ECO 1102 Lecture Notes - Lecture 2: Opportunity Cost, List Of Civilisations In The Culture Series, Root Mean Square

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Tuesday, September 13, 2016

ECO1102 - Lecture 2 & 3 - Chapter 2: Thinking Like An

Economist

Economists Play Two roles

-as scientist, economist make positive statements, which try to describe or explain

how the world is

•to do so, they use scientiﬁc method,t he dispassionate development and testing of

theories about how the world works

-as policy advisors, economists make normative statements, which try to preserve how

the world should be, to improve it

•the Government of Canada relies not he advice of economists

•they are employed in many government agencies and departments, including the

Bank of Canada and the Department of Finance

-positive statements can be refuted; normative statements cannot

Positive vs. Normative Statements

-Prices rise when the government increases the quantity of money

•positive -descries a relationship, could use data to conﬁrm or refute

-the government should print less money

•normative - value judgement, cannot be conﬁrmed or refuted

-a tax cut is needed to stimulate the economy

•normative - value judgement

-an increase in the price of burritos will cause an increase in consumer demand for

video rentals

•positive - describes a relationship

•a statement doesn't need to be true to be positive

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Tuesday, September 13, 2016

Models & Assumptions

-like scientist, economists use models to study economic issues

•to draw logical conclusions (deductions)

•to predict real world behaviour

-a model is a highly simpliﬁed representation of a more complicated reality

•captures key features to be investigated

•uses reasonable simplifying assumptions about reality

-Assumption simplify the complexity of the world

•make the world easier to understand

-eg. To study international read, we often assume two countries and two goods

•this is unrealistic, but simple to learn and provided useful insights about the

real world

•results are often generalized

The Circular Flow Diagram

-a visual model of the economy that shows how dollars ﬂow through markets among

households and ﬁrms

-two markets

•for goods and services

•for factors of production - the resources the economy uses to produce goods and

services

-land, labour, capital (machienry & equioment), natural resources

-two types of economic agents

•households

-own factors of production & sell/rent them to ﬁrms in exchange for income

•ﬁrms

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Tuesday, September 13, 2016

The Production Possibilities Factor (PPF)

-a graph that shoes the maximum combinations of two goods an economy can

produce given its available resources and technology

-Example:

•assume the 2 goods are computers and whet

•assume one resource is used to produce each of the two goods

-labor (measure in hours)

•assume the economy has 50,000 labor hours per month available for production

•assume producing one computer requires 100 hours of labor

•assume producing one ton of wheat requires 10 hours of labor

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ECO 1102 Full Course Notes

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Document Summary

Eco1102 - lecture 2 & 3 - chapter 2: thinking like an. As scientist, economist make positive statements, which try to describe or explain how the world is: to do so, they use scienti c method,t he dispassionate development and testing of theories about how the world works. Bank of canada and the department of finance. Positive statements can be refuted; normative statements cannot. Prices rise when the government increases the quantity of money: positive -descries a relationship, could use data to con rm or refute. The government should print less money: normative - value judgement, cannot be con rmed or refuted. A tax cut is needed to stimulate the economy: normative - value judgement. An increase in the price of burritos will cause an increase in consumer demand for video rentals: positive - describes a relationship, a statement doesn"t need to be true to be positive.

Related Questions

Description
Thinking like an economist can be helpful in your daily life. If you understand basic economic principles such as incentives, opportunities, and risks and rewards, you can make better decisions. Learning to view the world as an economist can also help you make decisions about which credit card to apply for, what loan to take, or which health care plan is the best.

For this assignment, you will participate in a discussion about the two roles of economists in the context of a specific scenario. When responding to the discussion questions, be sure to reference course materials to support your conclusions and opinions. You should do the same whenever you respond to another personâs discussion post. By doing so, you not only make a stronger case, but better support your own learning.

Scenario
Imagine that a group of advisors to the president has suggested providing a tax cut for the middle class in order to stimulate the economy and reduce unemployment. The president has asked for your analysis of this proposed tax cut.

Instructions

In a post to the discussion, respond to the following:

Describe how an economic scientist would approach the tax cut recommended by the advisors in the scenario you just read. What are some economic factors that the economic scientist would consider when crafting his or her statement on the tax cut proposed?

Describe how an economic policy advisor would approach the same tax cut and provide the reasoning behind the position.

Remember to think like an economis, even if it goes against your own opinions about whether a tax cut is a good idea.

What economic principles does the tax cut involve?

What are some of the repercussions of the tax cut on the wealthy and do you think this is a positive or negative outcome? Why?

Do you think tax donations should be tax deductible even when it hurts government revenue?

salmonoyster595

21. The English word that comes from the Greek word for "one who manages a household" is

A- market
B- consumer
C- producer
D- economy

Question 22. 22. For a college student who wishes to calculate the true costs of going to college, the costs of room and board

A- should be counted in full, regardless of the costs of eating and sleeping elsewhere.
B- should be counted only to the extent that they are more expensive at college than elsewhere.
C- usually exceed the opportunity cost of going to college.
D- plus the cost of tuition, equals the opportunity cost of going to college.

