ECON 202 MIDTERM
Which of the following is not an item studied under microeconomics?
Economic output
How would you test this model?
You should run a natural experiment by analyzing bus ridership and price changes.
John earns $4,800 per month. He spends all of his money on two goods, A and B. The price of good A is $240, and the price of good B is $400. Identify the intercepts of John's budget constraint if good A is plotted on the x-axis and good B is plotted on the y-axis. the slope of john's budget constrain is ___________ Ria has an income of $1,200. She consumes two types of goods, shoes and handbags. Suppose the price of a pair of shoes is $400, and the price of a handbag is $200. What is the opportunity cost of each good?
20 units of good A on the x-axis and 12 units of good b on the y-axis -1.67 the opportunity cost of a pair of shoes is 2 handbags, and the opportunity cost of a handbag is 1/2 pairs of shoes
Consider the following data that show the quantity of coffee produced in Brazil from 2004 to 2012. Year Production (in tons) 2004 2,465,710 2005 2,140,169 2006 2,573,368 2007 2,249,011 2008 2,796,927 2009 2,440,056 2010 2,907,265 2011 2,700,440 2012 3,037,534 This is illustrated in the time series graph on the right. The mean quantity of coffee that Brazil produced from 2009 to 2011 is __________ tons. The 2012 crop has increased over the 2009-2011 mean by ______ percent.
2682587; 13.23
You are considering purchasing a new piece of equipment for your factory. The equipment will cost $3,000 and can be used for three years. If you do purchase it, you will earn $1,100 one year from now, $1,210 two years from now, and $1,331 three years from now. The net present value of this investment if the interest rate is 10 percent is $___________. (Round your response to two decimal places and include a minus sign if necessary.) The net present value of this investment if the interest rate is 9 percent is $____________. (Round your response to two decimal places and include a minus sign if necessary.) The net present value of this investment if the interest rate is 11 percent is $_____________. (Round your response to two decimal places and include a minus sign if necessary.) What is the highest interest rate such that you would be willing to buy this equipment?
300; 270; 330; 11 percent
Suppose your total benefit from eating slices of pizza (value in dollars) is 10x−x2, where x is the number of slices of pizza. Pizza is sold by the slice and costs $2 per slice, and so the total cost of pizza is 2x. Using optimization in levels, what is the optimal amount of pizza for you to eat? Your net benefit is maximized at _________ slices of pizza.
8?
Which of the following does NOT support the concept of an economic agent?
All economic agents are individuals; Their decisions do not have any effect on the economy of a country
Which of the following statements about the principles of economics is false?
An investor selecting and investing in a stock or a combination of stocks that always earns him 15% returns on his investment is an example of optimization.
Suppose the market price of corn is $5.50 per bushel. Which of the following is not one of the three conditions that will need to be satisfied for the corn market to be in equilibrium at this price?
Both the buyers and sellers of corn could benefit by making small changes to their market behaviors.
In which of the following examples is prescriptive economic analysis necessary?
C. Jay chooses to go to Europe rather than China because of the huge discounts
Which of the following would not be considered one of the possible opportunity costs of a recent high school graduate starting their career right away by getting a full−time job. A. Going to Haiti to do missionary work.. B. Spending a year backpacking across Europe. C. Starting college right away. D. None of these would be considered an opportunity cost. E. All of these is a possible opportunity cost.
E. All of these is a possible opportunity cost
What tool would you employ to analyze the relationship between gasoline prices and consumerbehavior?
Economic models.
Professor Adams decides to teach his 10 students how the stock market works. Therefore, he plans to develop a virtual stock market for the class that includes five different shares. Students are given $50 each to invest in any of the five shares. This exercise helps the students understand the overall stock market investing process. Which of the following statements is true for the above case?
It is a model, and its predictions can be checked with empirical evidence.
