Macroeconomics Quiz 1 Intro, Opportunity Costs, PPF Victoria Vernon

Macroeconomics Quiz 1 Intro, Opportunity costs, PPF Victoria Vernon

1. Describe your opportunity cost of • taking this course

• taking 2 hours off work to go to a free lunch

2. Give one example of a rational cost and benefit decision you made recently. List costs and benefits. Do benefits exceed the costs?

3. Near my house, there is a fast-food restaurant that sells egg muffins for $1.99 apiece. At home, I have a fancy toaster-and-egg-steamer that can produce a virtually identical product. You slice and butter an English muffin, stick it into the toaster slots; scramble an egg, pour it into the egg steamer, and add water to the steamer. Altogether, it takes about 15 minutes of preparation and cleaning. Producing an egg muffin at home costs only around $0.50. Nonetheless, I often find myself stopping by McDonald’s instead. Is it irrational to buy the same product for more money at McDonald’s? Explain why.

4. Give a definition and an example of one of the following terms: scarcity, market economy, mixed economy, centrally planned economy, capital, human capital, economic resources. 5. The graph on the right shows a nation’s PPF. a. The opportunity cost of increasing housing from 20 to 40 units is ______forgone units of education.

b. The opportunity cost of increasing housing from 120 to 140 units is ______forgone units of education

c. Which of the following can move this PPF inward? a. An improvement in technology b. A hurricane c. An increase in price d. Increase in labor force due to immigration

d. This PPF might shift up and outward as a result of: A. Technological advance. B. Depletion of natural resources. C. The exhaustion of its soil fertility due to over- planting and over-grazing. D. A natural disaster, like a hurricane.

e. Mark with X a point that is not feasible .

f. Mark with Y a point that is attainable but inefficient.

6. A researcher wants to know the effects of medication on clinical depression in a population. He surveys a random sample from the population, and he collects data on each person’s use of antidepressants, and he measures several indicators of depression for each person. When he looks at the data, the researcher finds a puzzling result: higher drug use is positively related to the level of depression. The researcher concludes that using antidepressants causes depression. Comment on his results. Is the researcher confusing correlation and causation?

7. Give two examples, an example of two variables that are directly related and an example of two variables that are inversely related. Draw your graphs, name each axis.