Macroeconomics Canvas HW 0
You are working a job earning $15 per hour. By an amazing stroke of luck, you win $20 million by playing the lottery. Which of the following is most likely to occur? (To be clear, I strongly recommend that you not play the play the lottery).
A. You work more hours at your job. B. The number of hours you work stays the same. C. You work fewer hours at your job. D. Your employer cuts your wage because you do not need the money as badly now. C. You work fewer hours at your job. EXPLANATION: You have more money, and therefore less incentive to work a minimum wage job for as long as you did before.
José is an illegal immigrant from Guatemala. Emma is a well-paid web designer who hires José to do some remodeling on her house. She offers José $9,000, but she would have been willing to pay him $15,000 (because that's how much she values the remodeling). José accepts, but he would have been willing to do the work for $7,000 (because that is how much he would earn doing work on a different house). What are the net gains to José and Emma that they get as a result of trading? You don't need to type a dollar sign with your answer; just enter a number.
8,000 EXPLANATION: Emma's gain is 6,000. She was willing to pay him 15,000, but he took the offer for 9,000, so she saves 6,000 in the trade. Jose gains 2,000 because she offered him 9,000, but he would've done the job for 7,000. 6,000+2,000=8,000.
Josephine teaches economics, and makes about $110,000 per year doing so. If she couldn't teach economics, she would be doing economic consulting for a major bank for $150,000 per year. If she couldn't work as an economic consultant, she would go back to school and study history. If she couldn't do that, she would stay at home and take care of the kids (her husband currently does this, but could go back to work if she couldn't find a job she liked). Which of the following is Josephine's opportunity cost of teaching economics?
A. $110,000 B. Doing economic consulting. C. Going back to school and studying history. D. Staying home and taking care of the kids. B. Doing economic consulting. EXPLANATION: This is the best thing she gave up, or her number 2 option.
I have limited spare time, and I like to spend a lot of it reading books and listening to podcasts (particularly history podcasts). Sadly, I cannot do both at the same time. The graph below represents the number of books and podcast episodes that I could consume. The line is like a Production Possibility Frontier, though it would be more accurate to call it a Consumption Possibility Frontier. Which of the following statements are correct? You may assume that I don't want to let any of my "media consumption time" go to waste--that is, I will always want to consume as much as I can.
A. I could listen to 12 podcasts and read 1 book each week. B. I would be as happy as possible if I read 1 book and listened to 2 podcast episodes each week. C. If I were to be assigned an extra class (which means a lot of extra work for me), I would now be able to consume 9 podcasts and 2 books each week. D. I could listen to 7 podcasts and read 1 book each week. D. I could listen to 7 podcasts and read 1 book each week. EXPLANATION: This point lies on the line, which indicates efficiency and what is possible to produce.
Which of the following are examples of people responding to incentives according to their rational self-interest? (There may be more than one correct answer.) The wholesale price of strawberries goes from $5 per pound to $100 per pound due to a blight that kills many strawberry plants. Publix, a popular grocery store chain, responds to this price change by tripling their purchases of strawberries. Mike is offered $50 to wash a car. In response, he climbs a flagpole, then jumps off while singing "O Canada". When the price of water is zero, consumers use a large amount of water. Anna has been playing a lot of DOTA2 in her spare time, and has become so good at it that she has been offered $70,000 a year to play for a professional team. She takes the job, dropping out of college. Aidan, tired of being made fun of because his parents gave him a fashionable name that very quickly became dated, has his name legally changed. He pays $40 in legal fees.
When the price of water is zero, consumers use a large amount of water. EXPLANATION: Water costs nothing. Why would you not consume a large quantity of water? Anna has been playing a lot of DOTA2 in her spare time, and has become so good at it that she has been offered $70,000 a year to play for a professional team. She takes the job, dropping out of college. EXPLANATION: Anna does not need college to pursue this opportunity. Paying for college is costly, and this is her better alternative. Aidan, tired of being made fun of because his parents gave him a fashionable name that very quickly became dated, has his name legally changed. He pays $40 in legal fees. EXPLANATION: The value of saving himself for social embarassment is worth the $40 it would take to get his name changed to him.
