HW #1 Econ 202 questions (exam 1)
When economists test their theories using evidence-based analysis, they are most likely using __________. A. empiricism through the use of data. B. optimization through observation. C. equity analysis through the use of models. D. opportunity-cost analysis.
A. empiricism through the use of data.
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 $326. If the additional revenue (the marginal revenue) during the last hour is $376, the profit earned during the last hour of operation will be $ ____ If the additional revenue during the last hour is $236236, the profit earned during the last hour of operation will be $ negative $___ . If the additional revenue (the marginal revenue) from staying open until 10.00 p.m. is $326, the profit earned during the last hour of operation will be $____.
$50 $-90 $0
How does microeconomics differ from macroeconomics? A. Microeconomics is the study of how individuals, households, firms, and governments make choices, while macroeconomics 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, households, firms, and governments make choices, while microeconomics is the study of the economy as a whole. D. Macroeconomics is the study of how individuals and firms make choices, while microeconomics is the study of all state and local government policies.
A. Microeconomics is the study of how individuals, households, firms, and governments make choices, while macroeconomics is the study of the economy as a whole.
Which of the following areas are addressed in the study of economics? (Check all that apply.) A. The costs associated with a decision B. Inflation rates C. Financial markets D. Pollution reduction policies
A. The costs associated with a decision B. Inflation rates C. Financial markets D. Pollution reduction policies
How would the equilibrium price in a market be affected if there were a largelarge decrease in supplysupply and a smallsmall decrease in demanddemand? A. The equilibrium price increases. B. The equilibrium price would remain the same. C. The equilibrium price decreases D. More information is needed. It may increase, decrease, or remain the same.
A. The equilibrium price increases.
How do economists distinguish between models that work and those that don't? A. They test their models against real-world data. B. They program their models into computers to test via simulation. C. They publish their model results in academic journals. D. They have their models reviewed by other economists.
A. They test their models against real-world data.
Statement 2 deals with ____________. A. equilibrium, because your friend presumes everyone is behaving optimally. B. optimization, because you will need this information to identify your best feasible option. C. empiricism, because your friend's prediction can be tested using data. D. equilibrium, because it is a prediction rather than an observation.
A. equilibrium, because your friend presumes everyone is behaving optimally.
Market demand is derived by __________. A. fixing the price and adding up the quantities that each buyer demands. B. fixing the quantity and adding up the prices that each buyer pays. C.adding up both the prices each buyer pays and the quantities that each buyer demands. D.dividing each buyer's demand by the total number of consumers in the market.
A. fixing the price and adding up the quantities that each buyer demands.
If sparkling wine producers expect nbspsparkling wine producers expect the price of wine to decrease in the futurethe price of wine to decrease in the future, then the supply curve for sparkling wine would __________. A. increase left parenthesis shift right right parenthesisincrease (shift right). B. remain unchanged. C. decrease left parenthesis shift left right parenthesisdecrease (shift left). If the number of sellers ofthe number of sellers of sparkling wine decreases significantlysparkling wine decreases significantly, then the supply curve for sparkling wine would __________. A. decrease left parenthesis shift left right parenthesisdecrease (shift left). B. increase left parenthesis shift right right parenthesisincrease (shift right). C. remain unchanged.
A. increase left parenthesis shift right right parenthesisincrease (shift right). A. decrease left parenthesis shift left right parenthesisdecrease (shift left).
Optimization in levels examines ___________, while optimization in differences analyzes ____________. A. total net benefits of alternatives; the change in net benefits. B. total benefits of alternatives; total costs of alternatives. C. marginal benefits of alternatives; the change in marginal benefits. D. total net benefits of feasible alternatives; total net benefits of infeasible alternatives. E. total benefits of alternatives; net benefits of alternatives.
A. total net benefits of alternatives; the change in net benefits.
Suppose your New Year resolution is to get back in shape. You are considering various ways of doing this: you can sign up for a gym membership, walk to work, take the stairs instead of the elevator, or watch your diet. How would you evaluate these options and choose an optimal one? A. It makes the most sense to do the action that costs the least amount of money. B. Do a cost-benefit analysis to compare the alternatives. C. You should do the activity that gives you the greatest personal benefit, regardless of the cost. D. You should choose an activity randomly to avoid regretting your decision later. 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.
B. Do a cost-benefit analysis to compare the alternatives. As well as, net
Which of the following is not an item studied under macroeconomics? A. The inflation rate B. Firm profits C. The unemployment rate D. The money supply
B. Firm profits
What is the difference between marginal values and average values? A. 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. B. 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. C.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. 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.
B. 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.
How would an increasean increase in supplysupply affect the equilibrium price in a market? A. The equilibrium price would remain the same. B. The equilibrium price decrease. C. The equilibrium priceincreases D. More information is needed. It may increase, decrease, or remain the same.
