ECONOMICS 201 - CH 1 & 2

Calculate the slope of a line passing through point A at (2, 1) and point B at (4, 2). Calculate to one decimal place.

0.5

To have _____ advantage means to be able to produce more using the same resources. To have _____ advantage means to have a lower _____. Comparative advantage is the basis for _____. It is _____ for a producer to have a comparative advantage in both goods.

1. AN ABSOLUTE 2. A COMPARATIVE 3. OPPORTUNITY COST 4. GAINS FROM TRADE 5. IMPOSSIBLE

Assume that an economy produces only two goods, pizza and wings. Place the events in order to show how an improvement in pizza-making technology would lead to an increase in wing production.

1. Better pizza-making technology is developed. 2. Fewer workers are needed to make as much - or even more - pizza as before. 3. Workers are available to make more wings. 4. More workers making wings means increased wing production.

It is characteristic of _____ goods that they are not used up in the short run. A society can choose to _____ some quality of life now—fewer consumer goods—in order to build up its stock of capital goods. This will lead to a _____ —and more consumer goods—later on.

1. CAPITAL 2. SACRIFICE 3. BETTER QUALITY OF LIFE

Leading up to the Great Recession, a major problem with computer models used by _____ to predict the performance of _____ was that the models were designed to assume that real estate _____ would always_____.

1. MANY BANKS 2. MORTGAGE BACKED SECURITIES 3. PRICES 4. RISE

A production possibilities frontier is a _____ summarizing the different ways a society's _____ could be used _____, assuming those resources _____.

1. MODEL 2. PRODUCTION RESOURCES 3. TO FULL CAPACITY 4. REMAIN FIXED

Place the steps that make up the scientific method in their proper order.

1. Observe an interesting phenomenon. 2. Develop a hypothesis. 3. Construct a model. 4. Design experiments, 5. Collect results. 6. Assess the hypothesis.

There is a _____ correlation between the number of doughnuts Homer eats and his weight. If Homer wants to lose weight, he should eat _____ doughnuts. If Homer graphed this relationship (the number of doughnuts and weight gain) on a scatterplot, an increase on the y axis would lead to _____ on the x axis.

1. POSITIVE 2. FEWER 3. AN INCREASE

Trade-offs between the _____ and the future require weighing the _____ available today against what will be available tomorrow. A good produced for present _____ is a _____ good; a good that will help in the production of other valuable goods for the _____ is a _____ good.

1. PRESENT 2. BENEFITS 3. CONSUMPTION 4. CONSUMER 5. FUTURE 6. CAPITAL

Even though ______ are almost always limited, whereas on the other hand, ______ are practically unlimited. We describe this situation by saying that a condition of______ exists, which forces us to ______.

1. RESOURCES 2. OUR WANTS AND/OR NEEDS 3. SCARCITY 4. MAKE CHOICES

Adam prefers activities and goods in the following descending order: 1. hanging out with friends 2. having milkshakes with his mom 3, playing video games 4. eating fried chicken Adam's mom has several chores she wants him to finish. Place the incentives in order, from most effective to least effective, that will encourage Adam to finish his chores.

1. not letting Adam leave home or have visitors until he finishes his chores 2. promising to go with Adam to get milkshakes when he finishes his chores 3. taking away Adam's video games until he finishes his chores 4. promising Adam a fried chicken dinner after he gets done with his chores

In one week, Jedidiah Schlepp can produce 24 gizmos or 20 whatsits. What is the opportunity cost ratio in gizmos per whatsit? Give the answer to one decimal place.

1.2 gizmos per whatsit

The figure shows an increase in resources that shifts the production possibilities frontier from PPF1 to PPF2. Suppose the economy was and is only producing pizzas. How many more pizzas can the economy produce after the shift to PPF2?

20

Which numbers would be used to calculate Blake Piazza's opportunity cost for producing wings?

24; 72

In one year, Wynn Debbler can make 90 pairs of pants or 30 coats, whereas Peg Michaels can make 100 pairs of pants or 30 coats. They discuss an arrangement in which Peg gives Wynn pants in exchange for coats, so that they both benefit. Which of the following arrangements would be an acceptable trade-off of pants and coats that falls between the opportunity costs of both Wynn and Peg?

