. Production in the automobile industry is still low and should be subsidized by the government. C. The U.S. automobile industry had its lowest growth in 5 years in 2020. D. In the last 10 years, the annual unemployment rate was at its peak in 2020.
B. Production in the automobile industry is still low and should be subsidized by the government.
How is the mean calculated from a series of observations? A. The mean is the median value of a set of observations. B. The mean is the sum values of the observations divided by the number of observations. C. It is calculated as the difference of all the different items divided by the number of items. D. It is calculated as the product of all the different items divided by the number of items.
B. The mean is the sum values of the observations divided by the number of observations.
Give an example of a pair of variables that have negative correlation. A. The number of physicists and the speed of sound. B. The number of winter coats sold and the temperature outside. C. The color of a person's shirt and the number of meals sold at Chinese restaurants. D. The quantity of fertilizers used and crop yield.
B. The number of winter coats sold and the temperature outside.
Which of the following would not be considered a cause for concern with economic experiments? A. Conclusions can take a long time to evaluate. B. The subjects are often randomized. C. There is no historical, natural experiment to draw from. D. They can be very costly depending on the experiment's goals.
B. The subjects are often randomized.
During the process of optimization economists believe that people are considering _________. A. only the decisions that will result in the least cost to the individual. B. what they would do if they had no money or time constraints of any kind. C. the feasibility of a choice, given the information available at the time. D. the benefits of their choices for others more than the benefits to themselves. The goal of optimization for an individual is to maximize __________.
C. the feasibility of a choice, given the information available at the time. overall well-being
Advances in work-from-home technologies reduce the need for some workers to go into the office as frequently as they have in the past; for example, Zoom meetings enable workers to stay at home instead of coming into the office. How will this affect people's willingness to pay for apartments near the city center? A. These technology advances will raise the opportunity cost of commuting, making people less willing to pay for apartments near the city center. B. These technology advances will lower the opportunity cost of commuting, making people less willing to pay for apartments near the city center. C. These technology advances will raise the opportunity cost of commuting, making people more willing to pay for apartments near the city center. D. These new technologies will have no impact on where people decide to live. For those people who work in the city, living far away from the city center requires commuting to work. This results in _________ opportunity cost of time for those traveling to work compared to those living near the city center.
B. These technology advances will lower the opportunity cost of commuting, making people less willing to pay for apartments near the city center. a greater
The statement that the U.S. government should increase carbon taxes to $10/ton of carbon dioxide to reduce emissions that cause global warming is ___________. A. a normative statement, since it is an incorrect statement. Most economists believe that carbon taxes should be lowered to control emissions. B. a normative statement, since it describes what ought to be done and is therefore not possible to confirm with data. 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. 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 describes what ought to be done and is therefore not possible to confirm with data.
All of the following are principles of economics except: A. empiricism. B. categorization. C. equilibrium. D. optimization.
B. categorization.
Economics is all about making choices. The reason we have to choose one thing over another is: A. economic agents are scarce. B. economic resources are scarce. C. economic wants are limited. D. economic choices are unlimited.
B. economic resources are scarce.
When economists test their theories using evidence-based analysis, they are most likely using __________. A. opportunity-cost analysis. B. empiricism through the use of data. C. optimization through observation. D. equity analysis through the use of models.
B. empiricism through the use of data.
Which of the following would be considered an opportunity cost of spending time to go to the movies with your friends? A. the cost of a new shirt B. the amount of money you would have made had you worked instead C. the cost of renting a DVD D. the cost of the movie ticket
B. the amount of money you would have made had you worked instead
The concept of opportunity cost is a measure of _________. A. all the possible alternative uses of a resource. B. the value of the best alternative use of a resource. C. the dollar amount you must pay to do any activity. D. the benefit that you receive from doing any activity.
