Econ 202 Problem Set 2
Scenario: Maria has to choose between driving and taking a train to destination A. Travelling by train will cost her $400 and will take 4 hours. Driving to destination A takes 6 hours and the required amount of gasoline costs $250. Her opportunity cost of time is $15 per hour. Refer to the scenario above. If Maria borrows her parents' car and pays for only the gasoline, what is her total cost of driving to destination A?
$340
Scenario: Maria has to choose between driving and taking a train to destination A. Travelling by train will cost her $400 and will take 4 hours. Driving to destination A takes 6 hours and the required amount of gasoline costs $250. Her opportunity cost of time is $15 per hour. Refer to the scenario above. What is the total cost involved if Maria chooses to travel by train?
$460
Scenario: Maria has to choose between driving and taking a train to destination A. Travelling by train will cost her $400 and will take 4 hours. Driving to destination A takes 6 hours and the required amount of gasoline costs $250. Her opportunity cost of time is $15 per hour. Refer to the scenario above. If Maria's opportunity cost of time increases to $80 per hour, the cost involved in taking the train is:
$720
Scenario: Maria has to choose between driving and taking a train to destination A. Travelling by train will cost her $400 and will take 4 hours. Driving to destination A takes 6 hours and the required amount of gasoline costs $250. Her opportunity cost of time is $15 per hour. Refer to the scenario above. If Maria's opportunity cost of time increases to $80 per hour, the cost of driving to destination A is:
$730
- The three economic questions that every society must answer are -Centrally planned economies allocate resources based on decisions by __________________________ , while market economies answer these questions through decisions made by __________________________________
- What goods will be produced, how will they be produced, and who will receive the goods? -Govt; households and firms
Which of the following best describes scarcity? Scarcity is central to the study of economics because it implies that
-Unlimited wants exceed the limited resources available. -every choice involves an opportunity cost.
Every society faces trade-offs because we live in a world of scarcity. Suppose a student-athlete has the opportunity to earn $200 comma 000200,000 next year playing for a minor league baseball team, $500 comma 000500,000 next year playing for a European professional football team, or $0 returning to college for another year. The opportunity cost of the student-athlete returning to college next year is $
500,000
Which of the following is most likely to be an example of causation?
A firm producing CFLs installs new machinery. The per-day production of CFLs increases.
Several owners of McDonald's restaurants, however, point out that offering breakfast 24 hours a day presents two logistical problems: (1) Burgers and other meats need to be cooked at a higher temperature than eggs, so it would be difficult for employees to set the grill at the right temperature for both foods; and (2) scrambled eggs require employees to continually stir, while hamburgers don't require this attention. In addition, some customers might buy the cheaper breakfast than the more expensive lunch or dinner meals. A. From an economics perspective, to determine whether to serve breakfast all day, McDonald's should B. Would McDonald's decision have to be all or nothinglong dash—either serve breakfast only up to 10:30 A.M. or serve breakfast all day?
A. compare the marginal revenue from serving breakfast all day with the marginal cost of serving breakfast all day. B. No. McDonald's could evaluate serving items from the breakfast menu that could be cooked in better coordination with the dinner menu for a period after 10:30 A.M.
Which of the following statements is true about data?
Consistency of models can be checked using data.
Which of the following statements identifies a difference between correlation and causation?
Correlation implies a mutual relationship between two things, whereas causation occurs when one thing directly affects another.
Consider the following statement: "The problem with economics is that it assumes that consumers and firms always make the correct decisions. But we know that everyone makes mistakes." What is the most correct response to this statement?
Economics assumes that consumers and firms are rational, not that they always make the right decisions.
In a paper written by Bentley College economists Patricia M. Flynn and Michael A. Quinn, the authors state: "We find evidence that Economics LOADING... is a good choice of major for those aspiring to become a CEO [chief executive officer]. When adjusting for size of the pool of graduates, those with undergraduate degrees in Economics are shown to have had a greater likelihood of becoming an S&P 500 CEO than any other major." A list of famous economics majors published by Marietta College includes business leaders Warren Buffet, Donald Trump, Ted Turner, and Sam Walton, as well as former presidents George H.W. Bush, Gerald Ford, and Ronald Reagan. Why might studying economics be particularly good preparation for being the top manager of a corporation or a leader in government?
Economics teaches us how to look at the tradeoffs involved in every decision.
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.
Utility refers to how much consumers utilize a product or service.
