ECON 200: Chapter 1 & 2 (Homework) – Flashcards
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Which common saying best captures the concept of incentives, which is one of the foundations of economics? (page 7)
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"If the carrot doesn't work, try the stick."
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Which of the following elements in a society are required for economic study? (page 6)
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1. Sources in limited supply 2. People with wants and needs 3. Decisions about how to allocate resources
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Which description best captures the idea of marginal thinking? (page 15)
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Evaluating the cost and benefit of one more unit of something. (Considering "one more unit" means choosing between two outcomes that differ by only one unit's worth of production or consumption.)
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T/F? Because resources are scarce, all choices involve trade-offs, which means nothing is free.
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True
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Positive Incentive Examples:
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1. In a class, everyone's starting grade is a 0, and students earn points for answering questions correctly. 2. An electronics store employee earns a commission on each smartphone she sells.
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Negative Incentive Examples:
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1. A boy faces a time out if he does not clean his room. 2. A city will fine a homeowner if the lawn around the house is overgrown.
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Which of the following items describe ways of classifying incentives, from an economist's point of view?
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1. Indirect 2. Direct 3. Positive 4. Negative
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Calvin and Hobbes run a company that sells wallet chains and wallet decals. Calvin is faster at making decals than chains, and Hobbes is faster at making chains than decals. Which statements accurately describe the situation?
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1. Company output will be maximized if Calvin makes all the decals and Hobbes makes all the chains. 2. Calvin has a comparative advantage for making decals. 3. Hobbes has a higher opportunity cost for making decals than Calvin.
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Pharmaceutical companies are perceived as profiting unfairly from drugs they sell. A new law shortens the time during which the manufacturer has exclusive use of the drug formula. Place the events in sequence to illustrate how restricting profits by pharmaceutical companies affects innovation.
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1. Pharmaceutical companies reduce their estimate of the profitability of new drug research. 2. Pharmaceutical companies are less willing to invest in drug development. 3. Fewer new drugs are brought to market.
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Iowa has a ( 1 ) in producing corn. We would expect Texas to produce ( 2 ) and trade it for ( 3 ). If these states do not trade, cotton and corn production will be ( 4 ) than if the states did trade.
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1. Comparative advantage 2. cotton 3. corn 4. lower
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Which of the following is true of economically beneficial specialization? pg 17
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1. Each worker does whatever involves the lowest opportunity cost, compared with other tasks. 2. Each worker does whatever he or she does best, compared with other tasks.
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T/F? At the end of the semester, a student values his used textbook at $75. This student would be willing to resell his used textbook if the price he receives is $36.
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FALSE
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Microeconomic
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1. A laid-off worker enrolls in job re-training 2. A team of three partners starts a new ad agency.
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Macroeconomic
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1. Nationwide, new housing construction declines for the third month in a row. 2. The inflation rate rises.
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A production possibilities frontier is a ( 1 ) summarizing the different ways a society's ( 2 ) could be used ( 3 ), assuming those resources ( 4 ).
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1. model 2. production resources 3. to full capacity 4. remained fixed.
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endogenous factors
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Factors that we know about and can control ex: wing angle, wind speed,
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exogenous factors
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Factors beyond our control—outside the model ex: humidity, air pressure
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T/F? An economic model is always a simplification.
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True
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A pro football quarterback has to move. What would be a good economic reason for him to do his own moving rather than hiring someone else?
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he is retiring, so he no longer has the trade-off of missing practice or a game
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T/F? By comparing opportunity costs and gains from trade for two parties each making the same two goods, one can determine the exact exchange ratio at which the parties should agree to trade
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False
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Leading up to the Great Recession, a major problem with computer models used by ( 1) to predict the performance of ( 2 ) was that the models were designed to assume that real estate ( 3 ) would always ( 4 ).
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1. Many banks 2. mortgage-backed securities 3. prices 4. rise
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Which of the following statements is normative rather than positive?
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Incoe inequality should be minimized in a developed society
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Natalia notices that if she does not sleep a lot at night, she feels tired the next day. What relationship (if any) exists between hours of sleep and degree of exhaustion?
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There is a negative correlation
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To have (1) advantage means to be able to produce more using the same resources. To have (2) advantage means to have a lower (3). Comparative advantage is the basis for (4). It is (5) for one producer to have a comparative advantage for every good.
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1. an absolute 2. a comparative 3. opportunity cost 4. gains from trade 5. not possible
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What is the usual term for spending on infrastructure, production facilities, or anything else that will increase future production possibilities?
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1. capital investment 2. investment
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In one year, Wynn Debbler can make 90 pairs of trousers or 30 coats, while Peg Michaels can make 100 pairs of trousers or 30 coats. They discuss an arrangement in which Peg gives Wynn trousers in exchange for coats, so that they both benefit. Which of the following arrangements should be acceptable to both Wynn and Peg?
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4 COATS FOR 13 TROUSERS A coat-to-trouser ratio of 413? 0.31, is between Peg's per-trouser opportunity cost of 310 = 0.3 and Wynn's per-trouser opportunity cost of 39? 0.333. 8 COATS FOR 25 TROUSERS A coat-to-trouser ratio of 825 = 0.32, is between Peg's per-trouser opportunity cost of 310 = 0.3 and Wynn's per-trouser opportunity cost of 39? 0.333.
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T/F? A bar graph is usually the best choice for graphing one variable to show proportions.
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FALSE
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Which of the following is not a characteristic of a good economic model?
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captures the full complexity of a phenomenon
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Which country is a good example of a high present rate of investment and a low present rate of consumer goods consumption?
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china
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Mike and Debra are the only producers in an economy with two goods, wings and pizza. What is wrong with the following statement? "Whether Mike should make pizza or wings depends on which he is better at making."
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What matters is not what Mike is better at but the comparative advantage for each producer.
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T/F? A health club membership could be considered a form of investment.
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True
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If a community of woodworkers gains five new members who specialize in chairs, the community will be able to produce both more tables and more chairs, because the increase in labor resources has shifted the entire PPF upward and outward.
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False
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What methods may an economist use to test a hypothesis?
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1. Wait for real-world events to confirm or refute the hypothesis 2. Gather historical data 3. conduct one or more experiments
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T/F? Correlation does not always indicate direct causation.
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True
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What Latin phrase means "other things being equal"?
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Ceteris Paribus
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In one week, Jedidiah Schlepp can produce 24 gizmos or 20 whatsits. What is the opportunity cost ratio, in gizmos per whatsit? Give the answer to one decimal place.
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1.2 gizmos per whatsit (24 divided by 20=1.2)
