Macro test 1 lp3
If people expectpeople expect the price of SUVsthe price of SUVs to decrease in the futureto decrease in the future, then the demand for the Toyota Rav4 SUV would __________.
decrease (shift left)
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 and execute an experiment.
The concept of diminishing marginal benefits means that __________
each additional unit consumed is worth less to you than the previous one.
Economics is all about making choices. The reason we have to choose one thing over another is:
economic resources are scarce.
Market demand is derived by __________.
fixing the price and adding up the quantities that each buyer demands.
1 hour= chemistry 2 hours=1 hour on each 3 hours= 2 on chem and 1 on biology
go down from 0 hours to 1 hour and see how much they change
The concept of diminishing marginal benefits ________ for goods you like a lot
holds true
If sparkling wine producers expect the price of wine to decrease in the future, then the supply curve for sparkling wine would __________. If an increase in the immigration of unskilled labor leads to a fall in the wages wine minus grape pickers, then the supply curve for sparkling wine would __________
increase (shift right) increase (shift right)
If opportunity cost were to suddenly increase, total cost would
increase and net benefit would decrease
As a firm produces more of a good, the cost of producing each additional unit ________. This implies that the marginal cost of producing a good ____________ as you make more of that good.
increases, increases
An argument against evidence-based economics would be:
it is only an approximation, often based on averages.
In a perfectly competitive market, if one seller chooses to charge a price for its good that is slightly higher than the market price, then it will _________.
lose all or almost all of its customers.
Argument by anecdote ________ be taken seriously. Anecdotes _________ appropriate when contradicting a blanket statement.
should not, are
n general people with more education earn higher salaries. Economists have offered two explanations of this relationship. The human capital argument says that high schools and colleges teach people valuable skills, and employers are willing to pay higher salaries to attract people with those skills. The signaling argument says that college graduates earn more because a college degree is a signal to employers that a job applicant is diligent, intelligent, and persevering. The _____ implies that a college student who drops out of school one month before graduation should earn much less than a student who graduates. The ________ implies that a college student who drops out of school one month before graduation should earn almost the same as a student who graduates.
signaling argument human capital argument
In equilibrium, everyone ___________.
simultaneously optimizes, so that nobody benefits by changing his or her own behavior.
He is still unconvinced about the reliability of using economic models to make business decisions. You can answer this concern by sharing that you will confirm the accuracy of the model by _______ with ________
testing its prediction, empirical data
There is a proverb "anything worth doing is worth doing well." Do you think an economist would agree with this proverb?
No, because the marginal cost of extra effort may be greater than the marginal benefit.
Does the shape of the market demand curve differ from the shape of an individual demand curve?
No, they both tend to be downward-sloping curves.
Does the principle of optimization imply that people always make the best choices?
Yes, it is a good approximation for the decisions people make.
Which of the following is not a characteristic of a market?
Markets are physical locations where trading occurs
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?
No Because their opportunity cost of commuting must be lower
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? How would you test this model?
No, because it predicts the outcome of increased bus ridership on average. You should run a natural experiment by analyzing bus ridership and price changes.
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. During a meeting with your client, the CEO asks if your economic models include all factors that impact gasoline prices. What is your response to his question?
No, the model is a simplified representation of reality.
Are all markets perfectly competitive?
No, there are other market types where firms have considerable power to control the price.
John is attempting to decide on a movie. He determines that the new Batman movie provides him with $5 more of a net benefit than the new Spiderman movie.
Optimization in differences, since he is calculating the change in net benefits between alternatives.
To say that economists use the scientific method means that they are using ___________
an ongoing process to develop models of the world and then test and evaluate those models.
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
as well as, net
Policy decisions made by the government are analyzed by _________
both microeconomics and macroeconomics.
Since optimization is used to analyze people's choices and help them improve the outcomes of their choices, its
both normative and positive.
In a perfectly competitive market, sellers _________ and buyers _________
cannot charge more than the market price; cannot pay less than the market price.
Economists mostly use optimization in differences, as opposed to optimization in levels, because ____________.
comparing different features of alternatives is intuitiveintuitive.
Economists mostly use optimization in differences, as opposed to optimization in levels, because ____________.
comparing different features of alternatives is simple
Comparing a set of feasible alternatives and picking the best one is an optimization process called _________.
cost-benefit analysis.
If people began topeople began to believe that SUV were causing global warming, then the demand for the Toyota Rav4 SUV would __________.
decrease (shift left)
Which of the following would be considered a scarce resource for producers?
