Econ 202 Problem Set 2

Scenario: Maria has to choose between driving and taking a train to destination A. Travelling by train will cost her​ $400 and will take 4 hours. Driving to destination A takes 6 hours and the required amount of gasoline costs​ $250. Her opportunity cost of time is​ $15 per hour. Refer to the scenario above. If Maria borrows her​ parents' car and pays for only the​ gasoline, what is her total cost of driving to destination​ A?

$340

​Scenario: Maria has to choose between driving and taking a train to destination A. Travelling by train will cost her​ $400 and will take 4 hours. Driving to destination A takes 6 hours and the required amount of gasoline costs​ $250. Her opportunity cost of time is​ $15 per hour. Refer to the scenario above. What is the total cost involved if Maria chooses to travel by​ train?

$460

Scenario: Maria has to choose between driving and taking a train to destination A. Travelling by train will cost her​ $400 and will take 4 hours. Driving to destination A takes 6 hours and the required amount of gasoline costs​ $250. Her opportunity cost of time is​ $15 per hour. Refer to the scenario above. If​ Maria's opportunity cost of time increases to​ $80 per​ hour, the cost involved in taking the train​ is:

$720

​Scenario: Maria has to choose between driving and taking a train to destination A. Travelling by train will cost her​ $400 and will take 4 hours. Driving to destination A takes 6 hours and the required amount of gasoline costs​ $250. Her opportunity cost of time is​ $15 per hour. Refer to the scenario above. If​ Maria's opportunity cost of time increases to​ $80 per​ hour, the cost of driving to destination A​ is:

$730

- The three economic questions that every society must answer are -Centrally planned economies allocate resources based on decisions by __________________________ ​, while market economies answer these questions through decisions made by __________________________________

- What goods will be​ produced, how will they be​ produced, and who will receive the​ goods? -Govt; households and firms

Which of the following best describes​ scarcity? Scarcity is central to the study of economics because it implies that

-Unlimited wants exceed the limited resources available. -every choice involves an opportunity cost.

Every society faces​ trade-offs because we live in a world of scarcity. Suppose a​ student-athlete has the opportunity to earn ​$200 comma 000200,000 next year playing for a minor league baseball​ team, ​$500 comma 000500,000 next year playing for a European professional football​ team, or​ $0 returning to college for another year. The opportunity cost of the​ student-athlete returning to college next year is ​$

500,000

Which of the following is most likely to be an example of​ causation?

A firm producing CFLs installs new machinery. The​ per-day production of CFLs increases.

Several owners of​ McDonald's restaurants,​ however, point out that offering breakfast 24 hours a day presents two logistical​ problems: (1) Burgers and other meats need to be cooked at a higher temperature than​ eggs, so it would be difficult for employees to set the grill at the right temperature for both​ foods; and​ (2) scrambled eggs require employees to continually​ stir, while hamburgers​ don't require this attention. In​ addition, some customers might buy the cheaper breakfast than the more expensive lunch or dinner meals. ​ A. From an economics​ perspective, to determine whether to serve breakfast all​ day, McDonald's should B. Would​ McDonald's decision have to be all or nothinglong dash—either serve breakfast only up to​ 10:30 A.M. or serve breakfast all​ day?

A. compare the marginal revenue from serving breakfast all day with the marginal cost of serving breakfast all day. B. No.​ McDonald's could evaluate serving items from the breakfast menu that could be cooked in better coordination with the dinner menu for a period after​ 10:30 A.M.

Which of the following statements is true about​ data?

Consistency of models can be checked using data.

Which of the following statements identifies a difference between correlation and​ causation?

Correlation implies a mutual relationship between two​ things, whereas causation occurs when one thing directly affects another.

Consider the following​ statement: ​ "The problem with economics is that it assumes that consumers and firms always make the correct decisions. But we know that everyone makes​ mistakes." What is the most correct response to this​ statement?

Economics assumes that consumers and firms are​ rational, not that they always make the right decisions.

In a paper written by Bentley College economists Patricia M. Flynn and Michael A.​ Quinn, the authors​ state: ​"We find evidence that Economics LOADING... is a good choice of major for those aspiring to become a CEO​ [chief executive​ officer]. When adjusting for size of the pool of​ graduates, those with undergraduate degrees in Economics are shown to have had a greater likelihood of becoming an​ S&P 500 CEO than any other​ major." A list of famous economics majors published by Marietta College includes business leaders Warren​ Buffet, Donald​ Trump, Ted​ Turner, and Sam​ Walton, as well as former presidents George H.W.​ Bush, Gerald​ Ford, and Ronald Reagan. Why might studying economics be particularly good preparation for being the top manager of a corporation or a leader in​ government?

Economics teaches us how to look at the tradeoffs involved in every decision.