B. the value of the best alternative use of a resource.
One of the largest costs of going to college is the opportunity cost of not having the income from a fulltime job. Also, during an economic recession, people often find it difficult to find a full-time job. Given these two facts, should the number of people who want to go to college increase or decrease during a recession? A. Decrease since the opportunity cost of going to college will now be higher since fewer jobs are available. B. Decrease since the opportunity cost of going to college will now be smaller since fewer jobs are available. C. Increase since the opportunity cost of going to college will now be smaller since fewer jobs are available. D. There is no relationship between the availability of fulltime jobs and college enrollment.
C. Increase since the opportunity cost of going to college will now be smaller since fewer jobs are available.
Which of the following is true regarding the concept of causation? A. It states that if event A causes event B, then event B cannot have a causal effect on event A. B. For any two events that occur, economists state that the first must have caused the second, since it came first. C. It describes how one event can bring about change in another. D. It states that if event A causes event B, then event B must also cause event A.
C. It describes how one event can bring about change in another.
Which of the following is the best example of causation (versus correlation)? A. The groundhog sees its shadow and winter lasts longer. B. Women's skirts get shorter and the stock market goes up. C. Oil prices go up and gasoline prices go up. D. Ice cream sales and the number of drownings.
C. Oil prices go up and gasoline prices go up.
Optimization in levels examines ___________, while optimization in differences analyzes ____________. A. marginal benefits of alternatives; the change in marginal benefits. B. total net benefits of feasible alternatives; total net benefits of infeasible alternatives. C. total net benefits of alternatives; the change in net benefits. D. total benefits of alternatives; net benefits of alternatives. E. total benefits of alternatives; total costs of alternatives.
C. total net benefits of alternatives; the change in net benefits.
Empiricism is a principle in economics that _________. A. aggregates data to create graphs. B. gathers data using surveys. C. uses data to test economic models. D. collects data using the scientific method.
C. uses data to test economic models.
Advances in wireless communication technology are reducing the non-financial costs of long commutes; for example, people who ride trains can get work done, and people who drive cars have more entertainment options. How will this affect people's willingness to pay for apartments near the city center? A. People will be more willing to pay for these apartments since the opportunity cost of the commute time from outside the city is increasing. This makes the more affordable housing outside the city less attractive to people. B. People will be more willing to pay for these apartments since the opportunity cost of the commute time from outside the city is decreasing. This makes the more affordable housing outside the city less attractive to people. C. People will be less willing to pay for these apartments since the opportunity cost of the commute time from outside the city is decreasing. This makes the more affordable housing outside the city more attractive to people. D. People will be less willing to pay for these apartments since the opportunity cost of the commute time from outside the city is increasing. This makes the more affordable housing outside the city more attractive to people.
C. People will be less willing to pay for these apartments since the opportunity cost of the commute time from outside the city is decreasing. This makes the more affordable housing outside the city more attractive to people.
If the price of a good in an equilibrium market is $112, all of the following statements are true except: A. Retail outlets successfully sell what they stock at that price. B. Production costs are less than $112. C. Producers know that if they colluded, they could increase the price. D. Consumers feel that they are getting their money's worth at that price.
C. Producers know that if they colluded, they could increase the price.
How does the sample size affect the validity of an empirical argument? A. The sample size is not relevant if it is greater than 50. B. The sample size is not relevant if it is greater than 30. C. The larger the sample size the better. D. The smaller the sample size the better.
C. The larger the sample size the better.
Using the concept of a natural experiment, which of the following statements is true about the scenario? A. This is a good natural experiment. B. This is a decent natural experiment. C. This is not a natural experiment.
C. This is not a natural experiment.
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 disease (morbidity). What does this imply about the cost-benefit analysis of environmental regulations? A. Since the costs are incurred by the government and the benefits are enjoyed by the consumer, such an analysis is meaningless. B. Since the benefits of these regulations are not in dollar terms, a cost-benefit analysis cannot be done. C. We must first translate the mortality and morbidity data into dollars in order to compare it to the costs of the regulations. D. Since these are government regulations, a cost-benefit analysis is not needed because the government acts independent of such analysis.
C. We must first translate the mortality and morbidity data into dollars in order to compare it to the costs of the regulations.
