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ECO 561 Week 1 Discussion Decision Making and Buyer
Behavior
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Behavior
Post a total of 3 substantive responses over 2 separate days
for full participation. This includes your initial post and 2
replies to other students.
Due Monday
Respond to the following in a minimum of 175 words:
• People may make bad decisions because they fail to
compare the relevant costs and benefits. Do you agree?
Provide an example of when you made a bad decision, and an
example of when you made a good decision. Did you
compare the relevant costs and benefits?
• Discuss an example of behavior you have observed
that could be described as “smart for one but dumb for all.”
Due Monday
Reply to at least 2 of your classmates. Be constructive and
professional in your responses.

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ECO 561 Week 2 Discussion Competition, invis
hand(2Response).docx
ECO 561 Week 2 Discussion Competition and the Invisible
Hand
Due Thursday
• Read the following statement and discuss if you agree
or disagree, and your rationale: If the demand of illegal drugs

is inelastic, increased arrests of illegal-drug sellers will
increase total expenditures on illegal drugs.
• Discuss at least 2 reasons for the change in this
scenario: Early suppliers of more fuel-efficient cars were able
to charge premium prices for them, but that ability faded as
other suppliers adopted similar technologies.
Due Monday
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ECO 561 Week 3 Discussion Explaining the
Imperfections
ECO 561 Week 3 Discussion Explaining the Imperfections

Due Thursday
• Explain why monopoly sellers usually offer discount
prices to buyers who are willing to mail in a rebate coupon or
endure some other type of inconvenience.
• Discuss why traditional economic models find it
difficult to explain why people would pay to attend weight-
loss camps that restrict their daily calorie intake.
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ECO 561 Week 4 Discussion Income Distribution
and Labor Markets
ECO 561 Week 4 Discussion Income Distribution and Labor
Markets

Due Thursday
• Discuss at least two self-interested reasons that a top
earner might favor policies to redistribute income.
• Discuss why the supply curve of labor for any
specific occupation is likely to be upward-sloping, even if,
for the economy as a whole, people work fewer hours when
wage rates increase.
Due Monday
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ECO 561 Week 5 Discussion Money Multiplier

Due Thursday
Watch the Money Multiplier:
Money Multiplier Transcript
This video explains the multiplier effect. How does the
multiplier facilitate the creation of money? Note: Be careful
you do not confuse the monetary multiplier with the
“multiplier effect” that is associated with gross domestic
product (GDP) and is also referred to as the spending
multiplier or the GDP multiplier.
Due Monday
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ECO 561 Week 5 Discussion Open Economy
Activities
ECO 561 Week 5 Discussion Open Economy Activities
Due Thursday
One standard that corporations use to evaluate their
performance against their competitors is the set of rankings
developed by Fortune magazine. These include the Fortune
500, the 100 Best Companies to Work For, and other lists.
The public also uses these rankings to decide to what
companies they should give their business

• Discuss who gains and who loses when an economy
opens for trade.
• Explain what determines exchange rates in the short
and long run.
Due Monday
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ECO 561 Week 6 Discussion Economic Growth and
Capital Flow
ECO 561 Week 6 Discussion Economic Growth and Capital
Flow

Due Thursday
• Discuss the following statement from Principles of
Economics: “Because the environment is fragile and natural
resources are finite, ultimately economic growth must come
to an end.”
• Explain why, in any period, a country’s net capital
inflows equal its trade deficit? Include examples.
Due Monday
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ECO 561 Week 6 Discussion System Dynamics

Due Thursday
Watch “System Dynamics” from the University Library.
Jackson uses a visual aid to show the circular flow model of
the economy. How would you describe the creation of
novelty?
Due Monday
professional in your respons

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ECO 561T Apply Week 1 Assignment
1) For the fall semester, you had to pay a nonrefundable fee
of $600 for your meal plan, which gives you up to 150 meals.
If you eat 100 meals, your average cost for a meal is:
2) Refer to the accompanying table below. The marginal cost
of the 4th unit of activity is:
3) Refer to the accompanying table below. The average cost
of 5 units of activity is:
4) Suppose the most you would be willing to pay for a plane
ticket home is $250. If you buy one for $175, then your
economic surplus is:
5) Pat can either drive to work, which takes half an hour and
uses $1.50 worth of gas, or take the bus, which takes an hour
and costs $1.00. How should Pat get to work?
6) Pat earns $25,000 per year (after taxes), and Pat's spouse,
Chris, earns $35,000 (after taxes). They have two pre-school-