Suppose you are on a date with an economics major, and you want to impress them by asking good economic questions. Two characteristics of a good economic question are:
It is important to individuals or society; it can be answered
Which of the following statements explain positive economics
It can be rejected or amended depending on the evidence available; The predictions are testable
Which of the following statements is not a correct explanation of empiricism? (Check all that apply)
It has nothing to do with optimization and equilibrium. Your answer is correct.; It cannot be monitored.
This chapter discussed natural and randomized experiments. Which of the following is not a characteristic of a natural experiment?
It is an inferior approach to a randomized method.
Which of the following is not an important property of an economic model?
It predicts actual results over half the time.
Salmon fishing in Alaska is a seasonal business; May through September is the best time to bait salmon and halibut. Toland Fisheries, a small commercial fishery, recorded its highest ever catch last year. They started this year's fishing season with the same number of workers and equipment. With the new season also starting well, Toland has increased hiring substantially. However, the fishery did not make any additional investment in trawlers and other fishing equipment. Other things remaining unchanged, what is likely to happen to the marginal product of each new worker in the short run? In the long run, if Toland Fisheries would like to increase the productivity of its workers, it will need to___________
It will be increasing at a decreasing rate, meaning each additional worker will have a lower marginal product of labor than the previous one hired. increase its amount of capital equipment
The government of a certain country decides that all its citizens should be equally well off. It decides to redistribute money so that each person has a roughly equal share of the total income. How would this policy affect economic activity in the country?
It would be adversely affected since incentives to work or seek profits would be greatly diminished
How does microeconomics differ from macroeconomics?
Microeconomics is the study of how individuals, households, firms, and governments makechoices, while macroeconomics is the study of the economy as a whole.
Which of the following areas are addressed in the study of economics?
Money, Inflation rates, Pollution reduction policies, The cost associated with a decision
Some studies have found that people who owned guns were more likely to be killed with a gun. On this evidence alone, do you think there is conclusive evidence in favor of stricter gun control laws? ________, because it is possible that the studies may be confusing _______ with ________
No; correlation; causation
Suppose a total of 2,500 students are allowed in the engineering programs at all of the colleges in a particular city. From the previous three years' record, it shows that the number of students who enroll in the entrance exam for the engineering program increases if there is an increase in the number of IT recruiters the previous year.This year there is a total of3,200 students who have enrolled to take the entrance exam of which only up to 2,500 of those who passed would get in. Based on either the students' perspective or the college perspective, what combination of economic key concepts does the situation follow?
Optimization, equilibrium, and empiricism
The statement that the United States saw the unemployment rate peak at 10 percent in 2009 is a ______ statement since it describes what people________.
Positive; actually do
Mason wants to buy a new outdoor grill so he can barbecue. Mason has two options, a charcoal grill or a gas grill. By using ____________ he chooses to buy a gas grill. Mason knows that Jack would borrow his grill without asking; therefore, decides to use _________ in order to prevent his neighbor Jack from becoming a free-rider.
Prescriptive economic analysis; equilibrium analysis
Which of the following is NOT one of the three key principles of economics and which three ARE
Resource allocation; Optimization, Equilibrium, Empiricism
Suppose you have just been hired as a management consultant by a major oil company to help it optimally price gasoline at its service stations. In your first presentation to management, how would you describe your planned methodology to perform the analysis?
Scientific method
Suppose there are three activities in which you could participate: 1. The opportunity cost of the first activity is missing 3 hours of work. 2. The opportunity cost of the second activity is missing a concert that you have tickets to. 3. The opportunity cost of the third activity is missing the afternoon nap that you take every day. Given this information, for which of these activities would you be able to compare opportunity costs?
You can compare all the activities after you translate all the missed activities into dollar amounts.
Give an example of a pair of variables that have negative correlation.
The number of winter coats sold and the temperature outside.
Let's say that you are trying to decide what to do on Friday at 11 a.m. You rank your possible options from the one you value the most to the one that you value the least in the followingorder: going to class, sleeping in late, going to work early, getting lunch, going to the gym toexercise, and watching television. If you decide to go to class, then what do we know about the opportunity cost of yourdecision?
