82 Cards in this Set
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A government is an example of an __________.
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A government is an example of an __________.
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In economics, scarcity refers to the situation of...
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having more wants than the amount of available resources.
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Economic reasoning implies that economic agents will make decisions...
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by comparing the costs and benefits of various options.
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________ recommends what people ought to do.
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Positive economics
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Which is an example of a topic studied by microeconomists?
a.) Measure to combat inflation
b.) National income calculations
c.) Price determined by a firm
d.) Interest rate determination
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c
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Define "equilibrium".
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It refers to a situation where all agents are simultaneously optimizing.
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Economic agents who _______ attempt to choose the best feasible option, given the information that they have.
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Optimize
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A consumer has $40 that he wants to spend. He is faced with four options: a camera that costs $60, a cell phone that costs $150, a book that costs $10, and a Bluetooth speaker that costs $45. Which of the following is a feasible option for the consumer?
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The book
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Rational economic agents maximize more than just _______.
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Monetary income
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A consumer has $20 that he wants to spend on two goods: pens priced at $2 each and pencils priced at $1 each. Show his budget restraint.
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$20=($2 x Quantity of pens) x ($1 x Quantity of pencils)
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A student has two options: she can either surf the web or work part-time. Working part-time pays her $20 an hour. What is the student's opportunity cost of surfing the web for 5 hours?
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$100
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If a particular choice that an individual faces give him a benefit of $20 but costs $30, the net benefit from making this choice equals:
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-$10
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Maria has to choose between driving and taking a train to destination A. Traveling by train will cost her $400 and will take 4 hours. Driving to destination A takes 6 hours, and the required amount of gasoline costs $250. Her opportunity cost of time is $15 per hour. What is the total cos…
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$460
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Maria has to choose between driving and taking a train to destination A. Traveling by train will cost her $400 and will take 4 hours. Driving to destination A takes 6 hours, and the required amount of gasoline costs $250. Her opportunity cost of time is $15 per hour. If Maria's opportunit…
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$720
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Cost-benefit analysis can also be used for ______.
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Normative economic analysis
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Equilibrium refers to a situation where all economic agents __________ after considering each other's actions.
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Simultaneously optimize
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What is an example of free riding?
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An individual who sneaks inside a music concert.
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Empiricism refers to the process of...
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testing ideas using data.
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Data help in verifying ________.
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Casual relationships
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Economics can be used to predict _______.
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People's actions
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The scientific method refers to the process by which economists and other scientists...
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develop models of the world and test those models with data.
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A model refers to...
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a simplified description, or representation, of reality.
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Empirical evidence refers to..
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a set of facts established by observation and measurement.
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A model's predictions are referred to as..
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Hypotheses
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A model is based on an assumption that an additional year of education increases a student's future wage by 20%. The hypothesis of the model is that:
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College graduates will earn 107% more than high school graduates.
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A model is based on an assumption that an additional year of education increases a student's future wage by 20%. A model's prediction....
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Is an approximate relationship and may not hold for everyone.
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The monthly wages of five different individuals.
Individual Monthly Wage ($)
1 200
2 450
3 640
4 700
5 800
What is the average monthly wage?
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$558
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The mean income of 25 employees working in a firm is $1,754 per month. What is the total income of all employees?
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$43,850
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Using a large data set will strengthen the force of _________.
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Empirical argument.
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An example of causation...
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A firm producing CFLs installs new machinery. The per-day production of CFLs increases.
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A correlation between two variables implies that...
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There is a cause-effect relationship between the two variables.
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When two variables move in opposite directions, they are said to be...
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Negatively correlated
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Data show that in 2012, the college enrollment in Lithasia increased. The relationship between college enrollment and the sale of hotdogs exhibits...
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A postive correlation
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An omitted variable is a variable that...
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Has been left out, and if included, would explain why the variables considered in a study are correlated.
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What is a feature of experiments?
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Experiments help determine cause and effect between variables.
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a.) The subjects in the treatment group and the control group of an experiment are treated identically, except along ________.
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A single dimension
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What is an example of natural experiment?
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A research on the effect of air pollution on lung disorders by observing the health conditions of people who stay close to industrial areas and those who stay away from industries.
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What is a property of a good economic question?
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A good economic question can be answered.
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Which of the following graphical representations can be used most appropriately to show the distribution of a household's income, in terms of percentages, among the various categories of expenses?
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A pie chart
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As the number of advertisements of a firm increases from 100 to 500, its sale increases from $1,000 to $10,000. If this information is plotted on a line chart, the slope of the line equals
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$22.5
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Optimization implies...
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Choosing the best option from a set of alternatives.
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John has to choose between a camping holiday and a holiday in Las Vegas. If he evaluates the total net benefit of both alternatives before coming to a decision, he is using the technique of...
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Optimization in differences
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The techniques of optimization in levels and optimization in differences...
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Cannot be used to compare the same set of alternatives.
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Similarity between optimization in levels and optimization in differences?
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Both techniques require the conversion of all costs and benefits into a common unit of measurement.
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If an alternative provides a benefit of $8 to an individual at a cost of $6, the net benefits of the alternative equal
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$2
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When optimizing in levels, if the _______ exceeds the ________, Project A is chose over Project B.
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Net benefits of Project A; net benefits of Project B
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If Project A has a cost of $5, and a provides a benefit of $10, and Project B has a cost of $2, and provides benefit of $4, then switching from Project A to Project B.
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Decreases the net benefit by $3.
