1.Economists often use models to clarify their thinking and generate specific, testable predictions. These models specify relationships between variables. Variables that are not explicitly included in the model, but may have effects on the variables in the model are called:

Mistakes

Control variables

Exogenous variables

Endogenous variables

2.Which of the following scenarios best illustrates an indirect incentive?

-The US government pays a company for each mile of railroad built connecting two cities. The company adds extra curves to the route, making their railroad unnecessarily long and increasing their earnings.

-Connor is interested in becoming more active and buys a step-counter. He enjoys setting new records with his steps, so he begins to walk more often.

-Phyllis offers her daughter $10 to rake the yard. Her daughter rakes the yard and then asks Phyllis for $10.

-A bar offers lower prices at certain times of the day when business is usually slow. Customers respond by visiting the bar during those times.

3.Sanjay and Ted complete homework assignments for students in exchange for money (A+ guaranteed). They complete two kinds of assignments: English essays and math problem sets. Ted can complete 3 essays or 3 problem sets in a day. Sanjay can complete 6 essays or 7 problem sets in a day. This information is summarized in the table below.

Essays per day Problem sets per day Sanjay 6 7 Ted 3 3 What is Sanjay's opportunity cost of writing an essay?