Econ Chapter 1-7 & 15
A competitive market will:
move towards equilibrium quantity because both producers and consumers act in their own best interest.
How do economists distinguish between models that work and those that don't?
they test their models against real world data
Empiricism
using data to test economic models
How does a natural experiment differ from a randomized one?
A natural experiment uses existing variation, while a randomized experiment generates variation.
How is net present value used to decide whether a project should be undertaken or not?
By comparing the upfront cost of a project to the discounted value of the future benefits from the project.
Which of the following is not an important property of an economic model?
It predicts actual results over half the time.
Which of the following is not true about economic models?
They are not useful, since they do not include all variables.
anecdote
1- Arguments by anecdote should be taken seriously 2- Are appropriate when contradicting a blanket statement
In 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.
1- The ( Signaling argument) implies that a college student who drops out of school one month before graduation should earn much less than a student who graduates. 2- The (Human Capital Argument ) implies that a college student who drops out of school one month before graduation should earn almost the same as a student who graduates.
In valuing future rewards, economists often multiply delayed rewards by a positive factor to account for all of the following except:
Future rewards are worth more than current rewards
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 type of experiment is likely to yield more accurate results?
Randomization, because a natural experiment may not be completely randomized
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 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.
Suppose you come across a study that has discovered a link between reading books and life expectancy: People who read more books live longer. Which of the following correlations might exist between reading books and life expectancy even though there is no direct causal link between them?
Wealthy individuals who can afford to spend more time reading can also afford better medical care
Causation occurs when there is ____________
a logical cause-and-effect relationship.
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
This third principle of economics, supported by the scientific method, is:
empiricism
An argument against evidence-based economics would be:
its is only an approximation
The competitive equilibrium price equates
quantity supplied to quantity demanded
Holding all else constant, if the number of cell phone manufacturers suddenly decreased due to increased regulations, then
supply would shift leftwards, equilibrium price would increase, and equilibrium quantity would decrease.
All of the following statements about means and medians are true, except
the median is more skewed by extreme values.
As long as you receive the same amount, is a sum of money worth the same today and one year later?
No, if there is a positive interest rate the same amount of money is worth more today than receiving it in the future