B. The equilibrium price decrease.
A budget constraint represents _________. A. any actions taken by government officials to limit the amount of government spending. B. the bundles of goods or activities that a consumer can choose given her limited budget. C. the maximum amount of spending the federal government is allowed to do by law. D. the total amount of income a family earns from all sources.
B. the bundles of goods or activities that a consumer can choose given her limited budget.
Optimization is the process that describes __________. A. the production of resources. B. the choices that businessesbusinesses make. C. the budgeting process for businesses. D. how to obtain relevant data. E. how to maximize wealthwealth.
B. the choices that businessesbusinesses make.
When graphing the new total market supply and demand curves, these curves will be _________ the individual countries' demand curves, since these curves are derived by _________. A.directly above; summing prices for a given quantity. B. to the right of; summing quantities at a given price. C. above and to the right of; summing both prices and quantities simultaneously.
B. to the right of; summing quantities at a given price.
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
Does the shape of the market demand curve differ from the shape of an individual demand curve? A. Yes, individual demand curves tend to be upward-sloping, while market demand curves are horizontal. B. No, they both tend to be upward-sloping curves. C. No, they both tend to be downward-sloping curves. D. Yes, individual demand curves tend to be downward-sloping, while market demand curves are upward-sloping.
C. No, they both tend to be downward-sloping curves.
How would the equilibrium price in a market be affected if there were a largelarge increase in supplysupply and a smallsmall increase in demanddemand? A. The equilibrium price increases B. The equilibrium price would remain the same. C. The equilibrium price decreases D. More information is needed. It may increase, decrease, or remain the same.
C. The equilibrium price decreases
All of the following would cause a shift in the supply curve for orange juice, except A. new machinery that speeds up the picking process. B.tax credits for citrus farmers. C. a new medical discovery about the benefits of citrus. D. a freeze over all of Florida for three nights in a row.
C. a new medical discovery about the benefits of citrus.
Statement 3 deals with ____________. A.empiricism, because it illustrates people optimizing using cost-benefit analysis. B. optimization, because it predicts how people's behavior will change. C. empiricism, because it describes behavior using real-world data. D. empiricism, because it evaluates whether people maximize their well-being.
C. empiricism, because it describes behavior using real-world data.
The Law of Supply states that, in most cases, the quantity supplied of a good ___________ when the price of the good rises. This means we would expect a typical supply curve to be___________. A. falls; upward-sloping. B. rises; downward-sloping. C. rises; upward-sloping. D. falls; downward-sloping.
C. rises; upward-sloping.
Does the principle of optimization imply that people always make the best choices? A. No, because people do not have full information. B. Yes, because people make perfect calculations. C. Yes, it is a good approximation for the decisions people make. D. No, because people are irrational. E. It cannot be tested without more data.
C. Yes, it is a good approximation for the decisions people make.
Which of the following would be considered a scarce resource for producers? A. Machinery B. Low minus -- skill labor C. Land D. All of the above. 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______________. .
D. All of the above - Below - The Price Mechanism
You are thinking about buying a house. You find one you like that costs $300 comma $300,000. You learn that your bank will give you a mortgage for $240 comma $240,000 and that you would have to use all of your savings to make the down payment of $60 comma $60,000. You calculate that the mortgage payments, property taxes, insurance, maintenance, and utilities would total $1 comma $1,440 per month. 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 your monthly income, since you must know the source of the money when trying to calculate costs. 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 the opportunity cost of the money used to make the down payment. This money could be earning interest in a bank. Given the information above, if the interest rate on your savings account was 2 percent a year, then the yearly opportunity cost of using this money for a down payment would be equal to ______.
D. It should include the opportunity cost of the money used to make the down payment. This money could be earning interest in a bank. $1,200
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. Yes, because their direct commuting costs must be higher. B. No, because people face the same living costs in and away from the city. C. Yes, because people face direct and indirect commuting costs. D. No, because their opportunity cost of commuting must be lower. E. Yes, because people have different preferences.
D. No, because their opportunity cost of commuting must be lower.
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.
for goods that you like a lot. Suppose you have a flashlight that takes three batteries to power it. If you buy the batteries one at a time, for which purchase will diminishing benefits set in? A. When you buy the first battery. B. When you buy the second battery. C. When you buy the third battery. D. When you buy the fourth battery.
D. When you buy the fourth battery.
The concept of diminishing marginal benefits means that __________. A. the more of a good that you consume, the lower is your overall benefit from that good. B. as you consume more of a good, your willingness to pay for that good increases faster than the benefit you receive. C. each additional unit consumed is worth more to you than the previous one, but the additional benefit grows at a diminishing rate. D. each additional unit consumed is worth less to you than the previous one. The concept of diminishing marginal benefits ____ .