ACCEPTABLE TRADE-OFF - 8 coats for 25 pants - 4 coats for 13 pants UNACCEPTABLE TRADE-OFF - 7 coats for 20 pants - 6 coats for 12 pants

Which of the following types of graphs would be appropriate for data about a single variable?

APPROPRIATE - bar graph - pie chart - time series graph NOT APPROPRIATE - scatterplot

What simplifying assumption would explain the straight-line appearance of the production possibilities frontier (PPF) in the figure?

All workers have the same pizza-making skills and the same wing-making skills.

Calculate the slope of the curve between points B and C.

B (50,10) C(70,30) 1

Suppose Canada is currently planning to produce on PPF1 at point A on the graph shown below. Producing at point A now will allow Canada to produce at point B in the future. Now instead, suppose Canada decides to produce more consumer goods and fewer capital goods than is shown at point A. Click on the area of the graph where the likely future PPF will be if Canada chooses to change the current production of capital and consumer goods as indicated.

Between A and B; perfect oval line from "Quantity of Capital Goods Produced, and Quantity of Consumer Goods Produced"

Match the appropriate label to each specific good.

CAPITAL GOODS - cement mixing truck - commercial laser printer CONSUMER GOODS - mountain bike - trip to Disneyland - running shoes

Which of the following are common terms for spending on infrastructure (such as highways), production facilities (such as factories), schools, attending college, or anything else that will increase future production possibilities?

COMMON TERM - human capital - capital goods - investment NOT COMMON TERMS - consumption

In one day, Al's Furniture can make 3 tables or 4 chairs, whereas BIG Furniture Warehouse can make 20 tables or 30 chairs. Match the concept to the corresponding description.

COMPARATIVE ADVANTAGE -Al's can make tables at a lower opportunity cost than BIG. ABSOLUTE ADVANTAGE - BIG can make more tables than Al's. TRADE OFF - For BIG to make more tables, it has to make fewer chairs. GAIN FROM TRADE - BIG and Al's could both benefit if they coordinated their production efforts.

Which of the following is not a characteristic of a good economic model?

Captures the full complexity of a phenomenon

In a society producing hamburgers and french fries, the workers are producing at point A on the production possibilities frontier (PPF). Suppose there is an increase in the technology for deep fryers that impacts only the production of french fries. Click on another point on the PPF that shows a level of production that reflects improvement in deep fryer technology and shows a level of production where the society is actually producing fewer French fries than it was at point A.

D

Dinesh notices that many people with gym memberships are overweight. He concludes that gym memberships make people gain weight. What is the error in Dinesh's confusion as it relates to correlation versus causation?

Dinesh has the causation backward.

Match each term to its correct definition.

ECONOMICS - the study of how individuals and societies allocate their limited resources to satisfy their practically unlimited wants MICROECONOMICS - the study of the individual units that make up the economy - the study of individual cases that illustrate general economic laws MACROECONOMICS - the study of the overall aspects and workings of an economy NONE - the study of dollars and cents

A bar graph is usually the best choice for graphing one variable to show proportions.

FALSE

Juan and Wanda both make pancakes and bacon. If we compare the opportunity costs and possible gains from trade for Juan and Wanda, we can determine the exact exchange ratio at which the parties will agree to trade.

FALSE

How does money make the circular flow model more efficient?

Having a common medium of exchange, like money, eliminates the need to barter.

When a society moves from point A to point B along PPF1, the result is that PPF2 expands as shown. What phenomenon does this represent?

If current production shifts from consumer goods toward more capital goods, future production possibilities are increased.

In economics, the Latin phrase "ceteris paribus" means "other things being equal." How does the assumption of this phrase help economists when building models?

It assumes all variables remain constant except the one of interest.

What were the key factors that made the Wright brothers' wind tunnel a useful tool for wing design?

KEY FACTOR - enabled independent control of each key variable - allowed measurement of wing performance NOT A KEY FACTOR - could be used without prior knowledge of aerodynamics - included an element of unpredictability

What methods may an economist use to test a hypothesis?

METHOD TO TEST A HYPOTHESIS - Gather historical data. - Conduct one or more experiments. - Wait for real-world events to confirm or refute the hypothesis. NOT A METHOD TO TEST A HYPOTHESIS - Formulate an alternative hypothesis. - Frame the hypothesis as a normative statement.

Which country is a good example of a high present rate of investment and a low present rate of consumer goods consumption?

