Microeconomics 2106 Homework #1
In a congressional debate about agricultural price supports, senators, members of congress, and other experts made the following four statements. Which of these is a normative statement? A. "Price supports are important because America should preserve the small family farm." B. "Without price supports, the price of wheat and corn will fall by over twenty percent." C. "The decline in commodity prices caused by the removal of price supports will result in fewer, larger farms." D. "The decline in commodity prices caused by the removal of price supports will reduce the number of tractors sold in the United States."
A. "Price supports are important because America should preserve the small family farm."
The marginal cost of a vacation in Jamaica is $3,500. The marginal benefit to Colby of a vacation in Jamaica is $3,000. A. According to the rule of rational choice, Colby should choose not to vacation in Jamaica at this time. B. According to the rule of rational choice, Colby will experience a net gain of $500 if he vacations in Jamaica. C. According to the rule of rational choice, Colby should borrow $500 and vacation in Jamaica. D. According to the rule of rational choice, Colby will experience a net gain of $3,000 if he vacations in Jamaica. Save
A. According to the rule of rational choice, Colby should choose not to vacation in Jamaica at this time.
From an economists' perspective, which of the following observations is not true? A. Self-interest is purely monetary in nature. B. Self-interest can include benevolence. C. Self-interest is a good predictor of human behavior in most situations. D. Self-interest is not the same as selfishness.
A. Self-interest is purely monetary in nature.
Which of the following is not a resource? A. cash B. entrepreneurship C. land D. labor
A. cash
The problem of scarcity: A. exists because resources are limited relative to wants. B. exists because resources are unlimited relative to wants. C. can be eliminated through appropriate government intervention into markets. D. does not exist in communist societies.
A. exists because resources are limited relative to wants.
Positive incentives: A. increase benefits or reduce costs. B. decrease behaviors. C. decrease benefits or increase costs. D. create additional taxes on behaviors.
A. increase benefits or reduce costs.
"When one basketball team spends a large sum of money acquiring better players, it is better off. If all teams do the same thing, all of them are better off." These statements demonstrate: A. the fallacy of composition. B. confusing association with causation. C. a misunderstanding of the direction of causality. D. the ceteris paribus condition. Save
A. the fallacy of composition.
In the discussion of correlation and causation, correlation means: A. two sets of phenomena may be related, but one does not necessarily cause the other. B. two sets of phenomena are not related and one may in fact cause the other. C. that when two phenomena are repeatedly observed together, one must cause the other. D. that if a groundhog sees his shadow in February, this phenomena causes there to be six more weeks of bad weather.
A. two sets of phenomena may be related, but one does not necessarily cause the other.
Exhibit 2-1 Possibility A Economics History I 94 76 II 87 84 III 77 91 Refer to Exhibit 2-1. A student has only a few hours to prepare for two different exams this afternoon. The above table shows alternative possible exam scores with three alternative uses of the student's time. The opportunity cost of scoring a 94 on the economics exam rather than a 77 is: A. 8 points on the history exam. B. 15 points on the history exam. C. 76 points on the history exam. D. 91 points on the history exam.
B. 15 points on the history exam.
The marginal benefit to Lasca of weekend vacations during the year at a local resort are given by the following schedule: Number of Weekend Vacations Marginal Benefit 1 $600 2 $550 3 $475 4 $325 5 $250 6 $180 If the marginal cost of a weekend vacation at the local resort is constant and equal to $350, how many weekends at the local resort is Lasca likely to enjoy? A. 2 B. 3 C. 4 D. 5
B. 3
A hypothesis is: A. a normative economic statement. B. a testable proposition. C. a statement that cannot be evaluated using real-world data. D. a model with no connection to the real world.
B. a testable proposition.
The term "ceteris paribus" means that: A. everything is variable. B. all variables except those specified are constant. C. no one knows which variables will change and which will remain constant. D. what is true for the individual is not necessarily true for the whole.
B. all variables except those specified are constant.
A good economic theory: A. includes every detail that affects the economic behavior of interest. B. relies on simplifying assumptions in order to explain economic behavior. C. does not rely on simplifying assumptions. B. is impossible to achieve because of the difficulty of conducting controlled experiments.
B. relies on simplifying assumptions in order to explain economic behavior.
According to the rule of rational choice, an individual will undertake an activity as long as: A. the expected marginal benefits are less than the expected marginal costs. B. the expected marginal benefits are greater than the expected marginal costs. C. total costs exceed total benefits. D. total benefits exceed total costs.
B. the expected marginal benefits are greater than the expected marginal costs.
"If I didn't have class tonight, I would save the $4 campus parking fee and spend four hours at work where I earn $10 per hour." The opportunity cost of attending class this evening is: A. $4. B. $40. C. $44. D. $0.
C. $44.
An example of physical capital is: A. a $100 bill. B. a stock certificate. C. a chainsaw. D. a cheeseburger.