Which of the following statements is true of the scientific​ method?

Empirical arguments are more credible when they are based on a large data set.

Utility refers to how much consumers utilize a product or service.

False

Teachers often wish that students came to class prepared having read the upcoming material. A teacher could design the grading system to motivate students to come to class prepared by ________________________ the grade weight assigned to being prepared.

Increasing

Scenario: Maria has to choose between driving and taking a train to destination A. Travelling by train will cost her​ $400 and will take 4 hours. Driving to destination A takes 6 hours and the required amount of gasoline costs​ $250. Her opportunity cost of time is​ $15 per hour. Refer to the scenario above. If the opportunity cost of time increases to​ $80 per​ hour, which of the following statements is​ true?

Maria should choose to travel by train as it saves her​ $10.

Which of the following statements is​ true?

Normative statements depend on personal preferences.

Which of the following statements is​ true?

Rational economic agents maximize more than just monetary income.

Which of the following claims is most likely to suffer from reverse​ causality?

Relatively wealthy people tend to be relatively healthy

Soo Jin shares a oneminus−bedroom apartment with her classmate. Her share of the rent is​ $700 per month. She is considering moving to a studio apartment which she will not have to share with anyone. The studio apartment rents for​ $950 per month.​ Recently, you ran into Soo Jin on campus and she tells you that she has moved into the studio apartment. Soo Jin is as rational as any other person. As an economics​ student, you rightly conclude that

Soo Jin figures that the additional benefit of having her own place​ (as opposed to​ sharing) is at least​ $250.

Microsoft charges a price of​ $599 for a copy of Windows 7. Is this pricing decision​ rational?

When we assume the managers at Microsoft have used all available information and have weighed all known benefits and​ costs, we are assuming rationality.

Causation occurs​ when:

a change in one variable is the reason for the change in another variable.

Indicate which of the following statements represent positive analysis LOADING... and which represent normative analysis: a. A​ 50-cent-per-pack tax on cigarettes will reduce smoking by teenagers by 12 percent. This represents..... b. The federal government should spend more on AIDS research. This represents.... c. Rising paper prices will increase textbook prices. This represents....... d. The price of coffee at Starbucks is too high. This represents.....

a. positive analysis b. normative analysis c. positive analysis d. normative analysis

The grading system plays an important role in student learning. In their book Effective​ Grading: A Tool for Learning and Assessment in College​, Barbara Walvoord and Virginia Anderson state that: ​"grading infuses everything that happens in the​ classroom." They also argue that grading​ "needs to be acknowledged and managed from the first moment that an instructor begins planning a​ class." The grading system used by a teacher can affect the incentives of students to learn the course material by

altering the payoffs to achieving success on the various components of the course.

Trinh quits his ​$80,000 minus−aminus−year job to become a fullminus−time volunteer at a museum. What is the opportunity cost of his​ decision?

at least​ $80,000

If teachers put too littlelittle weight in the grading scale on a certain part of the​ course, like readings outside the​ textbook, students might respond by ______________ that part that part of the course.

de-emphasizing

An omitted variable is a variable​ that:

has been left​ out, and if​ included, would explain why the variables considered in a study are correlated.

Consider an organization that exists to help the poor. The members of the organization are discussing alternative methods of aiding the​ poor, when a proponent of one particular method asserts​ that: ​"If only one poor person is helped with this​ method, then all our time and money would have been worth​ it." If you were a member of the​ organization, what reply best represents clear economic​ thinking? This attitude

ignores the fact that the cost of helping that one person has an opportunity cost of what those funds could have been used for to help other people.

Consider an organization that exists to help the poor. The members of the organization are discussing alternative methods of aiding the​ poor, when a proponent of one particular method asserts​ that: ​"If only one poor person is helped with this​ method, then all our time and money would have been worth​ it." If you were a member of the​ organization, what reply best represents clear economic​ thinking? This attitude

ignores the fact that the cost of helping that one person has an opportunity cost of what those funds could have been used for to help other people.

​________ occurs when the direction of cause and effect is mixed up in a study.

reverse causality

One of the basic facts of life is that people must make choices as they try to attain their goals. This unavoidable fact comes from a reality an economist calls

scarcity

What is the economic definition of​ utility? Utility is

the enjoyment or satisfaction people receive from consuming goods and services.

Opportunity cost is

the highest valued alternative that must be give up to engage in an activity.

Economists assume that people are rational in the sense that

they use all available information as they take actions intended to achieve their goals.

Scenario: Maria has to choose between driving and taking a train to destination A. Travelling by train will cost her​ $400 and will take 4 hours. Driving to destination A takes 6 hours and the required amount of gasoline costs​ $250. Her opportunity cost of time is​ $15 per hour. Refer to the scenario above. Maria should choose​ to:

​drive, as it will save her​ $120