All the above
Which of the following is subject to the free-rider problem?
All the options A. A neighborhood watch. B. National security. C. Public libraries.
When one of the five major factors changes, causing an increase in demand, the demand curve shifts _______
rightward
When one of the four major factors changes, causing an increase in supply, the supply curve shifts ________
rightward
The concept of opportunity cost is a measure of _________
the value of the best alternative use of a resource.
If Jay's Fruit Stand is able to charge considerably higher prices than other fruit stands with the same produce, it is likely that
there are no fruit stands in close proximity to Jay's.
People who live farther away do not go to this new gym as much.People who live farther away do not go to this new gym as much.You compare fitness between these two groups.You compare fitness between these two groups. Using the concept of a natural experiment, which of the following statements is true about the scenario?
this is a good natural experiment
Optimization in levels examines ___________, while optimization in differences analyzes ____________.
total net benefits of alternatives; the change in net benefits
Your budget constraint for entertainment illustrates the concept of ________ , since as you increase your purchases of one item, you ____________
trade-offs,you must decrease your purchases of the other item
You are considering renting a city apartment with 1,000 square feet for $1600 per month. The monthly rent on a larger, 1,500-square-foot city apartment is $2100. The marginal cost of renting an apartment with 500 additional square feet is $___ per square foot per month.
$1 Subtract the monthly fee (2100-1600) then divide by difference of sq feet (500)
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 $160 If the additional revenue (the marginal revenue) during the last hour is $200, the profit earned during the last hour of operation will be $___ If the additional revenue during the last hour is $70, the profit earned during the last hour of operation will be $___
$40 -$90 0
You have been invited to play a 4-hour round of golf that has a value to you of $7070. The total price to play the round of golf is $2525. The net benefit of the round of golf is __ Now assume that you have a job that pays you $66 per hour. Would you be optimizing to accept the invitation to play golf?
$45 you should play if job (4 hours) if more expensive that $45 or whatever it is
In which of the following areas will taking an economics course help benefit you throughout your life?
( ALL THE ABOVE) It will give you the logic behind using cost-benefit analysis when evaluating decisions. B. It will help you analyze and predict human behavior in a variety of situations. C. It will instill the concept that what activity is given up by a decision plays an important role when making choices.
You are a professor of economics at a university. You've been offered the position of serving as department head, which comes with an annual salary that is $5,500 higher than your current salary. However, the position will require you to work 200 additional hours per year. Suppose the next best use of your time is spending it with your family, which has value of $30 per hour. What is the difference in the net benefit from becoming the department head? The change in Net benefit is $______ To optimize you _________ become a department head
-$500 Should not (multiply 200 x 30)
Identify the cause and effect in the following examples: Lower infant mortality is ______ and an improvement in nutrition is ______ A surge in cocoa prices is ______ and a pest attack on the cocoa crop is
1- An effect, the cause 2- an effect, the cause
For a market to be in equilibrium, three conditions must hold. Fill in the blanks below to complete these conditions. The amount produced by sellers must be __________the amount purchased by buyers. The costs of making a product must be ________the final price at which the product sells. Buyers must place a value on the uses of the product that is _________ the cost of buying the product.
1- Equal to 2- Less than 3- Greater than
A company mines 300 comma 000300,000 tons of coal per year in a rural county. The coal is worth $6969 per ton. The average price for a 2,000-square-foot house with three bedrooms more than 20 km away from the mining site in this county is $250 comma 000250,000. The average price for a similar, 2,000-square-foot house with three bedrooms within 4 km of the mine is 88 percent lower. Using comparative statics, what is the effect of mining on home prices in this county? Mining changes the price of a 2,000-square-foot home (with three bedrooms) by $______ (Round your response to two decimal places and use a negative sign if necessary.)
20,000 Decrease = Original Number - New Number then... % Decrease = Decrease ÷ Original Number × 100
Suppose 1,057 people bought popsicles on a hot summer day. If the average number of popsicles that each person bought is 4, the number of popsicles sold that day is
4228
What is meant by holding all else equal and how is this concept used when discussing movements along the demand curve
All variables that can affect the demand for the good are held constant.
What is the difference between marginal values and average values?
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.
What is meant by comparative statics? Explain with an example.
A change in an outcome, such as consumptionconsumption, that results from a change in a factor, such as the pricethe price.
When deciding whether to install visible countdown timers for pedestrians at crosswalks, which of the following would be considered in the cost-benefit analysis? (Check all that apply.)