C. a chainsaw.
The real core of the economic problem is to: A. increase the amount of leisure time available to people. B. guarantee everyone on the planet a minimum level of food, shelter and clean water. C. allocate limited resources among competing uses. D. eliminate scarcity.
C. allocate limited resources among competing uses.
Opportunity cost includes: A. monetary costs only. B. non-monetary costs only. C. both monetary and non-monetary costs. D. neither monetary nor non-monetary costs.
C. both monetary and non-monetary costs.
Microeconomics deals mainly with two actors: A. producers and entrepreneurs. B. individuals and consumers. C. households and firms. D. capitalists and entrepreneurs.
C. households and firms.
The determination of prices in the market for automobiles is primarily a concern of: A. positive economics. B. normative economics. C. microeconomics. D. macroeconomics.
C. microeconomics.
In order to acquire more of a good we must sacrifice production of another good (because resources are in limited supply). This illustrates the concept of: A. the division of labor. B. ceteris paribus. C. opportunity cost. D. specialization.
C. opportunity cost.
The opportunity cost of an action is equal to: A. only the monetary payment the action required. B. the total time spent by all parties in carrying out the action. C. the highest valued opportunity that must be sacrificed in order to take the action. D. the value of all of the alternative actions that could have been taken.
C. the highest valued opportunity that must be sacrificed in order to take the action.
The additional benefit received as a result of undertaking an action is: A. the opportunity cost. B. the marginal cost. C. the marginal benefit. D. the total benefit.
C. the marginal benefit.
An hour before takeoff an airline still has 5 empty seats on a flight from Atlanta to Las Vegas. They have 5 standby passengers waiting at the gate bidding the following amounts: Passenger A: $300 Passenger B: $275 Passenger C: $250 Passenger D: $200 Passenger E: $100 The average cost (AVC) per seat to operate the flight is $265. The Marginal Cost (MC) per passenger is $115 (taxes, extra fuel, food and drink per additional passenger). How many passengers should the airline allow on board? A. 1 B. 2 C. 3 D. 4 E. 5
D. 4
In a competitive free market system the 'Invisible Hand' (Adam Smith: The Wealth of Nations) brings about: A. an efficient price (p) at which all consumer demand is met by producer supply. B. a market equilibrium for each good/service. C. an outcome where all goods/services are produced at their lowest unit costs. D. all the above.
D. all the above. an efficient price (p) at which all consumer demand is met by producer supply, a market equilibrium for each good/service, and an outcome where all goods/servies are produced at their lowest unit costs.
Economists use data to validate economic models. To collect the data, economists do not choose to survey people but will usually prefer to look at the actual choices households (or firms) are making.This is because: A. people reveal their true preferences (Revealed Preference theorem) by the actual purchase decisions they are making. B. people are often not reliably truthful when answering survey questions. C. all surveys will be biased due to the fact that only certain individuals will agree to participate in the survey. D. all the above.
D. all the above. people reveal their true preferences (Revealed Preference theorem) by the actual purchase decisions they are making, people are often not reliably truthful when answering survey questions, and all surveys will be biased due to the fact that only certain individuals will agree to participate in the survey.
Economists use theories to: A. abstract from the complexities of the world. B. understand economic behavior. C. explain and help predict human behavior. D. do all of the above.
D. do all of the above. abstract from the complexities of the world, understand economic behavior, and explain and help predict human behavior.
The function of an entrepreneur is to: A. bear the business risks. B. organize the other factors of production. C. innovate. D. do all of the above.
D. do all of the above. bear the business risks, organize the other factors of production, and innovate.
Gallons of milk at a local grocery store are priced at one for $4.00, or two for $6.00. The marginal cost of buying a second gallon of milk: A. equals $6.00. B. equals $4.00. C. equals $3.00. D. equals $2.00.
D. equals $2.00.
Economics is the study of how people cope with: A. fluctuations in stock prices. B. greed. C. limited human wants. D. limited resources.
D. limited resources.
Measuring the rate of inflation is primarily a concern of: A. positive economics. B. normative economics. C. microeconomics. D. macroeconomics.
D. macroeconomics.
If a student enrolls in an additional course at the university, an economist would conclude that: A. the total benefit that the student expects to receive as a result of completing her college degree exceeds the total cost of her college education. B. the student is not following the rule of rational choice. C. the student must not be involved in extracurricular campus activities. D. the expected marginal benefit of an additional course must exceed the expected marginal cost of the course.
D. the expected marginal benefit of an additional course must exceed the expected marginal cost of the course. Save
A hypothesis is a normative statement. T/F
False
A positive statement is prescriptive—it prescribes what should be done. T/F
False
Scarcity applies to decision makers in macroeconomics but not in microeconomics. T/F
False
Self-interest could never include benevolence. T/F
False
When two variables repeatedly change at the same time, there must be a causal relationship between them. T/F
False
"Ceteris paribus" is a Latin expression that means "holding everything else constant." T/F
True
A testable proposition that predicts how people will react to changed circumstances is called a hypothesis. T/F
True
Living in a world of scarcity involves trade-offs. T/F
True