Suppose there are three activities in which you could participate: 1. The opportunity cost of the first activity is missing 3 hours of work. 2. The opportunity cost of the second activity is missing a concert that you have tickets to. 3. The opportunity cost of the third activity is missing the afternoon nap that you take every day. Given this information, for which of these activities would you be able to compare opportunity costs? A. You can only compare activities 1 and 2, since they can both be easily stated in terms of dollars forgone. B. You can only compare activities 1 and 3, since they both relate to an amount of time that is lost. C. You can compare all the activities after you translate all the missed activities into dollar amounts. D. You cannot compare any of these opportunity costs, since they each are measured in different units.
C. You can compare all the activities after you translate all the missed activities into dollar amounts.
When a cost-benefit analysis is done: A. the results are not useful for normative economic analysis. B. it can only be done with dollars. C. all relevant options must be considered. D. it is not considered the same thing as optimization because of the net benefit.
C. all relevant options must be considered.
To say that economists use the scientific method means that they are using ___________. A. a method to determine the best course of action for fiscal and monetary policy. B. a process to develop models that are intended to exactly represent all the details of a system. C. an ongoing process to develop models of the world and then test and evaluate those models. D. a method to develop recommendations for policy makers to run economies.
C. an ongoing process to develop models of the world and then test and evaluate those models.
All of the following are properties of the most exciting economic questions, except good questions A. can be answered. B. address topics that are important to society. C. cannot be answered. D. address topics that are important to individual economic agents.
C. cannot be answered.
Economists mostly use optimization in differences, as opposed to optimization in levels, because ____________. A. examining the net benefits of alternatives is counterintuitive. B. contrasting the total benefit of alternatives is intuitive. C. comparing different features of alternatives is simple. D. calculating cost-benefit ratios is complicated.
C. comparing different features of alternatives is simple.
Which of the following would an economist use when conducting empirical analysis? A. causes B. theories C. data D. policies
C. data
Which of the following statements, confirmed by empirical research, would you be most likely to trust? A. using orange and black during a campaign increases candy sales B. heart-themed advertising campaigns are among the most effective C. sales circulars with coupons generate increased sales D. using pictures of Pilgrims sells more turkeys
C. sales circulars with coupons generate increased sales
A budget constraint represents _________. A. the total amount of income a family earns from all sources. B. the maximum amount of spending the federal government is allowed to do by law. C. the bundles of goods or activities that a consumer can choose given her limited budget. D. any actions taken by government officials to limit the amount of government spending.
C. the bundles of goods or activities that a consumer can choose given her limited budget.
An 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 costs besides monetary costs. Which of the following, if true, supports the economist's conclusion? A. The opportunity cost of spending on college education is zero. B. A college education has no impact on an individual's earnings over his or her lifetime. C. The opportunity cost of spending on college education is negative. 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 instill the concept that what activity is given up by a decision plays an important role when making choices. C. It will give you the logic behind using cost-benefit analysis when evaluating decisions. D. All of the above.
D. All of the above.
Which of the following is subject to the free-rider problem? A. Public libraries. B. National security. C. A neighborhood watch. D. All of the above.
D. All of the above.
Which of the following would be considered a scarce resource for producers? A. Natural resources for production. B. Equipment and tools. C. Low−skill labor. D. All of the above.
D. All of the above.
Suppose the market price of corn is $5.50 per bushel. Which of the following is not one of the three conditions that will need to be satisfied for the corn market to be in equilibrium at this price? A. The buyers of corn will only use it for activities that they feel are worth at least $5.50 per bushel. B. The quantity of corn produced by corn farmers will equal the quantity purchased by buyers. C. The cost to corn farmers of growing the corn must be less than $5.50 per bushel. D. Both the buyers and sellers of corn could benefit by making small changes to their market behaviors.
D. Both the buyers and sellers of corn could benefit by making small changes to their market behaviors.
Which of the following statements regarding marginal analysis is true? A. If total cost is falling, marginal cost must be positive. B. If total cost is rising, marginal cost must be rising. C. If total cost is falling, marginal cost could be zero. D. If total cost is rising, marginal cost could be falling.