aged children. Childcare for their children costs $12,000 per
year. Given that Chris doesn't want to stay home with the
kids, regardless of what Pat does, Pat should stay home with
the kids if, and only if, the value of Pat spending more time
with the kids is greater than:
7) The following accompanying table shows the relationship
between the speed of a computer's CPU and its benefits and
costs. Assume that all other features of the computer are the
same (that is, CPU speed is the only source of variation), and
only the CPU speeds listed below are available for purchase.
8) The Incentive Principle states that a person:
9) The Cost-Benefit Principle indicates that an action should
be taken if:
10) Larry was accepted at three different graduate schools,
and must choose one. Elite U costs $50,000 per year and did
not offer Larry any financial aid. Larry values attending Elite
U at $60,000 per year. State College costs $30,000 per year,
and offered Larry an annual $10,000 scholarship. Larry
values attending State College at $40,000 per year. NoName
U costs $20,000 per year, and offered Larry a full $20,000
annual scholarship. Larry values attending NoName at
$15,000 per year. Larry maximizes his economic surplus by
attending:

11) In a market in which the government has set a price
ceiling below the equilibrium price:
12) According to the textbook, government price controls fail
because:
13) Refer to the accompanying figure. If the current market
price were $20:
14) Refer to the figure below. There would be an excess
supply of 25 at a price of ______.
15) Which of the following is NOT a characteristic of a
market in equilibrium?
16) If there is an excess supply of sport utility vehicles, then:
17) Which of the following is NOT a characteristic of rent
controls?

18) Refer to the accompanying figure. The equilibrium price
is ______, and the equilibrium
19) Refer to the accompanying figure. If the price is $4 today
and there is no change in either supply or demand, one would
expect the price in the future to be:
20) Refer to the accompanying figure. At a price of $3, there
will be:
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1) If the price elasticity of demand for pineapples is 0.75, then a 4 percent increase in the price of
pineapples will lead to a:

2) Suppose the company that owns the vending machines on your campus has doubled the price
of a can of soda. They then notice that they are selling approximately 15 percent fewer sodas.
The price elasticity of demand for sodas from the campus vending machines, therefore, is:
3) Suppose the price P on a given demand curve results in a price elasticity of demand equal to 1.
Any price higher than P will lie on the ______ part of the demand curve, and any price lower
than P will lie on the ______ part of the demand curve.
4) A demand curve that is drawn as a vertical line has a price elasticity of demand equal to:
5) A demand curve that is drawn as a vertical line has a price elasticity of demand equal to:
6) If the price of textbooks increases by one percent and the quantity demanded falls by one-half
percent, then demand for textbooks is:
7) The demand for a good is elastic if the price elasticity of demand is:
8) Refer to the accompanying graph. What is the price elasticity of demand at point A?
9) Suppose that the short-run price elasticity of demand for electricity is 0.03, and the long-run
price elasticity of demand is 1.2. One would classify the short-run elasticity as being
___________ and the long-run elasticity as being ____________.
10) Jeans in general have fewer close substitutes than a specific brand of jeans. Therefore, the
demand for jeans in general will be _______ than the demand for a specific brand of jeans.
11) Barriers to entry are forces that:
12) Superstar professional athletes can sustain their economic rents because:
13) Adam Smith’s theory of the invisible hand posits the actions of independent, self-interested
buyers and sellers will ______ lead to the most efficient allocation of resources.
14) Which of the following best describes how a perfectly competitive industry would respond to
a sudden increase in popularity of the product? The market demand curve would shift to the
right, leading to:
15) Which of the following is a characteristic of economic rent?

16) Adam Smith’s theory of the invisible hand posits that the most efficient allocation of
resources is often achieved by:
17) Assume that all firms in this industry have identical cost curves, and that the market is
perfectly competitive.
If S3 is the market supply curve, then in the short run, the profit-maximizing level of output for a
single firm in this market is ______ gallons per week.
18) The figure below depicts the short-run market equilibrium in a perfectly competitive market
and the cost curves for a representative firm in that market. Assume that all firms in this market
have identical cost curves.
A starting assumption about this industry was that all of the firms in the market had identical cost
curves. This assumption is:
19) Assume that all firms in this industry have identical cost curves, and that the market is
perfectly competitive.
If S3 is the market supply curve, then each firm in this market will earn an economic loss of
______ per week.
20) A cost-saving innovation in a perfectly competitive industry will lead to:
21) If the price elasticity of demand for pineapples is 0.75, then a 4 percent increase in the price
of pineapples will lead to a:
22) Suppose that the short-run price elasticity of demand for electricity is 0.03, and the long-run
price elasticity of demand is 1.2. One would classify the short-run elasticity as being
___________ and the long-run elasticity as being ____________.
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1) The essential feature that differentiates imperfectly competitive firms from perfectly
competitive firms is that an imperfectly competitive firm:
2) If a firm faces a downward-sloping demand curve, then:
3) Given the demand curve it faces, if an imperfectly competitive firm wants to sell another unit
of output, it must:
4) To sell an extra unit of output, a perfectly competitive firm ______, and an imperfectly
competitive firm ______.
5) Suppose a perfectly competitive firm and a monopolist are both charging $5 for their
respective products. From this, one can infer that:
6) A price setter is a firm that:
7) In many cities in the United States, a single firm provides electricity. Those firms are:
8) A pure monopoly exists when:
9) If a firm functions in an oligopoly, it is:
10) An imperfectly competitive firm faces a demand curve that is:
11) The Weber-Fechner law is the relationship according to which the perceived change in any
stimulus:
12) Suppose Michael is willing to drive across town to save 40 percent on a sweatshirt with a list
price of $80. If Michael is rational, this implies that he should
13) According to the Weber-Fechner law, the perceived size of a change in a stimulus will be
large when the change in the stimulus:
14) Suppose Alyssa is willing to drive across town to save 50 percent on a soccer ball with a list
price of $40. If Alyssa is rational, this implies that she should:
15) Consider two coupons: one offers 50 percent off a scarf that costs $20, and the other offers 5
percent off a jacket that costs $200. Using either coupon requires driving to the shopping mall
across town. According to the Weber-Fechner law, which coupon will people tend to perceive as
being more valuable?

