ECO 204 Chapter 1

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

Determine whether each of the following is covered by microeconomics or macroeconomics 1) Number of employees in the steel​ industry: _____ 2) Changes in the aggregate price level​ (inflation): _____ 3) The price of​ gasoline: _____ 4) The unemployment​ rate: ____

1) Microeconomics 2) Macroeconomics 3) Microeconomics 4) Macroeconomics

1) The inheritance tax should be repealed because it is​ unfair: (Positive/Normative) 2) An increase in the price of beer will result in a decrease of beer​ consumption: (Positive/Normative) We should introduce a tax on beer because consuming beer is bad for our​ health: (Positive/Normative)

1) Normative 2) Positive 3) Normative

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

1) model 2) variable

QUESTION 7 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? A. Positive​ relationship; positive slope. B. Negative​ relationship; negative slope. C. Positive​ relationship; negative slope. D. Negative​ relationship; positive slope.

A. Positive​ relationship; positive slope.

The importance of the ceteris paribus assumption when using models is​ that: A. It allows researcher to isolate the effect of one event on another without the influence of outside variables. Your answer is correct. B. It allows researcher to analyze the effect of all potential influences on a particular event. C. It converts normative analysis into positive analysis. D. It eliminates the need for abstraction or simplification.

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

The Agrizone Corporation invests ​$11.0 million in a new inventory tracking system. A. The opportunity cost of investing in a new inventory tracking system is any other projects Agrizone could have invested in. B. The opportunity cost of​ Agrizone's decision is the value of the other investments it is pursuing at the same time. C. The opportunity cost of​ Agrizone's decision is the value of leaving the money unutilized. D. All of the above. E. None of the above.

A. The opportunity cost of investing in a new inventory tracking system is any other projects Agrizone could have invested in.

GRAPH PROBLEMS

QUESTION 5

After receiving her​ master's degree, Molly chooses to enter the doctoral program in Political Science at the University of Texas. A. The opportunity cost of​ Molly's decision is the price of any other doctoral program she could have chosen to enter. B. The opportunity cost of entering a doctoral program is the time Molly could have spent on other activities. C. The opportunity cost of​ Molly's decision is not being able to have a family. D. All of the above. E. None of the above.

B. The opportunity cost of entering a doctoral program is the time Molly could have spent on other activities.

Taylor receives ​$200 from his grandmother for his birthday and uses it all to buy shares of stock in​ Harley-Davidson, Inc. A. The opportunity cost of buying the Harley Davidson shares is the price of the shares that could have been spent on other goods and services. B. The opportunity cost of​ Taylor's decision is the value of the​ next-best alternative not chosen. C. The opportunity cost of buying shares is the value of the time Taylor might have spent researching the stock market. D. A and B only. E. All of the above.

D. A and B only.

After a night of​ karaoke, Tiffany forgets to set her alarm and sleeps through her Economics final exam. A. The Opp. cost of Tiffanys decision is the price to retake the exam B. The Opp. cost of Tiffanys decision is the value of everything she could have done instead of staying out late C. The Opp. cost of Tiffanys decision is a poor grade on the exam D. The Opp. cost of Tiffanys decision is a better grade on the the exam E. All of the above

D. The Opp. cost of Tiffanys decision is a better grade on the the exam

Hector decides to spend the summer backpacking across Europe after he graduates from Yale Columbia University. A. The opportunity cost of​ Hector's decision is the wage he could earn if he decided to get a job. B. The opportunity cost of backpacking across Europe is the time Hector could have spent on other activities. C. The opportunity cost of​ Hector's decision is the​ next-best alternative to backpacking across Europe. D. None of the above. E. All of the above.

E. All of the above.

Monique quits her ​$45,000 per-year job as an accountant to become a​ full-time volunteer at a​ women's shelter. A. The opportunity cost of volunteering at the shelter is the wages she gave up. B. The opportunity cost of​ Monique's decision is the time she can spend on other activities. C. The opportunity cost of​ Monique's decision is the value of the​ next-best alternative not chosen. D. None of the above. E. All of the above.

E. All of the above.

Sanjay chooses to use his vacation time to paint the exterior of his house. A. The opportunity cost of​ Sanjay's decision is the price of the paint that he could have spent on other goods and activities. B. The opportunity cost of​ Sanjay's decision is the​ next-best alternative to painting the exterior of his house. C. The opportunity cost of​ Sanjay's decision is the time he could have spent on other activities. D. None of the above. E. All of the above.

E. All of the above.

QUESTION 6 The graph to the right is a _____ , which measures how a single variable changes over time. Which of the following is true of the graph to the​ right? A. It is positively sloped. B. It shows a general increase in the level of personal disposable income over time. C. It allows us to analyze the behavior of two variables at the same time. D. All of the above. E. A and B only.

time series ​graph E. A and B only.