D. If total cost is rising, marginal cost could be falling.
This chapter discussed natural and randomized experiments. Which of the following is not a characteristic of a natural experiment? A. It uses a process, out of the control of the experimenter, to assign subjects to groups in a random way. B. It can yield accurate results. C. It may utilize historical data for analysis. D. It is an inferior approach to a randomized method.
D. It is an inferior approach to a randomized method.
Which of the following is not an important property of an economic model? A. It makes predictions that can be tested with data. B. It predicts what would happen on average. C. It is based on a theoretical construct. D. It predicts actual results over half the time.
D. It predicts actual results over half the time.
How does microeconomics differ from macroeconomics? A. Macroeconomics is the study of how individuals, households, firms, and governments make choices, while microeconomics is the study of the economy as a whole. B. Microeconomics is the study of how individuals and firms make choices, while macroeconomics is the study of all state and local government policies. C. Macroeconomics is the study of how individuals and firms make choices, while microeconomics is the study of all state and local government policies. D. Microeconomics is the study of how individuals, households, firms, and governments make choices, while macroeconomics is the study of the economy as a whole.
D. Microeconomics is the study of how individuals, households, firms, and governments make choices, while macroeconomics is the study of the economy as a whole.
A simple economic model predicts that a fall in the price of bus tickets means that more people will take the bus. However, you observe that some people still do not take the bus even after the price of a ticket fell. Is the model incorrect? A. Yes, it's possible that certain factors, such as the price of gas, were not included in the model. B. Yes, because it does not predict the outcome with 100 percent accuracy. C. No, because it is based on an incorrect assumption. D. No, because it predicts the outcome of increased bus ridership on average. How would you test this model? A. You should run a natural experiment by analyzing bus ridership and price changes. B. You should randomly question people to see if they prefer taking the bus to other forms of transportation. C. You should determine whether increased bus ridership implies causation or correlation. D. All of the above are appropriate ways to test your model.
D. No, because it predicts the outcome of increased bus ridership on average. A. You should run a natural experiment by analyzing bus ridership and price changes.
There is a proverb "anything worth doing is worth doing well." Do you think an economist would agree with this proverb? A. No, because doing something well has no next best alternatives with which to compare. B. Yes, because the total net benefit of extra effort is positive by definition. C. Yes, because doing something to the best of your ability is optimizing behavior. D. No, because the marginal cost of extra effort may be greater than the marginal benefit. E. Yes, because the marginal cost of extra effort is typically increasing as effort increases.
D. No, because the marginal cost of extra effort may be greater than the marginal benefit.
Which type of experiment is likely to yield more accurate results? A. Natural, because there could be reverse causality. B. Randomized, because a natural experiment may be completely influenced by chance. C. Natural, because there could be an omitted variable. D. Randomized, because a natural experiment may not be completely randomized.
D. Randomized, because a natural experiment may not be completely randomized.
All of the following would fall under the study of microeconomics except: A. a labor union strike. B. an international trade dispute. C. a factory polluting a lake used for fishing. D. the stock market's response to an interest rate increase.
D. the stock market's response to an interest rate increase.
Suppose you had to find the effect of seatbelt rules on road accident fatalities. Would you choose to run a randomized experiment or would it make sense to use natural experiments here? Explain. A. Natural, because seatbelt rules may be unrelated to road accident fatalities. B. Randomized, because natural experiments with seatbelt rules may exist. C. Natural, because seatbelt rules may increase road accident fatalities. D. Randomized, because seatbelt rules may be influenced by road accident fatalities.
D. Randomized, because seatbelt rules may be influenced by road accident fatalities.
Which of the following is not true about economic models? A. They can be highly complex and based on lengthy mathematical analysis. B. A model is only an approximation. C. Models are not perfect replicas of reality. D. They are not useful, since they do not include all variables.