16) Corey is having difficulty deciding between two dishwashers, A and B. As shown in the
accompanying diagram, A makes more noise than B, but is cheaper. Ideally, Corey would like a
dishwasher that is both quiet and inexpensive.
If Corey behaves like most decision-makers, then the addition of option C would:
17) Brandon is having difficulty deciding between two jobs, X and Y. As shown in the
accompanying diagram, X entails a greater risk of injury than Y, but pays more. Ideally, Brandon
would like a job that both pays well and does not entail a high risk of injury.
If Brandon behaves like most decision-makers, then the addition of option Z would:
18) According to the Weber-Fechner law, when the change in a stimulus is large in proportion to
the original stimulus, the perceived size of the change will be:
19) Kendra is having difficulty deciding between two cars, A and B. As shown in the
accompanying diagram, A has more cargo room than B, but lower gas mileage. Ideally Kendra
would like a car both with a lot of cargo room and good gas mileage.
If Kendra behaves like most decision-makers, then the addition of option C would:
coupons: one offers 10 percent off a pair of jeans that costs $100, and the other offers 50 percent
off a pair of sunglasses that costs $20. Using either coupon requires driving to the shopping mall
across town. According to the Weber-Fechner law, which coupon will people tend to perceive as
being more valuable?
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1) The optimal amount of information to acquire before making a purchase is:
2) This graph illustrates the marginal costs and marginal benefits of acquiring information before
making a major purchase.
Suppose the marginal cost and marginal benefit curves were MC0 and MB0 several decades ago.
However, because information about this product is now available online, the:
3) The free-rider problem occurs when:
4) Pat goes to the local electronics store to learn about high-end audio equipment. The
salesperson spends an hour talking with Pat and demonstrating equipment. Pat then leaves and
orders an audio system on the Internet for $250 less than the price at the store. Pat's behavior:
5) Obi-Wan is considering whether to buy a lightsaber. With probability 0.50 he will value the
lightsaber at $4,000, and with probability 0.50 he will value it at $1,000. If new lightsabers sell
for $2,500, then buying a new lightsaber is a:
6) Suppose Mo is considering whether to see Zombie Revenge III at her local movie theater.
Tickets cost $12 each, but Mo isn’t sure how much she’s going to like the movie. There’s a 40
percent chance she’ll get $20 worth of enjoyment from seeing the movie, and there’s a 60
percent chance she’ll only get $10 worth of enjoyment from seeing the movie. Mo’s expected
value of seeing the movie is:
7) Mel is thinking of going on a cruise. Mel values a cruise in nice weather at $2,000 and values
a cruise in bad weather at $50. The probability of nice weather is 60 percent and the probability
of bad weather is 40 percent. Trip insurance is sometimes available. If purchased, it allows
travelers to delay the cruise until the weather is nice. If Mel is risk-neutral, then in the absence of
trip insurance, the most she will be willing to pay for the cruise is:
8) Mel is thinking of going on a cruise. Mel values a cruise in nice weather at $2,000 and values
a cruise in bad weather at $50. The probability of nice weather is 60 percent and the probability
of bad weather is 40 percent. Trip insurance is sometimes available. If purchased, it allows
travelers to delay the cruise until the weather is nice. The amount of money that Mel is willing to
pay for trip insurance will be:

