Q: If a person earns $$15 per hour with 13 years of education, and each additional year of education increases earnings by 10%, what will their hourly wage be after 4 more years of education? Use the formula W = 15$$ \times (1.1)^n$$ where n$ is the number of additional years.

$$W = 15 \times (1.1)^4$ = 21.9615$$

Question 1

Which of the following best describes the purpose of a model in economics?

Accepted Answer

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

Question 2

Suppose the average wage for a high school graduate is $$39,152 and for a college graduate is 56$$,182. What is the percentage increase in wages from high school to college, and how does it compare to the model's prediction?

Accepted Answer

The increase is 43.5%, which is slightly lower than the model's prediction of 46%.

Question 3

If a person earns $$15 per hour with 13 years of education, and each additional year of education increases earnings by 10%, what will their hourly wage be after 4 more years of education? Use the formula W = 15$$ 	imes (1.1)^n$$ where n$ is the number of additional years.

Accepted Answer

$$W = 15 	imes (1.1)^4$ = 21.9615$$

Question 4

Which of the following is an example of spurious correlation?

Accepted Answer

The number of people who drowned by falling into a pool correlates with the number of films a specific actor appeared in.

Question 5

Why is correlation not the same as causality?

Accepted Answer

Correlation can exist due to omitted variables or reverse causality, not because one variable causes the other.

Question 6

A study finds that gamblers over 65 are healthier than non-gamblers. Which of the following best explains why this correlation may not imply causation?

Accepted Answer

Healthier seniors may be more likely to gamble, indicating reverse causality.

Question 7

Which of the following best describes the difference between the mean and the median?

Accepted Answer

The median is the middle value in a data set, while the mean is the average of all values.

Question 8

Given the equation $$Y = 5 + 2X$$, what is the value of $$Y$$ when $$X = 3$$?

Accepted Answer

$$Y = 15$$

Question 9

Which of the following is a key feature of a good economic model?

Accepted Answer

It generates predictions that can be tested with data.

Question 10

Suppose you are given two numbers whose sum is 385 and whose difference is 97. What are the two numbers?

Accepted Answer

241 and 144

Question 11

A fishing boat brings in cod and haddock. Cod sells for $$2.00 per pound, haddock for 1.50 $$per pound. If the total catch is 5,000 pounds and the total revenue is $$9,000, how many pounds of cod were caught? Let x$ be pounds of cod and y$ be pounds of haddock.

Accepted Answer

$$x = 3,000$$

Question 12

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

Accepted Answer

A government changes the minimum school-leaving age, creating treatment and control groups based on birth year.

Question 13

If the mean income in a group is much higher than the median, what does this suggest about the income distribution?

Accepted Answer

There are a few very high incomes skewing the mean upward.

Question 14

Which of the following best illustrates the concept of opportunity cost for a college student?

Accepted Answer

The wages the student could have earned working instead of attending college.

Question 15

Which of the following is a possible omitted variable in the study that found named dairy cows produce more milk?

Accepted Answer

The quality of care given to cows that are named.

Question 16

If $$Y = A + BX$$, and $$A = 5$$, $$B = 2$$, what is the slope of the function?

Accepted Answer

$$2$$

Question 17

Which of the following is NOT a reason why correlation does not imply causation?

Accepted Answer

Correlation always means one variable causes the other.

Question 18

If the average wage for university graduates is $$56,182 and for those with no certificate is 31$$,778, what is the percentage difference?

Accepted Answer

$$(56,182 - 31,778)/31,778 \approx 76.8\%$$

Models, Data, and the Scientific Method in Microeconomics

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