D. They are not useful, since they do not include all variables.
How do economists distinguish between models that work and those that don't? A. They have their models reviewed by other economists. B. They program their models into computers to test via simulation. C. They publish their model results in academic journals. D. They test their models against real-world data.
D. They test their models against real-world data.
Suppose you come across a study that has discovered a link between reading books and life expectancy: People who read more books live longer. Which of the following correlations might exist between reading books and life expectancy even though there is no direct causal link between them? A. Individuals who can afford to spend more time reading books always enjoy more leisure and, therefore, earn less income, which leads to unsustainable life. B. Reading books continuously for a long period of time can sometimes deteriorate an individual's power of reasoning, causing early deaths. C. Reading books continuously for a long period of time can sometimes deteriorate an individual's learning process. D. Wealthy individuals who can afford to spend more time reading can also afford better medical care.
D. Wealthy individuals who can afford to spend more time reading can also afford better medical care.
Which of the following is least likely to be a question or study of economic concern? A. What are the benefits to Tampa Bay of hosting the Super Bowl? B. How connected is productivity and wage? C. Is anything really free? D. What is the motivation of the Red Cross?
D. What is the motivation of the Red Cross?
John is a soda drinker that likes both Coke and Pepsi. He usually picks whichever has the best price or is most convenient. If Pepsi is on sale for $1 a liter and Coke is charging $1.50 for the same, John's demand curve for Coke will experience: A. a movement up the curve. B. a right shift (outward). C. a movement down the curve. D. a left shift (inward).
D. a left shift (inward).
As the text explains, it can sometimes be very difficult to sort out the direction of causality. Causation occurs when there is ____________. A. a mythical-known relationship. B. a historical-known relationship. C. an ancedotal cause-and-effect relationship. D. a logical cause-and-effect relationship.
D. a logical cause-and-effect relationship.
This third principle of economics, supported by the scientific method, is: A. causation. B. equilibrium. C. optimization. D. empiricism.
D. empiricism.
Suppose your friend makes each of the following statements. She might simply have a dour disposition, or she might be an economist! Explain briefly how she has come to each conclusion, and try to use the concepts of optimization and equilibrium. Statement 1: "There is no use moving to that shorter line." Statement 2: "Do not bother trying to switch lanes during a traffic jam." Statement 3: "Do not actively trade stocks since it is impossible to predict whether the price will go up or down tomorrow." Which of these statements is related to optimization, and which is related to equilibrium? Statement 1 deals with ____________. A. equilibrium, because your friend's statement can be tested using data. B. optimization, because you will need this information to identify your best feasible option. C. equilibrium, because it is a prediction rather than an observation. D. equilibrium, because your friend presumes everyone is behaving optimally and the shorter line is slower. Statement 2 deals with ____________. A. optimization, because you are choosing your best feasible option. B. optimization, because other fans are maximizing their well-being. C. empiricism, because you believe you know what the other fans will do. D. equilibrium, because other fans may change their behavior. Statement 3 deals with ____________. A. empiricism, because it describes behavior using real-world data. B. optimization, because it predicts how people's behavior will change. C. empiricism, because it illustrates people optimizing using cost-benefit analysis. D. empiricism, because it evaluates whether people maximize their well-being.
D. equilibrium, because your friend presumes everyone is behaving optimally and the shorter line is slower. A. optimization, because you are choosing your best feasible option. A. empiricism, because it describes behavior using real-world data.
Marginal analysis is a cost-benefit calculation that A. focuses on the similarities between one feasonable alternative and the next feasible alternative. B. analyzes the marginal costs at points on the demand curve. C. analyzes the marginal revenue at points on the demand curve. D. focuses on the differences between one feasonable alternative and the next feasible alternative.
D. focuses on the differences between one feasonable alternative and the next feasible alternative.
If opportunity cost were to suddenly increase, total cost would A. decrease and net benefit would decrease. B. increase and net benefit would increase. C. decrease and net benefit would increase. D. increase and net benefit would decrease.