9) A gamble that offers a 1 percent chance of winning $699.93 and a 99 percent chance of losing
$7.07 would be classified as a(n):
10) If a gamble has an expected value of $10, then one can predict that:
11) Suppose that the salary range for recent college graduates with a bachelor's degree in
economics is $30,000 to $50,000, with 25 percent of jobs offering $30,000 per year, 50 percent
offering $40,000 per year and 25 percent offering $50,000 per year and that in all other respects,
the jobs are equally satisfying. Assume that in this market, a job offer remains open for only a
short time so that continuing to search requires an applicant to reject any current job offer. The
expected starting salary for a college graduate with a bachelor’s degree in economics is:
12) Suppose that the salary range for recent college graduates with a bachelor's degree in
economics is $30,000 to $50,000, with 25 percent of jobs offering $30,000 per year, 50 percent
offering $40,000 per year and 25 percent offering $50,000 per year and that in all other respects,
the jobs are equally satisfying. Assume that in this market, a job offer remains open for only a
short time so that continuing to search requires an applicant to reject any current job offer. Who
will accept an offer of $30,000?
13) Alex, who is risk-neutral, is looking for a one-bedroom apartment to rent for the month of
August while he’s on vacation in Seattle. All of the one-bedroom apartments in the
neighborhood where he wants to stay are of equal quality, but 70 percent rent for $700 per
month, 20 percent rent for $600 per month, and 10 percent rent for $500 per month. The first
apartment Alex finds rents for $700 per month. Suppose Alex is risk-averse. If the cost to Alex
of searching for another apartment is $40, then will he search for another apartment?

14) Suppose that there is not enough parking at an urban university. Sometimes students come to
campus, spend a few minutes searching for a parking spot, and then decide that going to class
isn't worth the effort of continuing to search for a parking spot, so they go home. Assume that all
professors give midterm exams on the same day. You would expect the optimal amount of time
spent searching for a parking spot on that day to _____ because ______.
15) There are two employers in Bucolic that hire people who do not have a high school degree: a
grocery store and a hardware store. The grocery store pays $10 per hour and the hardware store
pays $12 per hour. People who work at either store can work as many hours as they want at those
wages. Assume that it takes two hours to interview for a job. Lee works at the grocery store, but
would like to work at the hardware store. If Lee interviews at the hardware store, there is a 10
percent probability of being hired. Assume that Lee is risk-neutral. How many hours must Lee
anticipate working at the hardware store to justify interviewing for the job?
16) In the market for labor, the demand function describes
17) Technological advances that increase the marginal product of labor will lead to:
18) Kyle works for a perfectly competitive firm where he receives a wage rate of $15. From this,
one can infer that:
19) The general rule governing the hiring of workers is to:
20) In order to maximize its profits, a firm that hires workers in a perfectly competitive labor
market will hire workers until the:

21) In a perfectly competitive labor market, if the value of marginal product of the last worker
hired is $20 and the wage rate is $25, then the firm should:
22) To derive the labor demand curve for a particular market, one should ______for all the firms
in the market.
23) Suppose it is observed that the equilibrium wage and employment level have both risen in a
competitive labor market. One can infer that the:
24) In a competitive labor market, the equilibrium wage rate is determined by:
25) Suppose that this graph describes the current labor market for high school teachers:
If the wage is w*, then:

Why might the supply curve in this market shift to the left?

Given an initial wage of w*, then immediately following a decrease in supply:
28) A reduction in workers' marginal productivity would result in:
29) A decrease in demand for a firm's output results in a(n):
30) Assume that the graph below describes the current labor market for nurses in a mid-sized city
and that the labor market is perfectly competitive.
If supply shifts from S0 to S1 and demand shifts from D0 to D1, then

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http://www.tutorialrank.com/ECO/ECO-561T/product-27781-
ECO-561T-Apply-Week-5-Assignment
1) The following graph is the production possibility curve for
a three-person economy, with workers Janna, Drew, and
Karl.
The slope of the PPC between points X and Y is determined
by _____ opportunity cost.
2) Sheila and Jim live in an island where they are the only
two workers. Sheila can either catch 10 fish or gather 40
pounds of berries each day, and Jim can either catch 8 fish
or gather 24 pounds of berries each day. Both of them work
200 days per year. At current world prices 1 fish trades for

