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Exploring Macroeconomics 5th Edition Robert L. Sexton - Solutions
1. Why must every society choose some manner in which to allocate its scarce resources?
8. Why can’t a country become so technologically advanced that its citizens won’t have to choose?
7. Why might sunshine be scarce in Seattle but not in Tucson?
6. What are some of the ways that students act as entrepreneurs as they seek higher grades?
5. Why do you think economists often refer to training that increases the quality of workers’ skills as “adding to human capital”?
4. How and why does scarcity affect each of us differently?
3. Why does scarcity affect everyone?
2. Does wanting more tangible and intangible goods and services make us selfish?
1. What must be true for something to be an economic good?
6. Why is the opportunity cost of time spent getting an MBA typically lower for a 22-year-old straight out of college than for a 45-year-old experienced manager?
5. Why was the opportunity cost of staying in college higher for Tiger Woods than for most undergraduates?
4. Why is there no such thing as a free lunch?
3. What do we mean by opportunity cost?
2. What is given up when we make a choice?
1. Would we have to make choices if we had unlimited resources?
8. Imagine driving a car with daggers sticking out of the steering wheel—pointing directly at your chest. Would you drive more safely? Why?
7. If pedestrians felt far safer using crosswalks to cross the street, how could adding crosswalks increase the number of pedestrian accidents?
6. If you decide to speed to get to a doctor’s appointment and then get in an accident due to speeding, does your decision to speed invalidate the rule of rational choice? Why or why not?
5. Why do students often stop taking lecture notes when a professor announces that the next few minutes of material will not be on any future test or assignment?
4. Why does rational choice involve expectations?
3. How could the rule of rational choice be expressed in terms of net benefits?
2. What is the rule of rational choice?
1. What are marginal choices? Why does economics focus on them?
5. Why do many parents refuse to let their children have dessert before they eat the rest of their dinner?
4. How does the rule of rational choice imply that young children are typically more likely to misbehave at a supermarket checkout counter than at home?
3. According to the rule of rational choice, would you do more or less of something if its expected marginal costs increased? Why?
2. According to the rule of rational choice, would you do more or less of something if its expected marginal benefits increased? Why?
1. What is the difference between positive incentives and negative incentives?
5. What is a pie chart? Bar graph? Time-series graph? Scatter diagram?
4. Use the information in the following table to plot a graph. Is it a positive or negative relationship? What is the slope?X Y 1 2 2 4 3 6 4 8 5 10
3. Below is Emily’s demand curve for iTunes. How do we add income, a third variable, to price and quantity purchased on our graph? Using a graph, explain what would happen if Emily had an increase in income. What would happen if Emily has a decrease in income? Price of iTunes 0 D Quantity of
2. Which of the following will lead to a positive relationship? A negative relationship?a. Hours studied and grade in a courseb. The price of ice cream and the amount of ice cream purchasedc. The amount of seasonal snowfall and the sale of snow shovels
1. The following table gives the prices and quantity demanded of oranges (pounds) for the week of December 10–16.Price ($/lb.) Quantity Demanded (lbs.)$0.80 0 0.70 3 0.60 4 0.50 5 0.40 7 0a. Plot the data from the table into a graph.b. Is it a positive or negative relationship? Explain.
11. Using the map analogy from the chapter, talk about the importance of abstraction. How do you abstract when taking notes in class?
10. Answer the following questions:a. What is the difference between self-interest and selfishness?b. Why does inaction have consequences?c. Why are observation and prediction more difficult in economics than in chemistry?d. Why do economists look at group behavior rather than individual behavior?
9. In the debate about clean air standards we have often heard the statement, “A nation as rich as the United States should have no pollution.” Why is this a normative statement? Would it help you make a decision on national air quality standards?Describe two positive statements that might be
8. Are the following statements normative or positive, or do they contain elements of both normative and positive statements?a. A higher income-tax rate would generate increased tax revenues. Those extra revenues should be used to give more government aid to the poor.b. The study of physics is more
7. In the 1940s, Dr. Melvin Page conducted a national campaign to stop people other than infants from drinking milk.According to Page, milk was a dangerous food and a leading cause of cancer. He pointed to the fact that more people died of cancer in Wisconsin, the nation’s leading milk producer,
6. Do any of the following statements involve fallacies? If so, which ones do they involve?a. Because sitting in the back of classrooms is correlated with getting lower grades in the class, students should always sit closer to the front of the classroom.b. Historically, the stock market rises in
5. The Environmental Protection Agency asks you to help them understand the causes of urban pollution. Air pollution problems are worse the higher the Air Quality Index. You develop the following two hypotheses. Hypothesis I: Air pollution will be a greater problem as the average temperature
4. Identify which of the following headlines represents a microeconomic topic and which represents a macroeconomic topic.a. “U.S. Unemployment Rate Reaches Historic Laws”b. “General Motors Closes Auto Plant in St. Louis”c. “OPEC Action Results in a General Increase in Prices”d.
3. Are the following topics ones that would be covered in microeconomics or macroeconomics?a. the effects of an increase in the supply of lumber on the home-building industryb. changes in the national unemployment ratec. changes in the inflation rated. changes in the country’s economic growth
2. Write your own definition of economics. What are the main elements of the definition?
1. In most countries the birth rate has fallen as incomes and the economic opportunities for women have increased. Use economics to explain this pattern.