False
Teachers often wish that students came to class prepared having read the upcoming material. A teacher could design the grading system to motivate students to come to class prepared by ________________________ the grade weight assigned to being prepared.
Increasing
Scenario: Maria has to choose between driving and taking a train to destination A. Travelling by train will cost her $400 and will take 4 hours. Driving to destination A takes 6 hours and the required amount of gasoline costs $250. Her opportunity cost of time is $15 per hour. Refer to the scenario above. If the opportunity cost of time increases to $80 per hour, which of the following statements is true?
Maria should choose to travel by train as it saves her $10.
Which of the following statements is true?
Normative statements depend on personal preferences.
Which of the following statements is true?
Rational economic agents maximize more than just monetary income.
Which of the following claims is most likely to suffer from reverse causality?
Relatively wealthy people tend to be relatively healthy
Soo Jin shares a oneminus−bedroom apartment with her classmate. Her share of the rent is $700 per month. She is considering moving to a studio apartment which she will not have to share with anyone. The studio apartment rents for $950 per month. Recently, you ran into Soo Jin on campus and she tells you that she has moved into the studio apartment. Soo Jin is as rational as any other person. As an economics student, you rightly conclude that
Soo Jin figures that the additional benefit of having her own place (as opposed to sharing) is at least $250.
Microsoft charges a price of $599 for a copy of Windows 7. Is this pricing decision rational?
When we assume the managers at Microsoft have used all available information and have weighed all known benefits and costs, we are assuming rationality.
Causation occurs when:
a change in one variable is the reason for the change in another variable.
Indicate which of the following statements represent positive analysis LOADING... and which represent normative analysis: a. A 50-cent-per-pack tax on cigarettes will reduce smoking by teenagers by 12 percent. This represents..... b. The federal government should spend more on AIDS research. This represents.... c. Rising paper prices will increase textbook prices. This represents....... d. The price of coffee at Starbucks is too high. This represents.....
a. positive analysis b. normative analysis c. positive analysis d. normative analysis
The grading system plays an important role in student learning. In their book Effective Grading: A Tool for Learning and Assessment in College, Barbara Walvoord and Virginia Anderson state that: "grading infuses everything that happens in the classroom." They also argue that grading "needs to be acknowledged and managed from the first moment that an instructor begins planning a class." The grading system used by a teacher can affect the incentives of students to learn the course material by
altering the payoffs to achieving success on the various components of the course.
Trinh quits his $80,000 minus−aminus−year job to become a fullminus−time volunteer at a museum. What is the opportunity cost of his decision?
at least $80,000
If teachers put too littlelittle weight in the grading scale on a certain part of the course, like readings outside the textbook, students might respond by ______________ that part that part of the course.
de-emphasizing
An omitted variable is a variable that:
has been left out, and if included, would explain why the variables considered in a study are correlated.
Consider an organization that exists to help the poor. The members of the organization are discussing alternative methods of aiding the poor, when a proponent of one particular method asserts that: "If only one poor person is helped with this method, then all our time and money would have been worth it." If you were a member of the organization, what reply best represents clear economic thinking? This attitude
ignores the fact that the cost of helping that one person has an opportunity cost of what those funds could have been used for to help other people.
Consider an organization that exists to help the poor. The members of the organization are discussing alternative methods of aiding the poor, when a proponent of one particular method asserts that: "If only one poor person is helped with this method, then all our time and money would have been worth it." If you were a member of the organization, what reply best represents clear economic thinking? This attitude
ignores the fact that the cost of helping that one person has an opportunity cost of what those funds could have been used for to help other people.
________ occurs when the direction of cause and effect is mixed up in a study.
reverse causality
One of the basic facts of life is that people must make choices as they try to attain their goals. This unavoidable fact comes from a reality an economist calls
scarcity
What is the economic definition of utility? Utility is
the enjoyment or satisfaction people receive from consuming goods and services.
Opportunity cost is
the highest valued alternative that must be give up to engage in an activity.
Economists assume that people are rational in the sense that
they use all available information as they take actions intended to achieve their goals.
Scenario: Maria has to choose between driving and taking a train to destination A. Travelling by train will cost her $400 and will take 4 hours. Driving to destination A takes 6 hours and the required amount of gasoline costs $250. Her opportunity cost of time is $15 per hour. Refer to the scenario above. Maria should choose to:
drive, as it will save her $120