3.5 pounds of berries. Who has the comparative advantage
in producing berries?
3) The following graph is the production possibility curve for
a three-person economy, with workers Janna, Drew, and
Kari.
Who has the greatest comparative advantage in shoe
production?
4) Refer to the following graph.
The maximum amount of good A can be consumed in this
economy without trade is
5) An economy has two workers, Paula and Ricardo. Every
day they work, Paula can produce 4 computers or 16 shirts,
and Ricardo can produce 6 computers or 12 shirts. What is
the most of each good that can be produced each day if each
worker fully specializes according to his/her comparative
advantage?
6) ¬¬¬¬¬¬¬¬¬¬¬¬¬¬Amy can produce either 5,000 pounds
of cheese or 20 cars per year. Mike can produce either 5,000
pounds of cheese or 10 cars per year. If both Amy and Mike
produce the good in which they have comparative
advantage, the total annual output of this economy will be
_______.
7) ¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬An economy has two workers, Jen
and Rich. Every day they work, Jen can produce 2 TVs or
10 radios, and Rich can produce 4 TVs or 12 radios. _______

has the comparative advantage in TVs and _______ has the
comparative advantage in radios.
) ¬¬¬¬¬¬¬¬¬¬¬¬¬¬The country Happy Land claims that it
is producing everything its citizens consume. This situation
is called
9) Amy can produce either 5,000 pounds of cheese or 20 cars
per year. Mike can produce either 5,000 pounds of cheese or
10 cars per year. Amy has a comparative advantage in
producing _____, and Mike has a comparative advantage in
producing ______.
10) An economy has two workers, Jen and Rich. Every day
they work, Jen can produce 2 TVs or 10 radios, and Rich
can produce 4 TVs or 12 radios. To maximize total output,
Jen should specialize in producing _____ while Rich should
specialize in producing _______.
11) If the exchange rate moves from 10 Mexican pesos per
U.S. dollar to 8 Mexican pesos per U.S. dollar, then the
Mexican peso has ______ and the U.S. dollar has _____.
12) A decrease in the value of a currency relative to other
currencies is called a(n):
13) A country's nominal exchange rate, e, is defined as the
number of units of:

14) A decrease in the nominal exchange rate, e, defined as
the number of units of the foreign currency that one unit of
the domestic currency will buy, indicates that the domestic
currency has ______ relative to the foreign currency.
15) ¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬An increase in the nominal
exchange rate, e, defined as the number of units of the
foreign currency that one unit of the domestic currency will
buy, indicates that the domestic currency has ______ relative
to the foreign currency
and foreign price level, an increase in the nominal exchange
rate ______ the real exchange rate.
17) If a certain automotive part can be purchased in Mexico
for 60 pesos or in the United States for $6.25 and if the
nominal exchange rate is 8 pesos per U.S. dollar, then the
automotive part:
18) There is ______ connection between the strength of a
country’s currency and the strength of its ______.
19) An increase in the real exchange rate will tend to ______
exports and to ______ imports.

20) If the nominal exchange rate were to be expressed as the
number of units of domestic currency per unit of foreign
currency, and that rate increases, then the domestic
currency has:
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ECO 561T Apply Week 5 Think Like an Economist
ECO-561T-Apply-Week-5-Think-Like-an-Economist
Apply: Think Like an Economist Assignment Instructions
The accompanying table shows how total donations, average
donations, total labor costs and average labor costs vary
depending on the number of employees State U hires for its
fundraising activities.
Complete the following:

• Calculate the total value of donations raised by three
employees, and explain the method you used to make this
calculation.
• Calculate the total labor cost with four employees,
and explain the method you used to make this calculation.
• Analyze the relationship between average benefits
and average costs by filling in the blanks in the following
statement:
o If the President of State U decides to hire fundraising
employees as long as their average benefit exceeds their
average cost, then this results in ________ employees being
hired and a net benefit (total donations minus total labor
costs) of ________.
• Evaluate the marginal benefit (in terms of extra
donations) of the 2nd employee.
• Explain how the marginal cost of the 4th employee
will increase the total labor cost.

• Determine when the net benefit of hiring fundraisers
is the largest.
Please Show your Work:
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ECO-561T-Apply-Week-6-Assignment
1) Average labor productivity times the proportion of the
population employed equals:
2) ¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬A nation's standard of living, as
measured by real GDP per person, increases:

3) If average labor productivity increases, real GDP per
person:
4) Suppose that average labor productivity in Country C is
$6,000, and that Countries C and A have the same real GDP
per capita. Based on the information in the table, what must
be the average labor productivity in Country A?
Country Population (millions) Share of Population
Employed (%)
A 100 60
B 150 55
C 75 50
D 250 45
E 95 40

5) Suppose that the share of population employed in
Country C is 50 percent, and that Countries C and D have
the same real GDP per capita. Based on the information in
the table, what share of Country D’s population must be
employed?
Country Population (millions) Average Labor
Productivity ($)
A 100 2,000
B 150 10,000
C 75 25,000

D 250 50,000
E 95 60,000
6) If the share of population employed in two countries is the
same, average living standards will be higher in the country
with:
7) The population of Omega totals one million people, 30
percent of whom are employed. Average output per worker
in Omega is $30,000. Real GDP per person in Omega totals:
8) Real GDP per person equals average labor productivity:

