Econ202 Exam One (modules 1.1-5.6) and Problem Sets 2-5

john is ready to pay five dollars for an extra loaf of bread. due to an ongoing discount in the store, he gets a loaf for 2 dollars. john's consumer surplus from the purchase is

3 dollars

sandra mary and david constitute the whole market of wine. at 8 dollars, sandra demands 2 bottles and mary demands 10. the demand is 19. what is davids demand?

7 bottles

If you have a competitive equilibrium for a two market economy consisting of tacos and enchiladas, then.. a) the market equilibrium quantity of tacos is efficient b) the market equilibrium quantity of enchiladas is efficient c) the sellers of tacos have higher costs than other potential sellers d) all of the above e) A and B above

A and B

When trying to assess your economic well-being, you should:

Compare your situation to that of most people alive today.

The steps needed to evaluate the best way to organize an economy include

Determining what will be produced, how it will be produced, and who gets it, and then evaluating these outcomes.

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

When buyers and sellers operate in a competitive market, they are

Following their own self interest, doing whatever serves them best.

According to the video, is there enough bluebell?

No :P

What are the assumptions needed for simple arithmetic

Numbers exist & addition

The video describes the steps in simple arithmetic as proceeding from

Numbers to cardinal numbers to addition to subtraction to multiplication to division

In which of the following ways did the video NOT indicate you were rich compared to King George? a) power b) indoor plumbing c) travel d) music e) medical treatment

Power

Which of the following is a positive economic statement? a) raising the tax on gasoline raises the selling price of gas b) the government should revamp its immigration policies c) us citizens should only buy products which are produced in the us d) the government should ban the production and sale of incandescent light bulbs

Raising the tax on gasoline raises the selling price of gasoline

What did central control of economies imply

Regulating resources like land and water

What is an assumption of economics

Scarcity

Which of the following is NOT an economic question? a) should you eat healthy food? b) should seniors get the first pick of seats in the student section of Kyle field? c) should you study for a test or go to a party? d) Should TXA&M allocate seats in classes using a first-come, first-served approach? e) none of the above

Should you eat healthy food?

What can be derived from other assumptions about numbers

Subtraction, multiplication, and division

Adam smith's book, the wealth of nations, investigated

The role of markets in determining economic efficiency

When sellers sell goods in a market they are doing so because

They can make more money selling that good than doing something else

When buyers buy goods in a market they are doing so because

They prefer the good to the other good

the three fundamental questions that must be answered by any economy include

What to produce, how to produce goods, and who gets the goods

Scarcity generates which general questions in an economy:

What to produce, how to produce it, and who gets it?

Which of the following is NOT an economic question? a) Do we have enough medical care in the economy? b) Which type of music should we produce more of? c) Should we make hybrids or SUVs? d) Why do we need more bluebell ice cream?

Why do we need more bluebell ice cream?

Using basic assumptions you can determine

Why markets are efficient, when markets are efficient, and when government intervention helps or hurts economic preferences

Which of the following is NOT an economic question? a) how many iphones and droids should we produce? b) should we urbanize farmland? c) how much bluebell should be made? d) would people be better off if they wanted fewer goods? e) should we teach courses online?

Would people be better off if they wanted fewer goods?

a change in the slope of a budget constraint indicates

a change in the price of either good that causes a change in the opportunity cost

a budget constraint is a straight line bc

a consumer faces a fixed price of both goods that do not change with changes in consumption

a budget constraint is a straight line bc

a consumer faces a fixed price of both goods that do not change with changes in consumptions

what best describes the difference between a demand curve and a demand schedule

a demand curve is a graphical representation of the relationship between the quantity of a good and its price, whereas a demand schedule is a tabular representation

a model refers to

a simplified description or representation of reality

Which of the following will lead to a change in the opportunity cost of buying a pen and a pencil?

a twofold increase in the price of pens and a threefold increase in the price of pencils

which of the following will lead to a change in the opportunity cost of buying a pen and pencil

a twofold increase in the price of pens and a threefold increase in the price of pencils

