1.1 What economics is and why it's important Read Online
1.2 Microeconomics and macroeconomics Read Online
1.3 How economists use theories and models to understand economic issues Read Online
1.4 How economies can be organized: an overview of economic systems Read Online
To post or not to post? Every day we are faced with a myriad of decisions, from what to have for breakfast, to which route to take to class, to the more complex—“Should I double major and add possibly another semester of study to my education?” Our response to these choices depends on the information we have available at any given moment; information economists call “imperfect” because we rarely have all the data we need to make perfect decisions. Despite the lack of perfect information, we still make hundreds of decisions a day.
And now, we have another avenue in which to gather information—social media. Outlets like Facebook and Twitter are altering the process by which we make choices, how we spend our time, which movies we see, which products we buy, and more. How many of you chose a university without checking out its Facebook page or Twitter stream first for information and feedback?
As you will see in this course, what happens in economics is affected by how well and how fast information is disseminated through a society, such as how quickly information travels through Facebook. “Economists love nothing better than when deep and liquid markets operate under conditions of perfect information,” says Jessica Irvine, National Economics Editor for News Corp Australia.
This leads us to the topic of this chapter, an introduction to the world of making decisions, processing information, and understanding behavior in markets —the world of economics. Each chapter in this book will start with a discussion about current (or sometimes past) events and revisit it at chapter’s end—to “bring home” the concepts in play.
In this chapter, you will learn about:
What is economics and why should you spend your time learning it? After all, there are other disciplines you could be studying, and other ways you could be spending your time. As the Bring it Home feature just mentioned, making choices is at the heart of what economists study, and your decision to take this course is as much as economic decision as anything else.
Economics is probably not what you think. It is not primarily about money or finance. It is not primarily about business. It is not mathematics. What is it then? It is both a subject area and a way of viewing the world.
Start Quiz | Download PDF | |
Start Quiz | Download PDF | |
Start Quiz | Download PDF | |
Start Quiz | Download PDF | |
Start Quiz | Download PDF | |
Start Quiz | Download PDF |
This course begins with a survey of basic optimization tools and then applies them to solve problems over several periods in time. These optimization tools describe feasible choices and then direct you to the best possible solution. In essence, they will help you evaluate an economic environment and determine the best course of action. The role of risk in financial decisions is explored in relation to individual choices and macroeconomic processes. The equitable distribution of resources is then considered. In other words, this class will explore whether an optimal solution is indeed also fair to the participants and society. A specific application, game theory, is presented as one of the major recent advances in economic theory. The final topic returns to microeconomic problems such as taxes, elasticity, and specific types of supply and demand curves.
Question: Suppose Frank can either hunt for birds (b) or forage for wild berries (w) on his isolated island property. He can catch two birds in an hour or gather three pounds of berries. He only has 12 hours a week to devote to these activities. His utility function for birds and berries is u(w,b) = bw^(0.5). Which point is not Pareto efficient?
Choices:
(0, 24)
(3, 21)
(9, 18)
(12, 16)
Question: Suppose Frank can either hunt for birds (b) or forage for wild berries (w) on his isolated island property. He can catch two birds or gather three pounds of berries in an hour. He only has 12 hours a week to devote to these activities. His utility function for birds and berries is u(w,b) = bw^(0.5). What is the slope of his production possibilities frontier?
Choices:
3/2
-3/2
2/3
-2/3
Question: Suppose the government in a closed country imposes a tax of 25 percent on working people's wages (w) and redistributes the tax to nonworking people (n) in society as a lump sum distribution. This causes working people to reduce labor by 20 percent. After the tax is levied and distributed, what is the deadweight loss to society relative to a lump sum tax system?
Choices:
$0
0.25w
0.20w
0.05w
Question: Suppose the government in a closed country imposes a lump sum tax of $1,000 on some people (sp) and redistributes the income to other people (op) in society. After the tax is levied and distributed, what is the deadweight loss to society?
Choices:
$0
+$1,000*sp
-$1,000*op
e answer cannot be determined by the information given.
Question: Suppose you are shopping at a farmers' market at 4:59 p.m. It closes at 5 p.m. At the end of the day, the farmer will have to discard her lettuce. The price of the lettuce is $3. You are willing to pay $1.00 for the lettuce. What is the Pareto optimal price for the lettuce?
Choices:
$0
$1
$2
$3
Question: Suppose Frank can either hunt for birds (b) or forage for wild berries (w) on his isolated island property. He can catch two birds in an hour or gather three pounds of berries. He only has 12 hours a week to devote to these activities. His utility function for birds and berries is u(w,b) = bw^(0.5). What is the marginal rate of transformation of birds for berries?
Choices:
3/2
-3/2
2/3
-2/3
Question: Suppose Frank can either hunt for birds (b) or forage for wild berries (w) on his isolated island property. He can catch two birds in an hour or gather three pounds of berries. He only has 12 hours a week to devote to these activities. His utility function for birds and berries is u(w,b) = bw^(0.5). Using the information from the production possibilities frontier, what is the Pareto optimal allocation for berries?
Choices:
24
22
18
12
Question: Suppose Frank can either hunt for birds (b) or forage for wild berries (w) on his isolated island property. He can catch two birds in an hour or gather three pounds of berries. He only has 12 hours a week to devote to these activities. His utility function for birds and berries is u(w,b) = bw^(0.5). Using the information from the production possibilities frontier, what is the Pareto optimal allocation for birds?
Choices:
18
16
14
12
Question: Suppose Frank can either hunt for birds (b) or forage for wild berries (w) on his isolated island property. He can catch two birds in an hour or gather three pounds of berries. He only has 12 hours a week to devote to these activities. His utility function for birds and berries is u(w,b) = bw^(0.5). What is the expression for b when the marginal rate of substitution of birds for berries is equal to the marginal rate of transformation of birds for berries?
Choices:
(3/4)w
-(3/4)w
(4/3)w
-(4/3)w
Question: If supply is q = 7 + 2p and demand is q = 20 – 6p, then what is the market equilibrium price?
Choices:
1.63
2.33
3.63
4
Question: Suppose Frank can either hunt for birds (b) or forage for wild berries (w) on his isolated island property. He can catch two birds in an hour or gather three pounds of berries. He only has 12 hours a week to devote to these activities. His utility function for birds and berries is u(w,b) = bw^(0.5). What is the marginal rate of substitution of birds for berries?
Choices:
b/(2w)
-b/(2w)
(2b)/w
2bw