D. increase and net benefit would decrease.
An argument against evidence-based economics would be: A. it always ends with assumptions. B. it is more complicated than real life. C. it can't be backed up with factual data. D. it is only an approximation, often based on averages.
D. it is only an approximation, often based on averages.
For most people, one of the biggest challenges involved in studying economics is: A. it has no real life application. B. it ignores human actions and motivations. C. it focuses solely on the financial side of everything. D. it looks beyond simple cause and effect to the many possible long term effects of an action.
D. it looks beyond simple cause and effect to the many possible long term effects of an action.
All of the following statements about means and medians are true, except A. a median uses a mean with even number observations. B. the mean is another term for average. C. a mean sample would gain more accuracy with more observations. D. the median is more skewed by extreme values.
D. the median is more skewed by extreme values.
One reason free-riders exist could be that: A. the social cost ensures a strong, enforceable penalty. B. people often act in the best interest of others. C. the social cost exceeds the private benefit. D. the private benefit exceeds the private cost.
D. the private benefit exceeds the private cost.
Which of the following would not be considered one of the possible opportunity costs of a recent high school graduate starting college right away. A. Spending a year backpacking across Europe. B. Getting a full−time job. C. Using your college fund to buy a new car. D. None of these would be considered an opportunity cost. E. All of these is a possible opportunity cost.
E. All of these is a possible opportunity cost.
Suppose you had information on the sales of similar homes just east and just west of the boundary between two school districts. Also suppose schools on one side of the school boundary are better than the schools on the other side in terms of test scores. You could estimate the average value that parents place on a one-point increase in test scores by ___________. A. multiplying the price of a home in either district by the difference in test scores between districts. B. dividing the difference in the prices of similar homes between districts by the average test score for both districts combined. C. dividing the difference in the prices of big homes in one district and small homes in the other district by the difference in test scores between districts. D. dividing the difference in the prices of big and small homes in a district by the average test score in that district. E. dividing the difference in the prices of similar homes between districts by the difference in test scores between districts.
E. dividing the difference in the prices of similar homes between districts by the difference in test scores between districts.
Optimization is the process that describes __________. A. the budgeting process for firms. B. the production of resources. C. how to maximize revenue. D. how to obtain relevant data. E. the choices that businesses make.
E. the choices that businesses make.
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? ____________ .
No
Scott loves to go to baseball games, especially home games of the Cincinnati Reds. All else being equal, he likes to sit close to the field. He also likes to get to the stadium early to watch batting practice. He is willing to pay $1 for every minute of batting practice that he can watch. The closer he parks to the stadium, the more batting practice he is able to watch (the garages all open simultaneously). Find Scott's optimal seat location and parking garage location using the information that follows. Scott's optimal seat type is ________________. Scott's optimal parking is ___________________.
Scott Box; Under Stadium Parking
When optimizing for total value, opportunity cost must be ________________ total cost. Assuming __________________ benefits, the lowest cost option is the optimal choice.
added to; equal
Marginal analysis _________ picks out a different ___________ as minimization of total cost.
always; the same
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
When making your decision about which activity to choose, you should consider the monetary cost ________________ the opportunity cost of the activities. The goal is to choose the option that offers the greatest _______benefit.
as well as; net
Since the inputs used to produce goods are scarce, the total amount produced of most goods is _______ the amount that consumers would like to buy. To allocate the goods produced to the people who value them the most, we use the _____________________.
below; price mechanism
You are taking two courses this semester, biology and chemistry. You have quizzes coming up in both classes. The table below shows your grade on each quiz for different numbers of hours spent studying for each quiz (For the purposes of this problem, assume that each hour of study time can't be subdivided.). For instance, the table implies that if you spent 1 hour on chemistry and 2 hours on biology, you would get a 71 on the chemistry quiz and a 78 on the biology quiz. Hours of Study/ Chemistry/ Biology 0/ 65/ 66 1/ 71/ 73 2/ 75/ 78 3/ 77/ 81 Your goal is to maximize the sum of your grades on the two quizzes. Use the idea of optimization using marginal analysis to decide how much time you would spend studying for each quiz if you had a total of 1, 2, or 3 hours to prepare for each exam. If you had 1 hour, you should study ___________. If you had 2 hours, then you should study _______________ hour(s) for chemistry and ___________ hour(s) for biology. (Enter your responses as integers.) If you had 3 hours, then you should study _______________ hour(s) for chemistry and ___________ hour(s) for biology. (Enter your responses as integers.)