The key advantage of market exchange compared to one-on-one (barter) trade is that a) markets allow for greater specialization b) markets allow trading to occur to a larger extent c) markets are more efficient d) all of the above

all of the above

Which of the following methods have been used to govern economic activity? a) customs b) apprenticeships c) markets d) central control e) all of the above

all of the above

Which of the following is NOT an example of central economic control? a) family or clan leaders b) warlords c) dictators d) tribal chieftains e) all of the above are examples of central control

all of the above are examples of central control

Consider the following statements: a. Car owners purchase more gasoline from a gas station that sells gas at a lower price than other rival gas stations in the area b. banks do not take steps to increase security since they believe it a less costly to allow some bank robberies than to install expensive security monitoring equipment c. firms produce more of a particular DVD when it's selling price rises which of the statements demonstrate that economic agents respond to incentives?

all of them

economists assume that individuals

are rational and respond to incentives

if a consumer purchases any combo of goods and services on his ____________, he will exhaust his income completely

budget constraint

the ________________ plots the relationship between prices and the quantity that buyers are willing to purchase

demand curve

Making "how much" decisions involves

determining the additional benefits and the additional costs of that activity

consumer surplus

difference between willingness to pay and the price paid for a good

the opportunity cost of going to an outdoor music festival is

equal to the highest value of an alternative use of the time and money spent on the festival

economists assume that rational behavior is useful in explaining choices people make

even though people may not behave rationally all the time

marginal utility is the

extra satisfaction received from consuming one more unit of a product

positive analysis is concerned with "what ought to be" while normative analysis is concerned with "what is" t/f

false

Which of the following is a normative economic statement a) farmers should not be allowed to grow and self genetically-modified crops b) the federal government is considering increasing regulations on the use of fossil fuels to promote the use of wind power c) rising corn prices have increased the price of corn-based ethanol d) with rising home prices and falling mortgage interest rates, the amount of home foreclosures has decreased

farmers should not be allowed to grow and sell genetically-modified crops

an item has utility for a consumer if it

generates enjoyment or satisfaction

the buyers of a good will want to purchase it as long as their willingness to pay for the good is

greater than or equal to the price

`suppose that when the price of hamburgers decrease, the landry fam decrease their purchases of chicken nuggets. to the landry family

hamburgers and chicken nuggets are substitutes

trade

has been a feature of nearly all economies

Which of the following is a positive economic statement a) the standard of living in the us is too low b) the government should implement a national consumption tax c) the us government should increase regulations on the banking industry d) if the price of beef falls, a larger quantity of it will be bough

if the price of beef falls, a larger quantity of it will be bought

willingness to pay

is the highest price that a buyer is willing and able to pay for a unit of a good

the demand schedule for a commodity illustrates how the consumption of a commodity changes with changes in

its price

Are you richer than a) king george iii of england b) queen elizabeth ii of england c) most ppl in the world today d) all of these e) a&c

king george iii and most ppl in the world today

scarcity in an economy emerges from

limited resources and infinite wants

economists assume that the goal of consumers is to

make themselves as well off as possible

the extra cost associated with undertaking an activity is called

marginal cost

the demand by all consumers if a given good or service is the _____ for the good or service

market demand

As early societies became more complex, economies started to rely

on custom on centralized control of resources on markets and trade

the best alternative use of resource is referred to as its

opportunity cost

Suppose that some investors have decided that economic and financial uncertainty have made the prospect of investing in domestic stock markets more risky than investing in foreign stock market and therefore choose to invest in foreign markets. By using all available info as they act to achieve their goals, there investors are exemplifying the economic idea that

people are rational

holding all other personal characteristics- such as age, gender, and income-constant, economists would expect that

people with health insurance are more likely to be overweight than people without health insurance

which of the following is a normative economic statement a) rising global demand for coal has led to increases in the price of coal b) pharmaceutical manufacturers should not be allowed to patent their products so prescription drugs would be more affordable c) the state of texas is considering increasing funds for light-rail development to promote the use of public transportation d) with rising mortgage rates and rising unemployment rates, the number of unsold homes has increased

pharmaceutical manufacturers should not be allowed to patent their products so prescription drugs would be more affordable