All of these The cost in terms of dollars of installing these new timers all over the city. The higher maintenance bill associated with fixing these more complex signals when they break down. The value of the lives lost by drivers who watch the countdown timers and try to make it through a light. The value of the pedestrians' lives saved by having the timers to assist in crossing the street.
Which of the following would not be considered one of the possible opportunity costs of a recent high school graduate starting college right awaystarting college right away.
All of these is a possible opportunity cost.
Suppose that you allocate $20 each week for your entertainment budget. This money is spent on two items: either renting movies for $1 each at Redbox or downloading songs from iTunes at $1 each. Given this information, which of the following would represent your budget constraint for entertainment?
Amount spent on iTunes + Amount spent at Redbox = $20.
Which of the following is not an example of causation?
Driving without car insurance will lead to getting into an accident
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 ________ .
Below, The Price Mechanism
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 your team, recommends finding two groups of people already sorted by whether or not they have recently noticed an increase in the price of gas. Debbies method is a __________ and Troys method is a _______. Group a is the _______ and group B is the _________
Controlled experiment, natural experiment , treatment group, control group
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?
Do a cost-benefit analysis to compare the alternatives.
Your client becomes critical of your "sloppy" technique of using a model that does not include all factors. What is the most appropriate reply to this criticism?
Economic models are meant to be approximations that predict what happens in most circumstances.
Empiricism describes a situation where________ Optimzation describes a situation where __________ equilibrium
Empiricism-economists use data to analyze what is happening in the world Optimzation- people weigh costs and benefits when making a decision equilibrium-no one would benefit from changing his or her behavior
Which of the following is true regarding the concept of causation?
It describes how one event can bring about change in another.
A policy such as reducing government spending to control the national debtreducing government spending to control the national debt would be studied under ___________ , since it deals with ____________ .
Macro, the economy as a whole
Nikki decided to take the first available parking space as she entered the student lot. She felt that the first available space had a $5 premium compared with all other possible spaces since she did not want to risk being late for her exam.
Optimization in differences, since she is calculating the change in net benefits between alternatives.
Marcia finds that the net benefit of flying from Chicago to Honolulu on a non-stop United Airlines flight is $400, and the net benefit for the same trip flying on a one-stop American Airlines flight is $200.
Optimization in levels, since she is comparing the net benefits between alternatives
Reagan determined that the net benefit of taking the combination of two lecture courses and an online lecture course was $100. The same three courses online gave her a net benefit of $80, and all three in a lecture-based format gave her a net benefit of $90.
Optimization in levels, since she is comparing the net benefits between alternatives.
Economics, anthropology, psychology, sociology, and political science all study human behavior. Economics differs from these other social sciences because it also addresses these three key concepts: _________.
Optimization, equilibrium, and empiricism.
Free riding occurs when _________ are out of sync with _______
Peoples private benefits, the public interest
Demonstrate causation or correlation with the following examples: More _____ and ____ crime rates is likely to be __________ More ______ and ______ employment levels is likely to be _________ The length of women's skirts and stock market performance is likely to be
Police officers, lower, causation Economic growth, higher, causation correlation
The statement that the United States has an average annual inflation rate of 2.1 percenthas an average annual inflation rate of 2.1 percent is a _____statement since it describes what people _____
Positive, Actually do
Which of the following is not one of the five major factors that shifts the demand curve when it changes?
Prices of inputs used to produce the good
Suppose you thought income inequality in the United States had increased over time. Based on your answers to this question, would you expect the ratio of the mean income in the United States to the median income has risen or fallen? Explain.
Risen, because means change more with extreme values.
Which of the following examples do you provide as a normative question? Which of the following do you provide as a positive question?
Should welfare be repealed How much is the national debt
What is meant by randomization in the context of an economic experiment?
Subjects are assigned by chance, rather than by choice, to a group.
How would an increase in supply affect the equilibrium price in a market?
The equilibrium price decreases.
How would the equilibrium price in a market be affected if there were a large increase in supply and a smalls increase in demanddemand?
The equilibrium price decreases.
How would the equilibrium price in a market be affected if there were a large decrease in supply and a small decrease in demand?
The equilibrium price increases.
How does the sample size affect the validity of an empirical argument?
The larger the sample size the better.
How is the mean calculated from a series of observations?
The mean is the sum values of the observations divided by the number of observations.
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 following order: going to class, sleeping in late, going to work early, getting lunch, going to the gym to exercise, and watching television. If you decide to go to class, then what do we know about the opportunity cost of your decision?