The opportunity cost would be sleeping in late, since it was your next-best option
Which of the following are true about a model?
The outcomes of the model are used in comparison with the actual data.; It is not always the exact replica of the data.
Which of the following statements regarding economic questions is not correct?
The questions must have implication on individuals' choices and their budget.
In which of the following examples is the cause and the effect hard to untangle?
The relation between dense forests and heavy rains.
Which of the following is NOT true about economic models?
They are not useful, since they do not include all variables.
Land in Sonoma, California, can be used to either grow grapes for pinot noir wine or to grow Gravenstein apples. Given this information, what is the relationship between pinot noir wine and Gravenstein apples? If the demand for pinot noir suddenly shifts sharply to the right, we would expect to see __________ in the demand for land in Sonoma, which would __________ the equilibrium price of land. Since both pinot noir wine and Gravenstein apples use the same land in Sonoma, California, a sharp increase in demand for pinot noir wine will result in a _________ price for Gravenstein apples and a _________ equilibrium quantity.
They share a common input an increase; increase higher; lower
Which of the following cases can create a free-rider problem?
Use of public parks by locals. Your answer is correct; The street light on the road.
Which of the following questions is not an example of an issue a researcher could study to contribute to the welfare of society?
What combination of colors can one use to paint his bedroom wall?
Debbie, a member of your team, advocates finding random people and then breaking them up into two groups. Group A would be shown an increase in the price of gas before taking the survey. Group B would be told there was no increase in the price of gas before taking the survey. Troy, another member of yourteam, recommends finding two groups of people already sorted by whether or not they have recently noticed an increase in the price of gas. Debbie's method is a _______ and Troy's method is a ___________________ Group A is the ____________ and Group B is the ________________
controlled experiment; natural experiment treatment group; control group
Comparing a set of feasible alternatives and picking the best one is an optimization process called________ When deciding whether to install visible countdown timers for pedestrians at crosswalks, which of the following would be considered in the cost-benefit analysis? A. The value of the lives lost by drivers who watch the countdown timers and try to make it through a light. B. The cost in terms of dollars of installing these new timers all over the city. C. The higher maintenance bill associated with fixing these more complex signals when they break down. D. The value of the pedestrians' lives saved by having the timers to assist in crossing the street.
cost-benefit analysis All of them
Assume every semester after finals you fly back to your hometown using a $300 ticket you buy online. You have 40,000 frequent flier miles. You could exchange your miles for around-trip ticket to Bermuda over spring break. If you choose to exchange your airline miles for a free trip to Bermuda over spring break, then your trip _________.
cost $300, since your next-best alternative for your miles was to use them to fly home at the end of the semester.
The table above shows that for a given budget if you increase the amount of one type of good that youbuy, you must ________________the amount of the other good that you buy. Therefore, a budget constraint implies that the consumer faces _____________ .
decrease; trade-offs
Suppose you have been hired as a management consultant by a major oil company to help it optimally price gasoline at its service stations. Your client would like your team to perform a study on customers' gasoline purchasing habits when they notice price increases. You suggest that the team ____________
design ad execute and experiment
Assume that a perfectly competitive market inlong-run equilibrium with firms earning zero profit experiences a sudden decrease in demand for its good. As a result, in the long run, the ____________ in marginal revenue will cause firms to __________ the market.
drop, exit
If two investments have the same expected return, people who are risk neutral will prefer the investment with ____________.
either less risk or more risk
Suppose you have been hired as a management consultant by a major oil company to help it optimally price gasoline at its service stations. You have assigned your staff member, Troy, to divide a group of survey participants into a treatment group and a control group. The intent is tell Group A that gas prices have increased, and group B will be told that gas prices have not changed. Participant members will then be surveyed about their purchasing habits. When you come back from lunch you notice how Troy has set up the groups: Group A # of people 75 # of men 2 # of women 73 Group B # of people 75 # of men 70 # of women 5 You tell troy that _____________ because the groups are _______________
he has done a bad job; not randomly constructed
The concept of diminishing marginal benefits means that _______ the concept of diminishing marginal benefits ____________ for good that you like a lot suppose you have a flashlight that takes three batteries to power it. If you buy the bitterest one at a time, for which purchase will demising benefits set it?
he more of a good that you consume, the lower is your overall benefit from that good holds true when you buy the fourth battery
An argument against evidence-based economics would be:
it is only an approximation, often based on averages.