MEXICO

In one month, Mikhail's Furnishings can make 160 carpets or 160 quilts, whereas Dominique's Parlor can make 120 carpets or 200 quilts. Currently, Mikhail's is making 80 carpets and 80 quilts per month whereas Dominique's is making 60 carpets and 100 quilts. If from now on Mikhail's starts making nothing but carpets and Dominique's makes nothing but quilts, and the two shops trade 90 quilts from Dominique's for 70 carpets from Mikhail's every month, what will be each shop's gain from trade? Answer the question by matching gains to shop.

MIKHAIL'S - 10 quilts - 10 carpets DOMINIQUE'S - 10 quilts - 10 carpets

Malika just got hired by Amazon to work in upper management. She currently lives in South Carolina, and has to move to California for the job. Which of the following would be a good economic reason for her to move her personal belongings on her own rather than hiring someone else>

Malika's job starts in one month, so she will have one month without work. Therefore, the opportunity cost of moving herself is low during this month.

Match the appropriate label to the direction (positive or negative) of the relationship of each pair of variables.

NEGATIVE CORRELATION - rainfall and number of visitors at a golf course - seat belt use and car crash fatalities POSITIVE CORRELATION - team t-shirt sales and the winning percentage of the team - ice cream sales and temperature

Identify whether these statements are normative or positive.

NORMATIVE - We need a progressive tax system to improve equality and fairness for taxpayers in a society. - Income inequality should be minimized in a developed society. POSITIVE - Carla will get more exercise at the fair than a movie. - The average person lies four times a day. - If you want to get better at tennis, you have yo practice several hours a day.

Each box below describes a relationship between two variables that has been interpreted incorrectly. Match the appropriate label to each mistake.

OMITTED VARIABLE - People become tired when they wear athletic clothes. - Drinking a lot of water leads to sunburn. REVERSE CAUSATION - People who visit the dentist are more likely to get a cavity - Cars that mechanics work on regularly are more likely to break down.

Drag each formula to the part of the graph where it would be most useful.

ON THE SLOPE LINE slope = change in y/x PROODUCER'S TOTAL area = base x height CONSUMER SURPLUS area = 1/2 x base x height

In A Knight's Tale, three friends are deciding what to do with 15 silver coins they won in a jousting tournament. They can spend their winnings immediately and live the good life for a while, or they can spend the money on training for the next tournament. They ultimately decide to spend most of the winnings on training for the next tournament. What does their decision represent? More than one choice may be correct.

REPRESENTED BY THEIR DECISION - investment - trade off of present for future benefits NOT REPRESENTED BY THEIR DECISION - the only possible decision - a focus on consumption goods over capital goods

A community of woodworkers produces tables and chairs. If five new members join who specialize in chairs, the community will be able to produce both more tables and more chairs because the increase in labor resources has shifted the entire production possibilities frontier (PPF) upward and outward.

TRUE

Correlation does not always indicate direct causation.

TRUE

Natalia notices that if she does not sleep a lot at night, she feels tired the next day. What relationship (if any) exists between hours of sleep and degree of exhaustion?

There is a negative correlation.

Which of the following explanations accurately describes why there are so many more dashboard cameras in Russia than in the United States?

Traffic fatalities are far more prevalent in Russia, and the cameras are a way for drivers to prove when they are not at fault for an accident

Assume that an economy produces only two goods, pizza and wings, and that it is producing on its production possibilities frontier (PPF). If the economy can only produce two goods, which of the following ways would allow the economy to produce even more pizza?

WAY TO INCREASE THE NUMBER OF PIZZAS PRODUCED - improved pizza-making technology - improved wing-making technology - growth in labor force NOT A WAY TO INCREASE THE NUMBER OF PIZZAS PRODUCED - some workers move to a country that produces only pizza - more efficient use of existing production assets

Which of the following items describe ways of classifying incentives according to their different types, from an economist's point of view?

WAYS OF CLASSIFYING INCENTIVES - direct - indirect - positive - negative NOT A WAY OF CLASSIFYING INCENTIVES - irrational - secret

Gwen and Blake are the only producers in an economy with two goods, wings and pizza. What is wrong with the following statement? "Whether Blake should make pizza or wings depends on which good he can make more of."

What matters is not what Blake can make more of but the comparative advantage for each producer.