micro ch. 1

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The definition of economics states that it is the study of how​ _________. (a) money influences the economy in the short run and the long run. (b) the government determines​ policies, businesses set​ prices, and consumers choose how much to buy. (c) agents choose to allocate scarce resources and the impact of those choices on society. (d) businesses make decisions and how those decisions impact other​ firms, the​ government, and consumers.

(c) agents choose to allocate scarce resources and the impact of those choices on society.

For a market to be in​ equilibrium, three conditions must hold. what are those

1. amount produced by seller = the amount purchased by buyers 2. cost of making the product must be less than the final price it sells for 3. buyers must place value on uses of the product that are greater than cost of buying the product

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 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 minus time jobstarting their career right away by getting a full−time job

All of these is a possible opportunity cost.

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.

The three principles of economics include​ optimization, equilibrium, and empiricism.

Empiricism describes a situation where economists use data to analyze what is happening in the world Optimization describes a situation where people weigh costs and benefits when making a decision Empiricism describes a situation where no one would benefit from changing his or her behavior

The three principles of economics include​ optimization, equilibrium, and empiricism.

Empiricism describes a situation where economists use data to analyze what is happening in the world Optimization describes a situation where people weigh costs and benefits when making a decision Empiricism describes a situation where 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.

How does microeconomics differ from​ macroeconomics?

Microeconomics is the study of how​ individuals, households,​ firms, and governments make​ choices, while macroeconomics is the study of the economy as a whole.

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.

​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.

The statement that the United States has a lower unemployment rate than Spain is a ___ statement since it describes what people _____

Positive, Actually do

The ___ implies that a college student who drops out of school one month before graduation should earn much less than a student who graduates.

Signaling argument

What is meant by randomization in the context of an economic​ experiment?

Subjects are assigned by​ chance, rather than by​ choice, to a group.

They test their models against​ real-world data.

The larger the sample size the better.

​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

How do economists distinguish between models that work and those that​ don't?

They test their models against​ real-world data.

Which of the following is more susceptible to the​ free-rider problem: government funded symphonies or public roads?

Use of public roads is more susceptible since even those who don't pay taxes still benefit, while government funded symphonies can charge for administration, so everyone who goes pays their share

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

What is meant by comparative​ statics? Explain with an example.

a change in outcome

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.

Microeconomics studies​ _________, while macroeconomics studies​ _________.

a small piece of the overall​ economy; the economy as a whole.

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​ pedestrians' lives saved by having the timers to assist in crossing the street. b) The higher maintenance bill associated with fixing these more complex signals when they break down. c) The cost in terms of dollars of installing these new timers all over the city. d) The value of the lives lost by drivers who watch the countdown timers and try to make it through a light.

a-d

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.

Which of the following is subject to the​ free-rider problem? a) public libraries b) neighborhood watch c) national secuirty d) all of the above

all

In which of the following areas will taking an economics course help benefit you throughout your​ life? a) It will help you analyze and predict human behavior in a variety of situations. b) It will give you the logic behind using​ cost-benefit analysis when evaluating decisions. c) It will instill the concept that what activity is given up by a decision plays an important role when making choices.

all of the above

A surge in cocoa prices is ____ and a pest attack on the cocoa crop is

an effect, the cause

lower infant mortality is ____ and an improvement in nutrition is a ___

an effect, the cause

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

The concept of opportunity cost is a measure of​ _________.

the value of the best alternative use of a resource.

Policy decisions made by the government are analyzed by​ _________.

both microeconomics and macroeconomics.

Economists mostly use optimization in​ differences, as opposed to optimization in​ levels, because​ ____________.

comparing different features of alternatives is simple

Which of the following is not an example of​ causation?

driving without car insurance will lead to an accident

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.

human capital argument

Which of the following is not an item studied under macroeconomics?

individual preferences

As the text​ explains, it can sometimes be very difficult to sort out the direction of causality. Causation occurs when there is​ ____________.

logical cause and effect relationship

A policy such as passing economic stimulus to spur the economy would be studied under _____, since it deals with ________

macroeconomics, the economy as a whole

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.

The ethical implications of a hotly debated government policy would best be considered a​ _________. (A) normative​ question, since it deals with a subjective issue based on personal preferences. (b) positive​ question, since it deals with a subjective issue based on personal preferences. (c) positive​ question, since it deals with an objective issue based on factual evidence. (D) normative​ question, since it deals with an objective issue based on factual evidence.

normative​ question, since it deals with a subjective issue based on personal preferences.

The goal of optimization for an individual is to maximize

overall well-being

Free riding occurs when ____are out of sync with _____

people's private benefits, the public interest

Demonstrate causation or correlation with the following​ examples

police officers, lower, causation economic growth, higher, causation correlation

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 it's predictions, empirical data

Optimization is the process that describes​ __________.

the choices that people make

During the process of optimization economists believe that people are considering​ _________.

the feasibility of a​ choice, given the information available at the time.

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, must decrease your purchases of the other item

Empiricism is a principle in economics that​ _________.

uses data to test economic models.

Which of the following is not an example of​ causation

washing your car will lead to raining that day

The opportunity cost of an activity is a measure of _____when you do that activity.

what is given up

Comparing a set of feasible alternatives and picking the best one is an optimization process called​ _________.

​cost-benefit analysis.


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