Q: Suppose the opportunity cost of attending university is $17.60$ per hour, $50$ hours per week, $28$ weeks per year. What is the total opportunity cost for one year?

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

Question 1

Which of the following best describes an economic model?

Accepted Answer

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 of a 46% increase?

Accepted Answer

The increase is 43.5%, which is close to 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 is the formula for their wage after $n$ additional years?

Accepted Answer

$15.00 	imes (1.1)^n$

Question 4

Which of the following statements about correlation and causation is correct?

Accepted Answer

Causation means that one event directly affects another, while correlation means two events are related but not necessarily causally.

Question 5

A study finds that people who exercise daily are less likely to die in the next year. Which of the following is a possible example of reverse causality in this context?

Accepted Answer

People who are already healthier are more likely to exercise daily.

Question 6

Which of the following is an example of a spurious correlation?

Accepted Answer

The number of people who drowned by falling into a pool and the number of films Nicolas Cage appeared in.

Question 7

Why do economists use experiments, such as natural experiments, to study cause and effect?

Accepted Answer

Because experiments allow researchers to randomly assign subjects to treatment and control groups, helping to isolate causal relationships.

Question 8

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

Accepted Answer

The distribution is likely skewed to the right, indicating a few very high incomes.

Question 9

Given the following incomes: $30,000, $40,000, $50,000, $60,000, $250,000$, what is the median and mean income?

Accepted Answer

Median: $50,000; Mean: $86,000

Question 10

Suppose the opportunity cost of attending university is $17.60$ per hour, $50$ hours per week, $28$ weeks per year. What is the total opportunity cost for one year?

Accepted Answer

$17.60 	imes 50 	imes 28 = $24,640

Question 11

Which of the following is a key feature of economic models?

Accepted Answer

They generate predictions that can be tested with data.

Question 12

If a model predicts that each year of education increases wages by 10%, but actual data shows some people earn less after more education, what does this illustrate?

Accepted Answer

Models are not exact and averages can mask individual variation.

Question 13

Which of the following best explains why correlation does not imply causality?

Accepted Answer

There may be omitted variables or reverse causality affecting the relationship.

Question 14

A fishing boat brings in two kinds of fish, cod and haddock. The price per pound is $2.00 for cod and $1.50 for haddock. The total catch is 5,000 pounds and the total revenue is $9,000. How many pounds of each fish were caught? (Let $x$ be pounds of cod, $y$ be pounds of haddock)

Accepted Answer

$x = 3,000$, $y = 2,000$

Question 15

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

Accepted Answer

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

Question 16

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

Accepted Answer

$Y = 11$

Question 17

Which of the following is a reason why the mean income can be misleading in measuring economic well-being?

Accepted Answer

The mean can be skewed by a few very high incomes, not reflecting the typical experience.

Question 18

If a model predicts a 10% increase in earnings for each additional year of education, what is the predicted wage after 4 years, starting from $15 per hour?

Accepted Answer

$15.00 	imes (1.1)^4 = $21.9615

Question 19

Which of the following best describes the scientific method in economics?

Accepted Answer

Developing models and testing them using data to see how closely they match observations.

ECN104 Lecture 2

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