D. each additional unit consumed is worth less to you than the previous one. Holds True
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 shoes jeans $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
Question 34 - Graph
Graph
Question 37 graph
Graph look at
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 studying for each quiz. For instance, the second row implies that one hour of studying for Chemistry will generate an expected grade of 7272 on Chemistry, whereas one hour of studying for Biology will generate an expected grade of 7878 on Biology. Hr, C, B 0. 65. 72 1 72. 78 2. 77. 82 3. 80. 84 Your goal is to maximize your average grade on the two quizzes. Use the idea of optimization in differences 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.)
If you had 2 hours, then you should study _1__hour(s) for chemistry and_1__ hour(s) for biology. (Enter your responses as integers.) If you had 3 hours, then you should study __2_ hour(s) for chemistry and __1_ hour(s) for biology. (Enter your responses as integers.)
Question 39 graph - Excess supply graph
Look at graph
Question 30
Look at graphs
Michael has an economics final examan economics final exam tomorrow morning and he needs to decide how many hours to studyhow many hours to study. The benefits column shows how many more points he expects to earn because of increased knowledgeincreased 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.) Hr, Total benefit, Marginal Benefit, total cost 1 10 10 0 2 14 4 3 3 18 4 7 4 21 3 12 5 23 2 18 Using the marginal benefits and marginal costs analysis, if Michael studiesstudies for two hourstwo hours, the outcome will be ____________ because -----------. .
Non - optimal, Marginal benefit will be greater then margainal cost
The lowest price that a seller is willing to receive to sell an extra unit of a good is called _______, while the highest price that a buyer is willing to pay for an extra unit of a good is called _______. For a trade to take place, a buyer's willingness to pay must be ____________. A. higher than the seller's willingness to accept. B. equal to the seller's willingness to accept. C. lower than the seller's willingness to accept. D. A and B only. E. All of the above.
Willingness to accept, Willingness yo pay D. A and B only.
American Richard H. Thaler Wins Nobel Prize in Economics Source: Isidore, Chris "American Richard H. Thaler Wins Nobel Prize in Economics" CNN.com, posted 10/16/2017. Carefully watch the video, and then answer the following questions. A basic premise of economic decision-making is that people behave in _____manner. A rational decision-maker will make decisions that: A. minimize their costs. B. maximize their personal utility. C. make them better off in the short-run. D. None of the above. A fictional measure of satisfaction often used in economics is a: A. BTU. B. util. C. kilowatt. D. None of the above.
a irrational, B. maximize their personal utility. B. util.
Graph look at question 40
graph
When only the demand for housing increases, the equilibrium price and quantity in the market will ____. . Assume you don't know by how much each curve shifts. When both curves shift, the equilibrium price of housing will ______ and the equilibrium quantity of housing will ____.
increase, be indeterminate, increase
Question 28 graph
look at graph
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 Faster then Last person in the Five - person line
What is meant by holding all else equal and how is this concept used when discussing movements along the demand curve? A. everything else in the economy is held constant, including the price of the good. B. All variables that can affect the demand for the good are held constant. C.All variables in the model are set to equal values. D. All of the above. We make the assumption of holding all else equal when considering demand curves since we want to focus on the changes in the quantity demanded that result from changes in _____. .
B. All variables that can affect the demand for the good are held constant. only the price of a good
There is a proverb "anything worth doing is worth doing well." Do you think an economist would agree with this proverb? A. No, because the total net benefit of extra effort is negativenegative by definition. B. No, because the marginal cost of extra effort may be greater than the marginal benefit. C. No, because doing something well has no next best alternatives with which to compare. D. Yes, because the marginal benefitbenefit of extra effort is typically decreasingdecreasing as effort increases. E. Yes, because doing something to the best of your ability is optimizing behavior.
B. No, because the marginal cost of extra effort may be greater than the marginal benefit.
Advances in wireless communication technology reduce the non-financial costs of long commutes: People who ride trains can get work done, and people who drive cars have more entertainment options. Given this information, which of the following will be an effect on the geographic area of cities? A. The total cost of commuting from any given distance to work will reduce because the direct cost of the train ticket will fall. B. The total cost of commuting from any given distance to work will reduce because the indirect cost of the commute will fall. C. The total cost of commuting from any given distance to work will increase because the direct cost of the train ticket will rise. D. The total cost of commuting from any given distance to work will increase because the indirect cost of the commute will rise. How will this result impact people as they decide how close to live to the city where they work? They will be __________
B. The total cost of commuting from any given distance to work will reduce because the indirect cost of the commute will fall. more willing to locate farther from the city.