14. Which of the following is a positive statement?a. New tax laws are needed to help the poor.b. Teenage unemployment should be reduced.c. We should increase Social Security payments to the elderly.d. An increase in tax rates will reduce unemployment.e. It is only fair that firms protected from
13. Which of the following correlations is likely to involve primarily one variable causing the other, rather than a third variable causing them both?a. The amount of time a team’s third string plays in the game tends to be greater, the larger the team’s margin of victory.b. Ice cream sales and
12. Ten-year-old Tommy observes that people who play football are larger than average and tells his mom that he’s going to play football because it will make him big and strong. Tommy isa. committing the fallacy of composition.b. violating the ceteris paribus assumption.c. mistaking correlation
11. Which of the following statements can explain why correlation between Event A and Event B may not imply causality from A to B?a. The observed correlation may be coincidental.b. A third variable may be responsible for causing both events.c. Causality may run from Event B to Event A instead of in
10. The importance of the ceteris paribus assumption is that ita. allows one to separate normative economic issues from positive economic ones.b. allows one to generalize from the whole to the individual.c. allows one to analyze the relationship between two variables apart from the influence of
9. Economists use theories toa. abstract from the complexities of the world.b. understand economic behavior.c. explain and help predict human behavior.d. do all of the above.e. do none of the above.
8. Which of the following is most likely a topic of discussion in macroeconomics?a. an increase in the price of a pizzab. a decrease in the production of VCRs by a consumer electronics companyc. an increase in the wage rate paid to automobile workersd. a decrease in the unemployment ratee. the
7. When we look at a particular segment of the economy, such as a given industry, we are studyinga. macroeconomics.b. microeconomics.c. normative economics.d. positive economics.
6. When economists assume that people act rationally, it means theya. always make decisions based on complete and accurate information.b. make decisions that will not be regretted later.c. do the best they can based on their values and information under current and future circumstances.d. make
5. Which of the following would reflect self-interested behavior to an economist?a. worker pursuing a higher-paying job and better working conditionsb. consumer seeking a higher level of satisfaction with her current incomec. Mother Teresa using her Nobel Prize money to care for the poord. all of
4. Economics is concerned witha. the choices people must make because resources are scarce.b. human decision makers and the factors that influence their choices.c. the allocation of limited resources to satisfy unlimited wants.d. all of the above.
3. If scarcity were not a fact,a. people could have all the goods and services they wanted for free.b. it would no longer be necessary to make choices.c. poverty, defined as the lack of a minimum level of consumption, would also be eliminated.d. all of the above would be true.
2. Which of the following is true of resources?a. Their availability is unlimited.b. They are the inputs used to produce goods and services.c. Increasing the amount of resources available could eliminate scarcity.d. Both b and c.
1. If a good is scarce,a. it only needs to be limited.b. it is not possible to produce any more of the good.c. our unlimited wants exceed our limited resources.d. our limited wants exceed our unlimited resources.
15. A hypothesis is a normative statement. True or False:
14. The majority of disagreements in economics stem from normative issues. True or False:
13. A normative statement is nontestable. True or False:
12. A positive statement must be both testable and true. True or False:
11. Microeconomics would deal with the analysis of a small individual firm, while macroeconomics would deal with large global firms. True or False:
10. Determining whether an economic hypothesis is acceptable is more difficult than in the natural or physical sciences because, unlike a chemist in a chemistry lab, an economist cannot control all the other variables that might influence human behavior. True or False:
9. Economic theories do not ab True or False:stract from the particular details of situations so they can better focus on every aspect of the behavior to be explained.
8. Rationality could not apply to criminals. True or False:
7. According to the National Council of Economic Education, most adults tested in the United States performed well on economic literacy. True or False:
6. Adam Smith described how self-interest can be a force for the common good. True or False:
5. To say that people are rational is to assume that they never make mistakes. True or False:
4. Self-interest cannot include benevolence. True or False:
3. Living in a world of scarcity involves trade-offs. True or False:
2. Choices are costly because we must give up other opportunities that we value. True or False:
1. When our limited wants exceed our unlimited resources, we face scarcity. True or False:
23. “A tax increase will lead to a lower rate of inflation” is a(n) _____________ economic statement.
22. _____________ analysis is descriptive; normative analysis is _____________.
21. _____________ analysis involves judgments about what should be or what ought to happen.
20. The objective, value-free approach to economics, based on the scientific method, is called _____________ analysis.
19. The _____________ is the incorrect view that what is true for an individual is always true for the group.
18. When one event brings on another event, it is called _____________.
17. When two events usually occur together, it is called _____________.
16. In order to isolate the effects of one variable on another, we use the _____________ assumption.
15. _____________ analysis is the use of data to test a hypothesis.
14. A(n) _____________ in economic theory is a testable prediction about how people will behave or react to a change in economic circumstances.
13. Because of the complexity of human behavior, economists must _____________ to focus on the most important components of a particular problem.
12. Economic _____________ are statements or propositions used to _____________ and _____________ patterns of human economic behavior.
11. Rational self-interest implies that people do not make _____________ mistakes.
10. Actions have _____________.
9. Economists believe that it is _____________ for people to anticipate the likely future consequences of their behavior.
8. Economists assume that individuals act as if they are motivated by _____________ and respond in _____________ ways to changing circumstances.
7. _____________ deals with the aggregate (the forest), or total economy, while _____________ deals with the smaller units (the trees) within the economy.
6. Economics provided the tools to intelligently evaluate _____________ and make _____________.
5. Living in a world of scarcity means _____________.
4. The economic problem is that _____________ forces us to choose, and choices are costly because we must give up other opportunities that we _____________.
3. Resources are _____________ used to produce goods and services.
2. _____________ occurs because our unlimited wants exceed our limited resources.
1. Economics is the study of the choices we make among our many wants and desires given our _____________ resources.
5. Is the statement “UFOs land in my backyard at least twice a week” a positive statement? Why or why not?
4. Why do policy disagreements arise among economists?
3. Why is the positive/normative distinction important?
2. What is a normative statement? Is a normative statement testable?
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