biology 1; 1 1; 2
Suppose you have just landed a job near the center of a city and you now need to decide where to live. If you live close to the city center, your round-trip commute will be 15 minutes. If you live in the distant suburbs, your round-trip commute will be 60 minutes. There are lots of workers like you who work downtown. Since there are only a limited number of apartments near the city center, these apartments will be allocated based on ______________ that you face. This process is known as _______________________________.
both the costs and benefits; optimization
You are trying to decide how to spend $40 you earned last night. You could buy a new shirt or go out to dinner and a movie with a friend. You could also go to the movie, not have popcorn, and buy a less expensive shirt. Taken together these things form your ______________________.
budget constraint
An experiment would be conducted to determine ___________ among the chosen variables. Subjects should be assigned _____________ to either a test or control group in order to get the most unbiased comparison.
causation; randomly
You decide to run an experiment. You invite 20 friends to a party. You randomly select 10 friends and tell them that there will be free food: most of them show up to your party. For the other 10 friends you do not mention the free food: none of these friends show up. Based on the correlation in your data and also assuming that the correlation is not spurious, you conclude that free food causes people to come to parties. Given this information, it can be concluded that _______________________.
correlation implies causation
Suppose you have a part-time job and earn $400 a month. Suppose you decide to spend your income buying new shoes and jeans. The chart below shows the possible combinations that could be purchased in a month. Assume jeans cost $50 each and shoes cost $100 each. Budget/ Pairs of Shoes Purchased/ Pairs of Jeans Purchased $400/ 4/ 0 400/ 3/ 2 400/ 2/ 4 400/ 1/ 6 400/ 0/ 8 The table above shows that for a given budget if you increase the amount of one type of good that you buy, you must _____________ the amount of the other good that you buy. Therefore, a budget constraint implies that the consumer faces ______________.
decrease; trade-offs
An individual's willingness to pay measured over different quantities of the same good define the _______________. If the retail price of the good increases, the ______________ will decrease, all other things constant.
demand curve; quality demanded
For a market to be in equilibrium, three conditions must hold. Fill in the blanks below to complete these conditions. The amount produced by sellers must be _______________________ the amount purchased by buyers. The costs of making a product must be ____________________ the final price at which the product sells. 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
Clara visits the local bakery shop several times a week and knows the owner, Sam, very well. Her favorite cupcakes, chocolate cream, sell for $2 each at any bakery or coffee shop in town. Assuming Clara and all other buyers in the market believe they can't do better, $2 is likely the _______________ price. Now suppose there was some disruption in the market for flour, an ingredient in cupcakes, and Sam raised the price to $2.50, while the coffee shop down the street only raised its price to $2.25. Given this information, Clara chooses to buy her favorite cupcake from the coffee shop down the street, which is the __________________ choice for her.
equilibrium; optimum
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.
higher
Economists study all _______________; therefore, the unifying feature of economics is a focus on ___________.
human behavior; choice
The scientific method uses __________ for setting forth predictions and ________ to support or deny them. It is more important for a model to be ________ than __________.
hypotheses; data; usable; accurate
In general, apartment rental prices ______ as the opportunity cost of commuting rises, indicating a strong ____________ relationship between rents and commutes.
increase; negative
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 ____________ the longer line. 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; last person in the five-person line
A group of economic agents who are trading a good or service would define a ____________. Price takers exist throughout ______________ markets.