Question 23. 23. The phenomenon of scarcity stems from the fact that

A- most economies' production methods are not very good.
B- in most economies, wealthy people consume disproportionate quantities of goods and services.
C- governments restrict the production of too many goods and services.
D- resources are limited.

Question 24. 24. Central planning refers to

A- markets guiding economic activity. Today many countries that had this system have abandoned it.
B- markets guiding economic activity. Today many countries that did not have this system have implemented it.
C- government guiding economic activity. Today many countries that had this system have abandoned it.
D- government guiding economic activity. Today many countries that did not have this system have implemented it.

Question 25. 25. Senator Brown wants to increase taxes on people with high incomes and use the money to help the poor. Senator Johnson argues that such a tax will discourage successful people from working and will therefore make society worse off. An economist would say that

A- we should agree with Senator Brown.
B- we should agree with Senator Johnson.
C- a good decision requires that we recognize both viewpoints.
D- there are no tradeoffs between equity and efficiency.

Question 26. 26. Max and Maddy charge people to park on their lawn while attending a nearby craft fair. At the current price of $10, seven people park on their lawn. If they raise the price to $15, they know that only five people will want to park on their lawn. Whether they have seven or five cars parked on their lawn does not affect their costs. From this information, it follows that

A- they should leave the price at $10.
B- it does not matter if they charge $10 or $15.
C- they would do better charging $15 than $10.
D- they should raise the price even more.

Question 27. 27. A circular flow diagram is a model that

A- helps to explain how participants in the economy interact with one another.
B- helps to explain how the economy is organized.
C- incorporates all aspects of the real economy.
D- Both (a) and (b) are correct.

Question 28. 28. In the markets for goods and services in the circular-flow diagram,

A- households provide firms with savings for investment.
B- households provide firms with labor, land, and capital.
C- firms provide households with output.
D- firms provide households with profit.

Question 29. 29. Incomes of U.S. households in the 1970s and 1980s

A- grew rapidly, due to the widespread success of labor unions in pushing up wages during those decades.
B- grew rapidly, due to several increases in the minimum wage during those decades.
C- grew rapidly, due to government policies that discouraged the importation of foreign products during those decades.
D- grew slowly, due to the slow growth of the output of goods and services per hour of U.S. workers' time during those decades.

Question 30. 30. For economists, statements about the world are of two types:

A- assumptions and theories.
B- true statements and false statements.
C- specific statements and general statements.
D- positive statements and normative statements.

marooncat628

Suppose that, instead of taking this test, you could either have worked and earned income or partied and had a pleasurable time. Your opportunity cost of taking the test is the

	a.	forgone working or partying, depending on which was your next best choice.
	b.	forgone work.
	c.	forgone working and partying.
	d.	test because you are taking it.

1 points

QUESTION 2

A trend is

	a.	a measure of closeness on a scatter diagram.
	b.	a general tendency for a variable to rise or fall.
	c.	the maximum value of a variable.
	d.	the difference between the maximum value of a variable and the minimum value of the variable.

1 points

QUESTION 3

A time-series graph measures

	a.	time on the y-axis and the variable or variables in which we are interested on the x-axis.
	b.	time on the x-axis and the variable or variables in which we are interested on the y-axis.
	c.	the value of one variable against the value of another variable.
	d.	the value of an economic variable for different groups in a population at a point in time.

1 points

QUESTION 4

Canada has nationalized health care, so that everyone, regardless of their ability to pay, has some access to health care. Based on this observation, Canada has decided that "everyone, regardless of their ability to pay" is the answer to what microeconomic question?

	a.	Why will we offer health care?
	b.	How will health care be produced?
	c.	For whom will health care be produced?
	d.	What type of health care will be produced and in what quantity?

1 points

QUESTION 5

As a shoe factory adds more workers, shoe production grows, reaches a maximum, and then shrinks. In a diagram that has the number of workers on the horizontal axis and the number of shoes on the vertical axis, the relationship between the number of workers and the number of shoes starts as ________ and then, after the maximum point, is ________.

	a.	positive; negative
	b.	negative; positive
	c.	linear; negative
	d.	positive; linear

1 points

QUESTION 6

Microeconomics includes the study of the

	a.	choices made by individuals and businesses.
	b.	recessions and inflation in the global economy.
	c.	aggregate effects on the national economy.
	d.	reasons why the government changes interest rates.

1 points

QUESTION 7

When Fresh Express Salads decides to mechanically pick all of its lettuce, it directly answers the ________ question.

	a.	when
	b.	for whom
	c.	how
	d.	what

1 points

QUESTION 8

Proponents of cuts in income tax rates argue that when income tax rates are cut, workers have an incentive to increase their work hours. This argument is based on the assumption that

	a.	the opportunity cost of working is negative.
	b.	the marginal cost of each additional work hour is not important to most workers.
	c.	workers are irrational.
	d.	workers make decisions based on the marginal benefit of each hour worked compared to the marginal cost of work.

