Question 1

Identify each of the following topics as being part of microeconomics or macroeconomics:
a.the impact of a change in consumer income on the purchase of luxury automobiles
b.the effect of a change in the price of Coke on the purchase of Pepsi
c.the impact of a war in the Middle East on the rate of inflation in the United States
d.factors influencing the rate of economic growth
e.factors influencing the demand for tractors
f. the impact of tax policy on national saving
g. the effect of pollution taxes on the U.S. copper industry
h. the degree of competition in the cable television industry
i. the effect of a balanced-budget amendment on economic stability
j. the impact of deregulation on the savings and loan industry

Accepted Answer

The answer of Identify each of the following topics as...

Question 2

The concept of slope can be used to answer questions about how much one variable responds to changes in another variable.

Accepted Answer

The slope measures the rate of change of one variable in response to changes in another variable, therefore it can be used to answer questions about how much one variable responds to changes in another variable.

Question 3

The slope of a line is equal to the change in the x-variable divided by the change in the y-variable.

Accepted Answer

The slope of a line is equal to the change in the y-variable divided by the change in the x-variable.

Question 4

If a line passes through the points (20,5) and (10,10), then the slope of the line is -2.

Accepted Answer

The formula for calculating slope between two points $(x_1,y_1)$ and $(x_2,y_2)$ is

$$	ext{slope} = \frac{y_2 - y_1}{x_2 - x_1}$$

Using this formula, we get:

$$	ext{slope} = \frac{10 - 5}{10 - 20} = -\frac{1}{2}$$

Therefore, the statement "the slope of the line passing through the points (20,5) and (10,10) is -2" is false.

Question 5

The slope of a line is the ratio of the vertical distance covered to the horizontal distance covered along the line.

Accepted Answer

This is the definition of slope.

Question 6

If a line passes through the points (20,5) and (10,10), then the slope of the line is 1/2.

Accepted Answer

To calculate the slope of a line passing through two points (x1,y1) and (x2,y2), we use the formula:

slope = (y2-y1)/(x2-x1)

Applying this formula to the given points, we get:

slope = (10-5)/(10-20) = -1/2

Thus, the slope of the line passing through (20,5) and (10,10) is -1/2, not 1/2. Therefore, the answer is B (False).

Question 7

Which of the following statements are positive and which are normative?
a.The minimum wage creates unemployment among young and unskilled workers.
b.The minimum wage ought to be abolished.
c.If the price of a product in a market decreases, then, other things equal, quantity demanded will increase.
d.A little bit of inflation is worse for society than a little bit of unemployment.
e.There is a tradeoff between inflation and unemployment in the short run. 
f. If consumer income increases, then, other things equal, the demand for automobiles will increase.g. The U.S. income distribution is not fair.h. U.S. workers deserve more liberal unemployment benefits.i. If interest rates increase, then investment will decrease.j. If welfare benefits were reduced, then the country would be better off.

Accepted Answer

The answer of Which of the following statements are positive...

Question 8

Changes in one variable on a graph might be caused by the other variable on the graph or by a third omitted variable.

Accepted Answer

This statement is true. It is important to consider the potential influence of other variables that are not shown on the graph as they could also be contributing to the observed changes in the variables being shown.

Question 9

Draw a production possibilities frontier showing increasing opportunity cost of hammers in terms of horseshoes.
a.On the graph, identify the area of feasible outcomes and the area of infeasible outcomes.
b.On the graph, label a point that is efficient and a point that is inefficient.
c.On the graph, illustrate the effect of the discovery of a new vein of iron ore, a resource needed to make both horseshoes and hammers, on this economy.
d.On a second graph, illustrate the effect of a new computerized assembly line in the production of hammers on this economy.

Accepted Answer

The answer of Draw a production possibilities frontier showing increasing...

Question 10

Use the following graph to answer the following questions. a.How would point J be represented as an ordered pair? b.What type of curve is this? c.Does this curve show a positive or negative correlation between price and quantity? d.Compute the slope of D₁ between points J and L. e.What is the slope of D₁ between points L and N? Why would you not have to calculate this answer? f. What is it called if we move from D₁ to D₂ ? g. How do you know that the slope of D₂ is the same as the slope of D₁ ?

Accepted Answer

The answer of Use the following graph to answer the...

Question 11

The prairie dog has always been considered a problem for American cattle ranchers. They dig holes that cattle and horses can step in, and they eat grass necessary for cattle. Recently, ranchers have discovered that there is a demand for prairie dogs as pets. In some areas, prairie dogs can sell for as high as $150 each. Cattlemen are now fencing off prairie dog towns on their land so these towns will not be disturbed by their cattle.Draw a rancher's production possibilities frontier showing increasing opportunity cost of cattle production in terms of prairie dog production. Using a separate graph for each situation, show what would happen to the initial production possibilities frontier in each of the following situations:
a.The outcome is efficient, with ranchers choosing to produce equal numbers of cattle and prairie dogs.
b.As a protest against the government introducing the gray wolf back into the wild in their state, ranchers decide to withhold 25 percent of the available grassland for grazing.
c.The price of prairie dogs increases to $200 each, so ranchers decide to allot additional land for prairie dogs.
d.The government grants new leases to ranchers, giving them 10,000 new acres of grassland each for grazing.
e.A drought destroys most of the available grass for grazing of cattle, but not for prairie dogs since they also eat plant roots.

Accepted Answer

The answer of The prairie dog has always been considered...

Question 12

The slope of a horizontal line is infinite, and the slope of a vertical line is zero.

Accepted Answer

The slope of a horizontal line is 0, not infinite. The slope of a vertical line is undefined, not 0.

Question 13

Using the outline below, draw a circular-flow diagram representing the interactions between households and firms in a simple economy. Explain briefly the various parts of the diagram.

Accepted Answer

The answer of Using the outline below, draw a circular-flow...

Question 14

The slope of an upward-sloping line is positive, and the slope of a downward-sloping line is negative.

Accepted Answer

The statement is true. This is a basic concept in algebra where the slope of a line represents the rate at which it is rising or falling. A positive slope means the line is moving upward, and a negative slope means the line is moving downward.

Question 15

Deciding that A causes B when in fact B causes A is a mistake called omitted variable bias.

Accepted Answer

This mistake is called reverse causality, not omitted variable bias. Omitted variable bias occurs when a model fails to include one or more relevant variables, leading to incorrect conclusions about relationships between other variables.

Quiz 2: Thinking Like an Economist