ECO 230. Quiz: Chapter 1

1. Is concerned with WHAT IS 2.is concerned with WHAT OUGHT TO BE. 3. Economics is about _________, which measures the costs and benefits of different course of action.

1. Positive analysis 2. Normative analysis 3. Positive analysis

1. occurs when a good or service is produced at the lowest possible cost. 2. occurs when production is in accordance with consumer preferences

1. Productive Efficiency 2. Allocative Efficiency

is the study of the choices people make to attain their​ goals, given their scarce resources.

Economics

Economics is a social science because

1. It is based on studying the actions of individuals 2. It applies the scientific method to the study of the interactions among individuals 3. It considers human behavior --particularly decision-making behavior

Any model is based on making assumptions because

1. Models have to be simplified to be useful. 2. We cannot analyze an economic issue unless we reduce its complexity

[Related to the Making the​ Connection] Jay Bhattacharya and M. Kate Bundorf of Stanford University have found evidence that people who are obese and work for firms that have​ employer-provided health insurance receive lower wages than people working at those firms who are not obese. At firms that do not provide health​ insurance, obese workers do not receive lower wages than workers who are not obese. ​Source: Jay Bhattacharya and M. Kate​ Bundorf, "The Incidence of the Health Care Costs of​ Obesity," Journal of Health Economics​, Vol.​ 28, No.​ 3, May​ 2009, pp.​ 649-58. Firms that provide workers with health insurance may pay a lower wage to obese workers than to workers who are not obese because the formerformer tend to be less healthy less healthy and consequently

1. experience higher rates of absenteeism and early retirement. 2. more costly to insure and therefore employ due to their higher claim submission rate.. 3. lessless productive at work.

Alzuria is a developing economy. With trade and​ liberalization, the country has now seen substantial development in the private sector.​ However, government intervention in certain markets remains strong. The banking sector has a good mix of both private banks and those called​ "government undertakings," or public sector banks. Consumers are becoming increasingly aware of the difference in the quality of service provided by the private and the public sector banks. Competition among private banks has ensured that their employees adhere to high standards of customer service. Their public sector​ counterparts, however, do not appear to be making an effort to improve their customer service. Which of the​ following, if​ true, would explain the rationale behind continued patronage despite the bad service provided by public sector banks in​ Alzuria?

Deposits with public sector banks are insured unlike those with private banks.

Alzuria is a developing economy. With trade and​ liberalization, the country has now seen substantial development in the private sector.​ However, government intervention in certain markets remains strong. The banking sector has a good mix of both private banks and those called​ "government undertakings," or public sector banks. Consumers are becoming increasingly aware of the difference in the quality of service provided by the private and the public sector banks. Competition among private banks has ensured that their employees adhere to high standards of customer service. Their public sector​ counterparts, however, do not appear to be making an effort to improve their customer service. Which of the​ following, if​ true, would explain the careless attitude of employees in public sector​ banks?

Employees in the public sector have greater job security than those in the private sector.

In the United​ States, who receives the goods and services produced depends largely on

How income is distributed

Harry Fletcher is a market analyst at an automobile firm. He formed a hypothesis that an increase in advertising would increase demand for the​ firm's cars. The ad campaign ran for a period of six months.​ However, the results were not as positive as Harry had anticipated. Which of the​ following, if​ true, can explain this​ outcome?

Interest rates increased substantially during this period.

Julia​ Paul, an analyst at a research​ institute, lives very close to her office and walks to work every day.​ Meanwhile, her​ colleague, Amanda​ Jones, dislikes the fact that it takes her almost an hour to commute to work every day. As a​ result, when Julia decides to move to a suburb farther​ away, Amanda is very surprised. Which of the​ following, if​ true, would explain​ Julia's behavior?

Julia saves more in rent than she spends on commuting to work

Best​ Goods, one of the leading department store​ chains, offers goods at low prices. It recently opened many new stores across the country. After successfully setting up stores in most major​ cities, Best Goods faced substantial opposition in the city of​ Joberg, where lobbyists for smaller general stores​ (local businesses) opposed its entry. These lobbyists argued that Best Goods would put many local stores out of business and would also increase income inequality and unemployment in the city. Which of the following can most reasonably be concluded from the information given in the​ question?

Lobbyists believe that those who lose jobs​ won't find alternative opportunities in the short term.

Which of the following is not a step economists follow when developing an economic​ model?

Make value judgments to be proven or disproven.

Examining the costs and benefits of approving the sale of a new prescription drug is most likely an issue in

Microeconomics

Regarding the question of whether health insurance provides people with an incentive to become​ obese, the finding of Bhattacharya and Bundorf seems

Relevant since the link between insurance and obesity was established while holding many other variables constant.

A large corporation that runs nursing homes estimates that changes to Medicare will result in lower payments by Medicare to nursing homes for​ short-term stays by patients that require therapy or care upon leaving hospitals. Assume the corporation is considering expanding the number of​ "beds" it offers at its nursing homes. Given the changes to​ Medicare, if the marginal benefit of offering an additional bed is ​$2,000 and the marginal cost is ​$6,000 per​ bed, then the corporation ________________offer additional beds.

Should not

Late in the​ semester, a friend tells​ you, ​"I was going to drop my psychology course so I could concentrate on my other​ courses, but I had already put so much time into the course I decided not to drop​ it." Is your​ friend's reasoning correct or​ incorrect? Your​ friend's reasoning is

Your​ friend's reasoning is incorrect. Your friend is failing to think at the margin. It​ doesn't matter how much time has already been spent studying psychology. What matters is the marginal benefit to be received from studying psychology relative to the marginal​ cost, where cost is measured as the opportunity cost of lower grades in other subjects. If the course is​ required, that may raise the marginal benefit.

To develop a model that will answer economic questions, economists typically:

first make simplifying​ assumptions, then formulate a​ hypothesis, test the​ hypothesis, and finally revise the model if necessary.

Microeconomics is the study of

how households and firms make​ choices, how they interact in​ markets, and how the government attempts to influence their choices.

Japan has a market economy. As​ such, Japan​'s economy​ (relative to centrally planned​ economies) tends to result in

productive efficiency and allocative efficiency but not necessarily equity.

Opportunity cost is

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