If the price of the good measured along the vertical axis increases without a change in the price of the good measured along the horizontal axis, the consumers budget constraint

pivot leftward (pivot in) without a change in the intercept on the horizontal axis

if quantity of tea is measured on the horizontal axis and quantity of coffee is measured on the vertical axis, an increase in the price of coffee will cause the budget constraint to

pivot leftward along the vertical axis (in)

a decrease in the price of either one or the other good will cause a consumers budget constraint to

pivot rightward (pivot out)

a decrease in the price of either one ore the other good will cause a consumer's budget constraint to

pivot rightward (pivot out)

if quantity of milk is measured on the horizontal axis and quantity of juice is measured on the vertical axis, a decrease in the price of milk will cause the budget constraint to

pivot rightward (pivot out) along the horizontal axis

if the price of the good measured along the vertical axis increases without a change in the price of the good measured along the horizontal axis, the consumers budget constraint

pivots leftward (pivot in) without a change in the intercept on the horizontal axis

as the _______ increases, ___________

price of a good; its quantity demanded decreases

economics does not study correct or incorrect behaviors but rather it assumes that economic agents behave _____, meaning they make the best decisions given their knowledge of the cost and benefites

rationally

a budget constraint

refers to the limited amount of income available to consumers to spend on goods and services

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

reverse casuality

economics is the study of

scarcity and how societies deal with it

Which of the following is a positive economic statement a) people should not buy SUV's b) foreign workers should not be allowed to work for lower wages than the citizens of a country c) scarcity necessitates that ppl make trade offs d) the gov should mandate electric automobiles

scarcity necessitates that ppl should make trade off

economics studies

scarcity, the social institutions used to address scarcity, & what to produce, how to produce, & who gets it

economic models

simplify some aspect of economic life answer economic questions make economic ideas explicit and concrete for use by decision makers

the restriction that a consumer's total expenditure on goods and services purchased cannot exceed the income available is referred to as

the budget constraint

by definition, economics is the study of

the choices people make to attain their goals

if the price of a good increases,

the consumer surplus decreases

the principle of opportunity cost is that

the economic cost of using a factor of production is the alternative use of that factor that is given up

a change in price of good has two effects on the quantity consumed. what are these effects?

the income effect and the substitution effect

assume that an individual spends his income on sweaters and shirts. If the price of a sweater increases,

the opportunity cost of buying sweaters increases

assume that an individual spends his income on sweaters and shirts. if the price of a sweater increases,

the opportunity cost of buying sweaters increases

the slope of a budget constraint represents

the opportunity cost of one good in terms of another

Which of the following is a normative economic statement a) when the price of gas rises, transportation costs rise b) when the price of gas rises, the quantity of gas purchased falls c) the current high price of gasoline is the result of strong worldwide demand d) the price of gas is too high

the price of gas is too high

which of the following is a normative economic statement? a) the current low price of wheat is the result of increased worldwide supply b) when the price of wheat falls, the quantity of wheat purchased rises c) the price of wheat is too low d) when the price of wheat falls, the cost of the wheat-based products falls.

the price of wheat is too low

the law of demand implies, holding everything else constant, that as the price of bagels increases,

the quantity of bagels demanded will decrease

a correlation between two variable implies that

there is a mutual relationship between both the variables

"an increase in the price of gas will increase the demand for hybrid vehicles". this statement is an example of a positive economic statement.

true

t/f? The additional cost to a producer of hiring an additional unit of labor is called the marginal cost

true

when voluntary exchange takes place, both parties gain from the exchange t/f

true

economists assume the rational people do all of the following except

undertake activities that benefit others and hurt themselves

Making optimal decisions "at the margin" requires

weighing the costs and benefits of a decision before deciding it it should be pursued

A major question that faced societies 250 years ago was

what would happen if your organized more of the economy with markets

which of the following examples best describes the Law of Demand

when the price of bread doubles, john's consumption of bread halves

which of the following examples best describes the law of demand

when the price of tea increased, the quantity demanded of tea decreased