9) If average labor productivity in two countries is the same,
average living standards will be lower in the country with:
10) One factor that contributed to the growth in the share of
population employed in the United States between 1960 and
2000 was increased:
11) Each of the following is an example of a financial
intermediary EXCEPT a:
12) When the coupon rate on newly issued bonds increases
from 5 percent to 6 percent, the prices of existing bonds:
13) You originally required a risk premium of 6 percent in
addition to the rate of return on safe assets before you would
purchase shares of Techno Company stock. If you and other
investors reduce the risk premium you require to 4 percent,
the price of Techno Company stock will:
14) Chris pays $10,000 for a newly issued two-year
government bond with a $10,000 face value and a 6 percent
coupon rate. One year later, after receiving the first coupon
payment, Chris sells the bond. If the current one-year

interest rate on government bonds is 7 percent, then the
price Chris receives is:
15) Savers may prefer to use financial intermediaries rather
than lending directly to borrowers because financial
intermediaries:
16) If the principal amount of a bond is $2,000,000, the
coupon rate is 6 percent , and the inflation rate is 4 percent,
then the annual coupon payment made to the holder of the
bond is:
17) Financial systems in market economies improve the
allocation of saving in each of the following ways EXCEPT
by:
18) When the coupon rate on newly issued bonds decreases
from 6 percent to 5 percent, the prices of existing bonds:
19) The amount originally lent by a bondholder is called the:

20) A legal promise to repay a debt is called:
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ECO 561T Entire Course
ECO-561T-Entire-Course
Behavior
ECO 561 Week 2 Discussion Competition and the Invisible
Hand
ECO 561 Week 3 Discussion Explaining the Imperfections
ECO 561 Week 4 Discussion Income Distribution and Labor
Markets
ECO 561 Week 5 Discussion Open Economy Activities

ECO 561T Apply Week 5 Think Like an Economist
ECO 561 Week 6 Discussion Economic Growth and Capital
Flow
ECO 561T Week 1 Video Question
ECO 561T Week 2 Practice Knowledge Check
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ECO-561T-Week-1-Video-Question

1)The table below shows your total benefit measured in
dollars from drinking different amounts of coffee each
day.what’s your marginal benefit from a second cup of
coffee?
Number of cups of coffee per day Total benefit per day(in
dollars)
0 0
1 5
2 9
3 12
4 14
5 15

2)The table below shows your total benefit measured in
dollars from drinking different amounts of coffee each day.If
each cup of coffee costs you $2.50,then how many cups of
coffee should you drink each day?
Number of cups of coffee per day Total benefit per day(in
dollars)
0 0
1 5
2 9
3 12
4 14
5 15
3)The opportunity cost of an action is equal to:
4)Suppose joe is trying to decide whether to buy a latte at a
nearby coffee shop or make a cup of coffee at home.Joe
would get $5 worth of value from the latte,and the price of a

latte at the coffee shop is $3. Joe would get $2.50 worth of
value from a cup of homemade coffee,and it would cost him
$1 to make.What is the opportunity cost to joe of buying a
latte at the coffee shop?
5) Suppose joe is trying to decide whether to buy a latte at a
nearby coffee shop or make a cup of coffee at home.Joe
would get $5 worth of value from the latte,and the price of a
latte at the coffee shop is $3. Joe would get $2.50 worth of
value from a cup of homemade coffee,and it would cost him
$1 to make.How much economic surplus would joe get from
buying a latte at the coffee shop?
6)If the price of golf clubs felts,then we would expect the
demand for golf balls to:
7)If two goods are complements and the price of one good
increases, then demand for the other good will:
8)If the demand for bread increases when the price of
potatoes increases,then this suggests that potatoes and bread
are:
9)An increase in demand is represented by a:
===========================================
===

ECO-561T-Week-2-Practice-Knowledge-Check
1)If the price of textbooks increases by one percent and the
quantity demanded falls by one-half percent, then the price
elasticity of demand is equal to:
2)If 20 percent increase in the price of a good leads to a 60
percent decrease in the quantity demanded, then what is the
price elasticity of demand?
3)When the price of NBA tickets is $25 each, 30,000 tickets
are sold. After the price rises to $30 each, 20,000 tickets are
sold. At the original price, the demand for NBA ticket is:
4)Suppose the company that owns the vending machines on
your campus has doubled the price of a can of soda. They
then notice that they are selling approximately 15 percent
fewer sodas. The price elasticity of demand for sodas from
the campus vending machines, therefore, is:
5)Jeans in general have fewer close substitutes than a specific
brand of jeans. Therefore, the demand for jeans in general
will be _______ than the demand for a specific brand of
jeans.