1 points

QUESTION 9

A choice made by comparing all relevant alternatives systematically and incrementally is

	a.	an opportunity cost.
	b.	a benefit.
	c.	a sunk cost.
	d.	a choice on the margin.

1 points

QUESTION 10

A normative statement

i. can be tested as to whether it is true or false.

ii. is considered negative.

iii. depends on a person's values.

	a.	i, ii, and iii
	b.	iii only
	c.	i and iii
	d.	ii and iii

1 points

QUESTION 11

Normative statements

i. describe how the world is.

ii. describe how the world ought to be.

iii. depend on people's values and cannot be tested.

	a.	iii only.
	b.	i only.
	c.	ii and iii.
	d.	ii only.

1 points

QUESTION 12

In order to determine whether to major in economics, a rational individual compares the ________ of the decision.

	a.	positive benefits and normative costs
	b.	normative benefits and positive costs
	c.	marginal benefit and marginal cost
	d.	opportunity cost and the sunk cost

1 points

QUESTION 13

If x increases whenever y decreases, then x and y are

	a.	positively related.
	b.	negatively related.
	c.	not related.
	d.	related but whether positively or negatively related depends on whether the x variable or the y variable is plotted on the vertical axis.

1 points

QUESTION 14

Rational choice

	a.	is what you must give up get what you want.
	b.	is made by comparing different incentives.
	c.	making the choice.
	d.	provides the answer to only the "how" question.

1 points

QUESTION 15

Scarcity results from the fact that

	a.	choices made in self-interest rare not always in the social interest.
	b.	not all goals are desirable.
	c.	people's wants exceed the resources available to satisfy them
	d.	we cannot answer the major economic questions.

1 points

QUESTION 16

When Delta decides to quit flying to Lithuania, it directly answers the ________ question.

	a.	what
	b.	why
	c.	for whom
	d.	how

1 points

QUESTION 17

A normative statement

	a.	says what is currently believed about the way the world operates.
	b.	depends on someone's values.
	c.	cannot use the word "should."
	d.	must be tested to determine if it is correct.

1 points

QUESTION 18

Which of the following statements best describes the study of economics? Economics studies how

	a.	to organize production so that scarcity does not occur.
	b.	to create incentives so that scarcity does not exist.
	c.	firms make profits.
	d.	we make choices in the face of scarcity.

1 points

QUESTION 19

Which of the following best defines economics?

	a.	Economics teaches how to limit our wants.
	b.	Economics is concerned with prices and quantities of goods and services, both at the individual level and at the industry level.
	c.	Economics helps you earn as much money as possible.
	d.	Economics studies how to choose the best alternative when coping with scarcity.

1 points

QUESTION 20

In economics, cost is ________, and benefit is ________.

	a.	the amount of money that you pay for something; the amount of money that someone else is willing to pay you
	b.	what you are willing to pay on the margin; what the government pays you when you are unemployed or retired
	c.	what you must give up to get something; what you are willing to give up to get it
	d.	the amount of money that you pay on the margin; the amount of money that you receive on the margin

1 points

QUESTION 21

If Jessie studies economics for two hours instead of going to the movies with her friends, then

	a.	the opportunity cost of studying is the missed movie.
	b.	Jessie is ignoring a sunk cost
	c.	Jessie is not responding to any incentives.
	d.	Jesse definitely is making a rational choice.

1 points

QUESTION 22

Going skiing will cost Adam $80 a day. He also loses $40 per day in wages because he has to take time off from work. Adam still decides to go skiing.

	a.	The $80 price of skiing is a sunk cost and so did not affect Adam's decision.
	b.	He loses a total of $120 per day, so his decision is irrational.
	c.	His decision is rational if Adam's marginal benefit of spending a day skiing is greater than his marginal cost.
	d.	Adam's lost $40 per day in wages is a sunk cost and so did not affect his decision.

1 points

QUESTION 23

If a curve falls and then rises, it

	a.	has a maximum.
	b.	has a linear relationship.
	c.	has a minimum.
	d.	has a constant slope relationship.

1 points

QUESTION 24

In 2003, Michael Jordan decided to retire from professional basketball. Which of the following was an opportunity cost of his decision?

	a.	the avoidance of pain and injury from playing one more year
	b.	the time he could spend with his family while retired
	c.	the lost salary from playing one more year
	d.	the value of new employment opportunities that would await him

1 points

QUESTION 25

Which of the following statements is a normative statement?

	a.	Military spending as a percent of government spending decreased by 5 percent in the 1990s.
	b.	Every American household should have health care insurance coverage.
	c.	Welfare reform has decreased the amount the government spends on welfare.
	d.	The price of computers fell last year.

greencat417

ECO 1102 Lecture Notes - Lecture 2: Opportunity Cost, List Of Civilisations In The Culture Series, Root Mean Square

ECO 1102 Full Course Notes

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