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If the opportunity cost of time is _________, and an individual spends _________ commuting every month, his opportunity cost of commute is $100 every month.
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10 per hour; 10 hours
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Ryan wants to rent an apartment. The following table shows the monthly rent of five apartments and the monthly commuting time to work from each apartment. Ryan's opportunity cost of time is $15 per hour.
Apartment Commuting Time Rent
1 40 1,500
2 20 1,750
3 10 2,000
4 4 2,210
5 1 2,…
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2
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Ryan wants to rent an apartment. The following table shows the monthly rent of five apartments and the monthly commuting time to work from each apartment. Ryan's opportunity cost of time is $15 per hour.
Apartment Commuting Time Rent
1 40 1,500
2 20 1,750
3 10 2,000
4 4 2,210
5 1 2,…
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5
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Comparative statics
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A tool that can be used in both optimization in levels and optimization in differences.
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What is an example of comparative statics?
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The estimation of the supply of a good when the wage rate of labor changes from $30 to $10 per hour.
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Sarah has to choose between renting a hotel room for two days and renting a hotel room for three days. If Sarah is optimizing in differences, then... An optimizer will rent the hotel room for three days, if the benefit of staying for the third day exceeds the cost of staying for the third…
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An optimizer will rent the hotel room for three days, if the benefit of staying for the third day exceeds the cost of staying for the third day.
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Marginal analysis
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Compares the consequences of doing one more step of something.
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If the total cost incurred in hiring ten workers by a firm is $45, and the total cost incurred when the eleventh worker is hired is $60, the marginal cost of hiring the eleventh worker is:
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$15
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Assume that a firm wants to set up a factory. It has four different options. The rent of the factory in the four different locations and the time taken to transport the product from each location to the market is shown in the table below. The opportunity cost of time is $10 per hour.
Fac…
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$100
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Assume that a firm wants to set up a factory. It has four different options. The rent of the factory in the four different locations and the time taken to transport the product from each location to the market is shown in the table below. The opportunity cost of time is $10 per hour.
Fac…
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Far
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As the rental prices of downtown apartments rise, only workers with the lowest ________ of time will be willing to rent them.
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Opportunity cost
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In a marketplace, prices:
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Act as incentives that allow for the efficient allocation of resources.
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Incentives are designed to ________.
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Change behavior
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Suppose the prices are a pair of jeans, a shirt, and a tie are $30, $20, and $10 respectively. The opportunity cost of buying _______ is 2 ties.
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A shirt
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A buyer is said to be a price taker if she:
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Can purchase any amount of a good at a fixed price provided she has the money to pay for it.
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Assume that a consumer can spend $20 on two goods- pens and pencils. If the price of one pen is $5 and the price of one pencil is $2, which of the following combinations of the two goods represents a point on the consumer budget constraint?
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2 pens and 5 pencils
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The following table shows the total benefit that Jenny derives from consuming different quantities of chocolate.
Quantity Consumed Total Benefit
0 0
1 10
2 18
3 24
4 29
5 30
What is the marginal benefit that Jenny derives from the second unit of chocolate?
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$8
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The table shows the marginal benefit that a consumer derives by consuming different quantities of juice and milk.
Quantity Juice ($4/qt) Milk($2/qt)
Mar. Benefits Mar. Benefits
0 - -
1 12 10
2 8 7
3 6 5
4 4 2
5 3 1
If the income of the consumer is $24, the optimal choice contains:
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4 quarts of juice and 4 quarts of milk
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A quantity of tea is measured on the horizontal axis and quantity of coffee is measured on the vertical axis, an increase in the price of coffee will cause the budget constraint to:
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Pivot leftward along the vertical axis
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John is ready to pay $5 for an extra loaf of bread. Due to an ongoing discount in the store, he gets a loaf for $2. John's consumer surplus from the purchase is ____.
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$3
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Consumer surplus
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Measures difference between willingness to pay for a good and its price, whereas net benefits measure the overall satisfaction gained from consumption of a good.
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Elasticity is:
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The ratio of the percentage change in two variables.
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Higher price elasticity of demand means that a consumer's demand is:
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More responsive to price changes.
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The Law of Demand is the reason behind:
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The price elasticity of demand having a negative value.
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When the price of wine is $10 per bottle, Thomas purchases 30 bottles every month. Later, the government introduces a 50% tax on all alcoholic beverages, which is to be completely borne by consumers. This reduces Thomas's consumption to 20 bottles of wine a month. Thomas's arc elasticity …
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-1
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A good is said to have a relatively elastic demand if the value of price elasticity is:
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Greater than 1
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If a 1% change in the price of a good causes a 1% change in the quantity demanded, the good has an elasticity of demand:
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Equal to 1
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If a good has a price elasticity of demand equal to 0, ________.
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The quantity demanded is completely unaffected by a change in its price.
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In case of a linear negatively sloped demand curve, the price elasticity of demand:
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Is different at different points on the curve.
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At all the points below the midpoint on a linear demand curve, the value of price elasticity of demand is:
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Less than 1
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Which of the following goods is likely to have the lowest price elasticity of demand?
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Life-saving drugs
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As a consumer spends a larger share of his income on a particular good, the price elasticity of demand for that good:
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Increases
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The cross-price elasticity of demand between complements is ________.
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Negative
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Suppose that the government enacts a tax on Good X. In order to estimate the effect of the tax on the quantity demanded of a related good, Good Y, we can use the concept of the:
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Cross-price elasticity of demand
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Luxury goods have income elasticity:
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Greater than one
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EC 210: TEST 1