6)All else equal, compared to small-budget items such as
paper towels, the price elasticity of demand for big-ticket
items such as refrigerators is:
7)Demand tends to be ______ in the short run than in the
long run.
8)Assume the price of gasoline doubles tonight and remains
at that price for the next two years. Compared with the long-
run price elasticity of demand for gasoline, the short-run
price elasticity of demand for gasoline will be ______.
9)The accompanying graph depicts demand.
The slope of the demand curve (ignoring the negative sign)
is:
The price elasticity of demand at point A is:
At point A, demand is:
The price elasticity of demand at point B is:
13)Refer to the accompanying figure. At P = 8 and Q = 4, D1
is ______ elastic than D2, which is shown graphically as D1
being _____ D2.
14)If consumers completely cease purchasing a product when
its price increases by any amount, then demand is:
15)If the demand curve for open-heart surgery is vertical for
people with serious heart conditions, then the demand for
open-heart surgery is ______ with respect to price.

16)Adam Smith’s theory of the invisible hand posits the
actions of independent, self-interested buyers and sellers will
______ lead to the most efficient allocation of resources.
17)The role that prices play in distributing scarce goods and
services to those consumers who value them the most highly
is known as the ______ function of price.
18)The role that prices play in directing resources away from
overcrowded markets and towards markets that are
underserved is known as the ______ function of price.
19)The allocative function of price is to:
20)If the firms in a market are earning an economic profit,
then, in the long run, the market ______ curve will shift to
the ______.
21)If all firms in a perfectly competitive industry are earning
a normal profit, then:
22)In an industry with free entry and exit, positive economic
profit:
23)Assume that all firms in this industry have identical cost
curves, and that the market is perfectly competitive.
24)In the long run, there will be ______ firms in this market.
25)Which of the following best describes how a perfectly
competitive industry would respond to a sudden increase in
popularity of the product? The market demand curve would
shift to the right, leading to:
26)One assumption of the perfectly competitive model is free
entry and exit. This assumption most directly leads to the
implication that:

27)The allocative function of price cannot operate unless
there is:
29)If S3 is the market supply curve, then in the short run, the
profit-maximizing level of output for a single firm in this
market is ______ gallons per week.
31)If S3 is the market supply curve, then each firm in this
market will earn an economic loss of ______ per week.
32)In a free market economy, the decisions of buyers and
sellers are:
33)The supplier of a factor of production has a reservation
price of $100. The purchaser of the factor of production has a
reservation price of $200. If the factor of production is
unique, then:
===========================================
===

1)If people use the representative heuristic they assume that
something is ___ likely to belong to a category the more it
shares characteristics thought to be representative of
membership in that category
2)The ______ heuristic is the rule of thumb that estimates
the frequency of an event by the ease with which it is
possible to summon examples from memory
3)In traditional economic models the decision-maker often
referred to as homo economicus is assumed to be
4)Altruistic
5)The rule of thumb According to which the likelihood of
something belonging to a particular category increases with
the extent to which it shares characteristics with the
stereotypical members of that category is the ___ terroristic

6)According to the availability heuristic people are more
likely to think an event occurs frequently when they
7)____Is the property of an entity whose individual units are
interchangeable
8)Judgmental and decision ____ are rules of thumb that
reduce computation cost
9)Although traditional economic models assume that well-
being depends on absolute consumption there is considerable
evidence that well being
10)___Is a decision-making strategy that aims for adequate
results because optimal results May necessitate excessive
expenditure of resources

11) The estimation technique that begins with an initial
approximation which is then modified in accordance with
additional available information is referred to as ___
12)The tendency to experience losses as more painful than
the pleasure that result from gains of the same magnitude is
known as
13)The variant of the rational Choice model that permits
additional preferences to be added if they can be shown not
to handicap resource acquisition in competitive environments
is known as the ___
14)In traditional economic models homo economicus refers
to a decision maker who

15)According to the Weber fechner law the perceived change
in any stimulus is larger when the change
16)One problem with the ___ heuristic is that there are many
factors that influence the likelihood that someone belongs to
a particular
17)The general resistance to change often stemming from
loss aversion is known as
18)The traditional economic models assume that well-being
depends on
19)The ___ standard of rationality is a variant of the rational
Choice model that promotes greater flexibility and

assumptions about preferences but suffers from the criticism
that virtually any bizarre behavior Can be explained
20)Regression to the mean refers to the phenomenon in
which unusual events are
21)The relationships According to which the perceived
change and any stimulus varies according to the size of the
change measured as a proportion of the original stimulus is
called the___
22)The defining feature of loss aversion is that
23)The fact that people sometimes regret having chosen
behaviors whose consequences were perfectly predictable at
the outset____ by traditional economic models

