Exam 1: Limits, Alternatives, and Choices

There are two sets of x,y points on a straight line in a two-variable graph with y on the vertical axis and x on the horizontal axis.What would be the linear equation for the line if one set of points was (0,12)and the other set was (12,36)?

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Question 1

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The linear equation is y = 12 + 2x.

Explain the importance of the ceteris paribus or "other-things-equal" assumption.

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The real-world is "messy" so economists try to analyze changes in the variables of interest by finding ways to hold "other things constant or equal".The ceteris paribus assumption is made to indicate that these other variables are not changing or affecting the variables of interest.For example,the theory of consumer demand states that price and quantity demanded are inversely related;people will buy less at higher prices than they will at lower prices.But this theory assumes that other variables like tastes and income that might affect quantity demanded are not changing.Increasingly,experimental economists are attempting to test theories in laboratory environments in which ceteris paribus assumptions hold.

Define what is meant by a positive or direct relationship between two variables and describe the line graph depicting such a relationship.

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A positive or direct relationship between two variables describes a situation where the two variables change in the same direction.If the first variable increases,the second variable increases;if the first decreases,the second decreases.An example would be individual income and spending.Generally,high spending is associated with high incomes and lower spending is associated with lower incomes.The line graph of a direct,positive relationship is upward sloping from left to right.

An economy consists of five workers,who can produce either fish or fruit.The following table shows the daily output of each worker.

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Question 4

The value of the vertical intercept is $100 and the slope is 0.8 in a linear equation for consumption (measured on the vertical axis)and disposable income (measured on the horizontal axis).If disposable income is $1000,what is consumption? State the linear equation and show how you found the answer.

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Question 5

Give one example of a positive economic statement and one example of a normative economic statement.

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Question 6

What do economists mean when they say that "there is no free lunch"? Give another example to which this statement applies.

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Question 7

One application of the production possibilities concept has been to explain the difference in growth patterns of a nation with a high level of investment (Alta)and an equivalent nation with a low level of investment (Zorn).Use the concept to explain why Alta's economic growth would be greater than that of Zorn over time.

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Question 8

Below are six statements.Identify whether each is a positive or normative statement. (a)The minimum wage should be increased so low-income workers can earn a living wage. (b)The unemployment rate is too high and should be reduced through government actions. (c)The rate of inflation was about 2 percent last year,an all time low for the past decade. (d)The government should take action to break up the monopoly power of Air Canada. (e)Interest rates should be lower in Canada so that people can afford to build a home. (f)The Federal government achieved a budget surplus for the first time in thirty years.

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Question 9

What is meant by "society's economic problem"?

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Question 10

Why do economists use graphs in their work?

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Question 11

Look at the following production possibilities curve illustrating the possibilities in Sluggerville for producing bats and/or peanuts with the existing level of resources and technology.

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Question 12

"Bad theories are abstract and therefore unrealistic;good theories are fully realistic and fit all the facts".Evaluate.

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Question 13

In a two-dimensional graph showing the relationship between income and consumption in the economy,what is shown on the vertical axis and what is shown on the horizontal axis?

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Question 14

What is utility and what is its relevance to rational behaviour?

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Question 15

What is a brief definition of economics? What are the conditions that give rise to this definition?

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Question 16

What are the key economic concepts that pertain to the individual?

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Question 17

Show graphically the relationships that you would expect to find between (a)student IQs and grade point averages (GPAs); (b)the price of a product and the amount consumers will purchase; (c)the temperature and the number of people at the swimming pool.Which of these are direct relationships and which are inverse? What considerations might change the expected relationships?

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Question 18

The production possibilities table below shows the hypothetical relationship between the production of food and clothing in an economy. (a)What is the marginal opportunity cost of producing the second unit of clothing? (b)What is the total opportunity cost of producing two units of clothing? (c)What is the marginal opportunity cost of producing the third unit of clothing? (d)What is the total opportunity cost of producing three units of clothing?

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Question 19

What were the approximate average incomes of Canadians and Liberians in 2010?

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Question 20

Showing 1 - 20 of 56

There are two sets of x,y points on a straight line in a two-variable graph with y on the vertical axis and x on the horizontal axis.What would be the linear equation for the line if one set of points was (0,12)and the other set was (12,36)?

Explain the importance of the ceteris paribus or "other-things-equal" assumption.

Define what is meant by a positive or direct relationship between two variables and describe the line graph depicting such a relationship.

An economy consists of five workers,who can produce either fish or fruit.The following table shows the daily output of each worker.

The value of the vertical intercept is $100 and the slope is 0.8 in a linear equation for consumption (measured on the vertical axis)and disposable income (measured on the horizontal axis).If disposable income is $1000,what is consumption? State the linear equation and show how you found the answer.

Give one example of a positive economic statement and one example of a normative economic statement.

What do economists mean when they say that "there is no free lunch"? Give another example to which this statement applies.

What is meant by "society's economic problem"?

Why do economists use graphs in their work?

Look at the following production possibilities curve illustrating the possibilities in Sluggerville for producing bats and/or peanuts with the existing level of resources and technology.

"Bad theories are abstract and therefore unrealistic;good theories are fully realistic and fit all the facts".Evaluate.

In a two-dimensional graph showing the relationship between income and consumption in the economy,what is shown on the vertical axis and what is shown on the horizontal axis?

What is utility and what is its relevance to rational behaviour?

What is a brief definition of economics? What are the conditions that give rise to this definition?

What are the key economic concepts that pertain to the individual?

What were the approximate average incomes of Canadians and Liberians in 2010?

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

An Introduction to Macroeconomics

Measuring the Economys Output

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, Surpluses, and Debt

Money, Banking, and Money Creation

Interest Rates and Monetary Policy

Long-Run Macroeconomic Adjustments

International Trade

Exchange Rates and the Balance of Payments

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