Consider the following three statements: Statement 1: You can either stand during a college football game or you can sit. You believe that you will see the game very well if you stand and others sit but that you will not be able to see at all if you sit and others stand. You therefore decide to stand. Statement 2: Your friend tells you that he expects many people to stand at football games. Statement 3: An economist studies photos of many college football games and estimates that 75 percent of all fans stand and 25 percent sit. Which of these statements deals with optimization, which deals with equilibrium, and which deals with empiricism? Explain. Statement 1 deals with ____________. A. empiricism, because you believe you know what the other fans will do. B. optimization, because you are choosing your best feasible option. C. equilibrium, because other fans may change their behavior. D. optimization, because other fans are maximizing their well-being.
B. optimization, because you are choosing your best feasible option.
What is meant by comparative statics? Explain with an example. A. The effect of the best feasible choice, such as consumptionconsumption, on its marginal cost. B. Equilibria across multiple markets, such as labor markets, financial markets, and service markets. C. Changes in net benefits when a person switches from one alternative, such as consumptionconsumption, to another, such as no consumptionconsumption. D. A change in an outcome, such as consumptionconsumption, that results from a change in a factor, such as the pricethe price.
D. A change in an outcome, such as consumptionconsumption, that results from a change in a factor, such as the pricethe price.
Which of the following is not an important property of an economic model? A. It is based on a theoretical construct. B. It predicts what would happen on average. C. It makes predictions that can be tested with data. D. It predicts actual results over half the time.
D. It predicts actual results over half the time.
The costs of many prescription drug prescription drug 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 disease (morbidity). What does this imply about the cost-benefit analysis of prescription drug prescription drug regulations? A. Since these are government regulations, a cost-benefit analysis is not needed because the government acts independent of such analysis. B. Since the benefits of these regulations are not in dollar terms, a cost-benefit analysis cannot be done. C. Since the costs are incurred by the government and the benefits are enjoyed by the consumer, such an analysis is meaningless. D. We must first translate the mortality and morbidity data into dollars in order to compare it to the costs of the regulations.
D. We must first translate the mortality and morbidity data into dollars in order to compare it to the costs of the regulations.
To say that economists use the scientific method means that they are using ___________. A. a process to develop models that are intended to exactly represent all the details of a system. B. a method to develop recommendations for policy makers to run economies. C. a method to determine the best course of action for fiscal and monetary policy. D. an ongoing process to develop models of the world and then test and evaluate those models.
D. an ongoing process to develop models of the world and then test and evaluate those models.
Suppose your firm has a marginal revenue given by the equation MR equals 10 minus Upper QMR = 10 − Q, where Q is the quantity produced and sold. This means that the seventh unit of output brings in 10 minus 7 equals $ 310 − 7 = $3 of additional revenue. The marginal cost for your firm is given by the equation MC equals 2 plus Upper QMC = 2 + Q. This means that the seventh unit of output increases the marginal cost by 2 plus 7 equals $ 92 + 7 = $9. If the firm produces the seventh unit of output, marginal cost will be ________ marginal revenue. In which of the following cases, will the profit of the firm be maximized? A. When the average cost of producing an additional unit is less than the marginal revenue from that unit. B. When the average cost of producing an additional unit equals the marginal revenue from that unit. C.When the marginal cost of producing an additional unit is less than the marginal revenue from that unit. D. When the marginal cost of producing an additional unit equals the marginal revenue from that unit. The profit-maximizing level of output is ___units.
Greater then D. When the marginal cost of producing an additional unit equals the marginal revenue from that unit. 4 units
The table given shows the demand for books. Price , Quantity of books demanded 0. 900 10 600 20. 300 30 0 1.) Using the point drawing tool, plot each point in the table above in the adjacent graph. 2.) Using the line drawing tool, draw the line that connects all the four points in the graph. Label this line as 'Demand'. Carefully follow the instructions above, and only draw the required objects. Assume the law of demand is true. Also assume the information provided by the demand schedule is correct. However, make no other assumptions. Given this information, if the price of a book is $15, the quantity demanded of books will be _____. the quantity of books demanded when the price is $5 per book.
Greater then Graph look at question 29
Aaron has an option to choose from four forms of employment: full-time, part-time, contractor or self-employed. The opportunity cost of working hours for Aaron is $10/hour. Aaron receives travel allowances depending on his employment choice, which reduces his travel cost accordingly. full time 8 $5 part time 6 $10 contractor 5 $10 self employment 4. $35 - Using the Multipoint curve drawing tool, draw the total cost curve and label it. - Carefully follow the instructions above and only draw the required object. Using marginal analysis, the optimal choice for Aaron is to work _______. . This is because the move has a marginal total cost of negative $____/day, so it is cost cutting making the move worth it. (Use a negative sign if you are entering a negative number.)
on a contractual basis, $10, Look at graph (Question 25)
