Q: If the average wage for college graduates is $$56,182 and for high school graduates is 39$$,152, what is the percentage increase in wages for college graduates compared to high school graduates? Use the formula $$\frac{\text{College} - \text{High School}}{\text{High School}} \times 100\%.$$

$$\frac{56,182 - 39,152}{39,152} \times 100\% = 43.5\%$$

Q: If each additional year of education increases wages by 10%, what would be the wage after 4 years of college starting from $$15 per hour? Use the formula 15.00$$ \times $$(1.1)^4$.

$$15.00 \times (1.1)^4$ = 21.9615$$

Q: What is the opportunity cost of attending college for one year if the minimum wage is $$17.60/hour, you work 50 hours/week, and there are 28 weeks in the academic year? Use 17.60$$ \times 50 \times 28$.

$$17.60 \times 50 \times 28 = 24$$,640

Question 1

Which of the following best describes a model in economics?

Accepted Answer

A model is a simplified description of reality used to explain and predict economic phenomena.

Question 2

If the average wage for college graduates is $$56,182 and for high school graduates is 39$$,152, what is the percentage increase in wages for college graduates compared to high school graduates? Use the formula $$\frac{	ext{College} - 	ext{High School}}{	ext{High School}} 	imes 100\%.$$

Accepted Answer

$$\frac{56,182 - 39,152}{39,152} 	imes 100\% = 43.5\%$$

Question 3

According to the scientific method in economics, what are the two main steps?

Accepted Answer

Developing models and testing those models using data.

Question 4

If each additional year of education increases wages by 10%, what would be the wage after 4 years of college starting from $$15 per hour? Use the formula 15.00$$ 	imes $$(1.1)^4$.

Accepted Answer

$$15.00 	imes (1.1)^4$ = 21.9615$$

Question 5

Which of the following is an example of spurious correlation?

Accepted Answer

The number of computer science doctorates awarded in the US correlates with total revenue generated by arcades.

Question 6

Why does correlation not imply causality?

Accepted Answer

Because omitted variables or reverse causality may be present.

Question 7

A fishing boat brings in cod and haddock. Cod sells for $$2.00/lb, haddock for 1.50/lb. $$The total catch is 5,000 lbs and total revenue is $$9,000. How many pounds of cod were caught? Let x$ be pounds of cod and y$ be pounds of haddock. Solve: x + y = 5000$ and 2x + 1.5y = 9000$.

Accepted Answer

$$x = 3,000$$ lbs of cod

Question 8

Which statement about the mean and median is correct when the income distribution is skewed?

Accepted Answer

The median is less affected by extreme values than the mean.

Question 9

What is the opportunity cost of attending college for one year if the minimum wage is $$17.60/hour, you work 50 hours/week, and there are 28 weeks in the academic year? Use 17.60$$ 	imes 50 	imes 28$.

Accepted Answer

$$17.60 	imes 50 	imes 28 = 24$$,640

Question 10

Which of the following best illustrates reverse causality?

Accepted Answer

Assuming that exercise causes seniors to live longer, when in fact healthier seniors are more likely to exercise.

Question 11

If a model predicts a 46% increase in wages for college graduates over high school graduates, but the actual data shows a 43.5% increase, what does this suggest about the model?

Accepted Answer

The model is reasonably accurate, but not exact.

Question 12

Which of the following is NOT a feature of a good economic model?

Accepted Answer

It must be a perfect representation of reality.

Question 13

Given the function $$Y = A + BX$$, if $$A = 5$$ and $$B = 2$$, what is the value of $$Y$$ when $$X = 3$$?

Accepted Answer

$$Y = 5 + 2 	imes 3 = 11$$

Question 14

Which of the following is an example of a controlled experiment in economics?

Accepted Answer

Subjects are randomly assigned to treatment and control groups by the researcher.

Question 15

If the sum of two numbers is 385 and their difference is 97, what are the two numbers? Let $$x + y = 385$$ and $$x - y = 97.$$

Accepted Answer

$$x = 241, y = 144$$

Question 16

What is the main difference between a controlled experiment and a natural experiment in economics?

Accepted Answer

Controlled experiments use random assignment by the researcher, while natural experiments rely on external factors for group assignment.

Question 17

If the distribution of incomes is $$30, 40, 50, 60, 250$$, what is the mean and median?

Accepted Answer

Mean = $$86$$, Median = $$50$$

Question 18

Why might the mean not be a very accurate measure of central tendency when the range of incomes is skewed?

Accepted Answer

Because the mean is affected by extreme values, which can distort the average.

Question 19

Which of the following is a positive correlation?

Accepted Answer

Both variables increase together.

Models, Data, and the Scientific Method in Microeconomics

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