The opportunity cost would be sleeping in late, since it was your next-best option.
Which of the following is not one of the four major factors that shifts the supply curve when it changes?
The price of the good itself
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?
The total cost of commuting from any given distance to work will reduce because the indirect cost of the commute will fall.
How do economists distinguish between models that work and those that don't?
They test their models against real-world data.
Other people have health plans that require a copayment comma so they go to the doctor less frequently.Other people have health plans that require a copayment, so they go to the doctor less frequently.You compare life expectancy between these two groups.You compare life expectancy between these two groups. Using the concept of a natural experiment, which of the following statements is true about the scenario?
This is a decent natural experiment.
You compare the number of cavities for these people relative to those who do not go to the dentist at all.You compare the number of cavities for these people relative to those who do not go to the dentist at all.nothing Using the concept of a natural experiment, which of the following statements is true about the scenario?
This is not a natural experiment
Which of the following is more susceptible to the free-rider problem: state parks or public roads? street lights street lights or fishing
Use of public roads is more susceptible since even those who don't pay taxes still benefit, while state parks can charge for admission, so that everyone who goes pays their share. Use of street lightsstreet lights is more susceptible since even those who don't pay taxes still benefit, while state parksstate parks can charge for admissionadmission, so that everyone who goes pays their share. Use of street lightsstreet lights is more susceptible since even those who don't pay taxes still benefit, while fishing in public lakesfishing in public lakes can charge for a fishing licensea fishing license, so that everyone who goes pays their share.
The opportunity cost of an activity is a measure of ______ when you do that activity
What is given up
Suppose that you are on a date with an economics major, and you want to impress them by talking about economics. Your date challenges you to state your knowledge of positive and normative questions. You say that positive questions ask ______ and normative questions ask ________
What is or what will be, What ought be
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?
When you buy the fourth battery.
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.
As the text explains, it can sometimes be very difficult to sort out the direction of causality. Causation occurs when there is ____________.
a logical cause-and-effect relationship.
All of the following would cause a shift in the supply curve for orange juice, except
a new medical discovery about the benefits of citrus.
Microeconomics studies _________, while macroeconomics studies _________
a small piece of the overall economy; the economy as a whole.
The definition of economics states that it is the study of how _________.
agents choose to allocate scarce resources and the impact of those choices on society.
Economists study _______ ; therefore, the unifying feature of economics is a focus on _______
all human behavior, Choice
When a cost-benefit analysis is done:
all relevant options must be considered.
How will this result impact people as they decide how close to live to the city where they work? They will be ________________________________________
more willing to locate farther from the city
The ethical implications of a hotly debated government policy would best be considered a _________.
normative question, since it deals with a subjective issue based on personal preferences.
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
only the price of a good
The goal of optimization for an individual is to maximize
overall well being
Free riding occurs because _________.
people sometimes pursue their own private interests and don't contribute voluntarily to the public interest.
The Law of Demand states that as the price of a good increases, ceteris paribus, the _______________ decreases. This can be shown graphically with _____________ demand curve or numerically in a table using a ____________ The relationship that exists between these two variables can be described as ______
quantity demanded, a downward-sloping, demand schedule negatively related
The Law of Supply states that as the price of a good increases, ceteris paribus, the _________ of that good increases. This can be shown graphically with _________ supply curve or numerically in a table using a _________ The relationship that exists between these two variables can be described as _____________
quantity supplied, an upward-sloping, supply schedule positively related
Which of the following would be considered an opportunity cost of spending time to go to the movies with your friends?
the amount of money you would have made had you worked instead
Optimization is the process that describes __________.
the choices that people make.
You and your friend, Jim, have just moved out of your dorm and into a new apartment. Both of you decide that you need to get a couch. Jim thinks you should get a new one from a furniture store nearby. You feel that, given your budget, it is best to buy a used one. Your other options are to buy one online or get a couch custom-made at the same furniture store. How would you arrive at an optimal solution here? Assume that your opportunity cost of time is $5 per hour. You and Jim would need to consider __________________ Now suppose that you have a summer job that pays you $15 per hour. How would your analysis change? With a $15-per-hour summer job, ___________ would increase
the direct costs and the indirect opportunity cost of your time required to shop the opportunity cost of your time
During the process of optimization economists believe that people are considering _________
the feasibility of a choice, given the information available at the time
All of the following statements about means and medians are true, except
the median is more skewed by extreme values.
The supply curve represents ___________.
the minimum price sellers are willing to accept to sell an extra unit of a good.