Now suppose Harley has $480 to spend rather than $240. How will this change affect Harley's budget line? Given the information about Harley's income and the prices for concerts and movies, we are unable to determine where on the budget line Harley would choose to consume because_________
it shifts outward in a parallel fashion harley's tastes regarding movies and concerts are unknown to us
You should collect a _____ amount of data to create _______ to test the ______ indicated by the economic model
large; empirical evidence; hypoteses
Economists conduct research on the "effects of global warming on the economy". This means they study the effects of global warming on the national income, international trade etc. It is considered a ____________ study.
macroeconomic
The statement that the United States has an unemployment rate that is too high is a _______ statement since it describes what people _________.
normative; ought to do.
The ethical implications of a hotly debated government policy would be be considered a __________
normative question, since it deals with a subjective issue based on personal preferences.
Suppose conditions arise in the sugar market that would lead to a competitive equilibrium price that is below 18.75 cents per pound.In this situation, sugar mills will ________
not sell to private buyers at this lower price and will sell to the government instead, which will drive up the domestic price until it reaches 18.75 cents per pound
The goal of optimization for an individual is to maximize
overall well-being
a non-market price imposition is a in the figure on the right, the imposition of price PC results in if the imposed price PC were removed, market forces would rectify the mismatch between quantity demanded and quantity supplied by pushing the price This price adjustment would eliminate the mismatch by __________ market participants to change their behavior
price control shortage upward incentivizing
What happens to the equilibrium price and quantity demanded after the supply curve of solar energy panels shifts? Suppose the quantity demanded of gold has gone up in a country and therefore, the demand curve shifts rightward. On the other hand, due to some restrictions imposed by the government on gold imports, the supply curve of gold in that country shifts leftward. In this case, which of the following statements always holds true?
price decreases and the quantity demanded increases the price of gold increases
Which of the following statements, confirmed by empirical research, would you be most likely to trust?
sales circulars with coupons generate increased sales
Which of the following is not one of the four major factors that shifts the supply curve when it changes? When one of the four major factors changes, causing an increase in supply, the supply curve shifts
sellers' beliefs about the future rightward
In equilibrium, everyone ___________.
simultaneously optimizes, so that nobody benefits by changing his or her own behavior.
A budget constraint represents ________
the bundles of goods or activities that a consumer can choose given her limited budget.
During the process of optimization economists believe that people are considering_________.
the feasibility of a choice, given the information available at the time
Expected value is ___________ Expected value is calculated by ____________.
the maximum possible payout from an event multiplying the probability of each possible outcome by the dollars associated with each outcome
All of the following statements about means and medians are true, except
the median is more skewed by extreme values.
one reason free-riders exist could be that
the private benefit exceeds the private cost
All of the following would fall under the study of microeconomics EXCEPT
the stock market's response to an interest rate increase
The concept of opportunity cost is a measure of _______
the value of the best alternative use of a resource
Empiricism is a principle in economics that _______
uses data to test economic models.
The opportunity cost of an activity is a measure of _______ when you do that activity.
what is given up
Are all efficient outcomes also equitable? Explain.
yes, if an outcome is effective, by definition, it maximizes social surpass and consequently must be equitable.
A simple economic model predicts that a fall in the price of bus tickets means that more people will take the bus. However, you observe that some people still do not take the bus even after the price of a ticket fell. Is the model incorrect?
No, because it predicts the outcome of increased bus ridership on average.