market; competitive
Michael has a statistics final exam tomorrow morning and he needs to decide how many hours to study. The benefits column shows how many more points he expects to earn because of increased knowledge. The cost column shows how many points he will lose because of careless errors due to lack of sleep. (The "marginal" columns show the effect of each additional hour. These numbers are the differences of the "total" columns.) Using the marginal benefits and marginal costs analysis, if Michael studies for three hours, the outcome will be ____________ because _________________________________.
optimal; net benefit is maximized
The three principles of economics include optimization, equilibrium, and empiricism. Optimization describes a situation where ________. Equilibrium describes a situation where ___________. Empiricism describes a situation where ________________.
people weigh costs and benefits when making a decision; no one would benefit from changing his or her behavior; economists use data to analyze what is happening in the world
Free riding occurs when ________________________ are out of sync with __________________________.
people's private benefits; the public interest
Demonstrate causation or correlation with the following examples: More ________________ and _____________ crime rates is likely to be ____________________. More _________________ and __________________________ employment levels is likely to be ______________________. The length of women's skirts and stock market performance is likely to be _____________________________.
police officers; lower; causation economic growth; higher; causation correlation
A study was conducted examining diabetes rates by ethnicity. It was determined that Hispanics had the highest rate of diabetes. A conclusion might be made that people of Hispanic origin are the most inclined to be diabetic. However, that ____________ correlation could be the result of _______________, given that other factors, such as diet, that were not considered.
positive, omitted variables
Making a prediction today about the world's population in twenty years based on current growth trends is an example of ________________ economics. Advising the residents of a town to choose a toll road over a freeway extension due to a limited budget and high trucking usage is an example of __________________ economics.
positive; normative
Argument by anecdote __________be taken seriously. Anecdotes __________ appropriate when contradicting a blanket statement.
should not; are
In general people with more education earn higher salaries. Economists have offered two explanations of this relationship. The human capital argument says that high schools and colleges teach people valuable skills, and employers are willing to pay higher salaries to attract people with those skills. The signaling argument says that college graduates earn more because a college degree is a signal to employers that a job applicant is diligent, intelligent, and persevering. The __________________ implies that a college student who drops out of school one month before graduation should earn much less than a student who graduates. The _________________________ implies that a college student who drops out of school one month before graduation should earn almost the same as a student who graduates.
signaling argument; human capital argument
How would you represent the following graphically? Income inequality in the United States has increased over the past 10 years. This could best be represented with a ______________________. All the workers in the manufacturing sector in a particular country fit into one (and only one) of the following three categories: 31.5 percent are high school dropouts, 63.5 percent have a regular high school diploma, and the rest have a vocational training certificate. This could best be represented with a _____________. The median income of a household in Alabama was $43,464 in 2012 and the median income of a household in Connecticut was $64,247 in 2012. This could best be represented with a ______________.
time series graph; pie chart; bar graph
When John determines what choice of walking shoes will give him the best bang for his buck, he is using optimization based on _______________. When Janet looks at the additional value of purchasing a new laptop to the cost as compared to keeping her old one, she is using optimization based on _________.
total value; marginal value
You run a coffee shop that is open all day. You are considering staying open in the evening. The total benefit (i.e., revenue) from keeping your coffee shop open for each additional hour at night is shown in the table. Fill out the marginal benefit (the difference from one row to the next). (Enter your answers as a whole number. Include a negative sign (-) if the answer is negative but do not include a plus sign (+) if the answer is positive.) Hours per Night/ Total Benefit/ Marginal Benefit 0/ $0/ _________ 1/ 70/ _________ 2/ 100/ __________ 3/ 125/ _______ 4/ 140/ __________ 5/ 125/ _______ 6/ 105/ _________ If your goal is to maximize total revenue, you should keep your store open _______ hours. (Enter your answer as a whole number.) If you go beyond this amount, the marginal revenue _________________. Suppose it costs $35 for each additional hour that you keep the store open. If this is the case, you should keep your store open for _______ hours at night. (Enter your answer as a whole number.)
− 70−0=70 100−70=30 125−100=25 140−125=15 125−140=−15 105-125=-20 4; becomes negative 3