24)A(n) ___Is a game which the first player has the power to
confront the second player with a take-it-or-leave-it offer
25)If people discount the future excessively then government
programs designed to encourage saving
26)When Tversky and Khaneman asked one group of people
to imagine that, having previously purchased a ticket for $10,
they arrived at the theater to discover they have lost their
ticket and a second group to imagine that they arrived just
before the performance to buy a ticket and find they have lost
$10 from their wallets, they found that people in the lost
ticket group were more likely to say they would ___ the
performance even though the rational choice model predicts
that people in ___.
27)According to the representative heuristic, people will
think that Cameron likes to go camping if

28)The individual pursuit of Maximum utility will not
necessarily lead to an efficient allocation of resources if
people care about
29)Policies that restrict___ can be best understood as an
attempt to limit the potential harm caused by impulse control
problems
30)Suppose that it has been a long time since anyone Talia
knows has lost his or her job. According to the availability
heuristic, this will tend to make Talia think that

31)When researchers compare people who are asked to
imagine that, having previously purchased a ticket for $10,
tickets to people who are asked to imagine that they arrived
just before the performance to buy a ticket and find they have
lost $10 from their wallet, which group is more likely to say
that they would still attend the performance
32)Legal and social sanctions against adultery can be seen as
a way to help people overcome
33)Policies that make the individual pursuit of additional
wealth less attractive
34)According to the representative heuristic people think
Ariel is a musician if

35)When individuals care about how their consumption
compares to the consumption of others, then the individual
pursuit of Maximum utility
36)When Tversky and Khaneman asked one group of people
to imagine that, having previously purchased a ticket for $10,
ticket and a second group to imagine that they arrived just
before the performance to buy a ticket and find they have lost
$10 from their wallets, The majority of the people in The
Lost ticket group say they ___
attend the performance, in the majority of the people in The
Lost $10 group say they ___ attend the performance
37)If people care about relative consumption rather than
absolute consumption, then individual decisions

38)If people care about how their consumption compares to
the consumption of others, then policies that make the pursuit
of additional wealth less attractive
39)An imperfectly competitive firm faces a demand curve
that is ___, while a perfectly competitive firm faces a demand
curve that is ___
40)Perfectly inelastic; downward-sloping
41)The essential feature That differentiates imperfectly
competitive firms from perfectly competitive firms is that an
imperfectly competitive firm:
42)A price-setter is a firm that:

43)To sell an extra unit of output, a perfectly competitive
firm ____, and an imperfectly competitive firm ___.
44) In many cities in the United States a single firm provides
electricity. those firms are:
45)Given the demand curve it faces, if an imperfectly
competitive firm wants to sell another unit of output, it must:
46)A monopolistically competitive firm is one:

47)Suppose a perfectly competitive firm and a monopolist
are both charging $5 for their respective products. From this,
one can infer that:
48)A pure monopoly exists when:
49)If a firm faces a downward-sloping demand curve, then:
50)Suppose a firm’s total revenue is $100 when it sells 10
units, and $110 when it sells 11 units. The firm, therefore, is
a(n):
51)If a firm functions in an oligopoly, it is:

52)An imperfectly competitive firm faces a demand curve
that is:
53)The Weber-Fechner law is the relationship according to
which the perceived change in any stimulus:
54)Natasha is having difficulty deciding between two jobs, A
and B. As shown in the accompanying diagram, A is closer to
home than B, but doesn’t pay as well. Ideally, Natasha would
like a job that both pays well and is close to her home.
55)If Natasha behaves like most decision-makers, then the
addition of option C would:

56)_______ is the relationship according to which the
perceived change in any stimulus varies according to the size
of the change measured as a proportion of the original
stimulus.
57)According to the Weber-Fechner law, the perceived
change in any stimulus:
58)Corey is having difficulty deciding between two
dishwashers, A and B. As shown in the accompanying
diagram, A makes more noise than B, but is cheaper. Ideally,
Corey would like a dishwasher that is both quiet and
inexpensive.
59)If Corey behaves like most decision-makers, then the

60)Suppose Michael is willing to drive across town to save
40 percent on a sweatshirt with a list price of $80. If Michael
is rational, this implies that he should
61)According to the Weber-Fechner law, when the change in
a stimulus is large in proportion to the original stimulus, the
perceived size of the change will be:
62)Consider two coupons: one offers 50 percent off a scarf
that costs $20, and the other offers 5 percent off a jacket that
costs $200. Using either coupon requires driving to the
shopping mall across town. According to the Weber-Fechner
law, which coupon will people tend to perceive as being
more valuable?
63)Consider two coupons: one offers 10 percent off a pair of
jeans that costs $100, and the other offers 50 percent off a
pair of sunglasses that costs $20. Using either coupon
requires driving to the shopping mall across town. According

to the Weber-Fechner law, which coupon will people tend to
perceive as being more valuable?
64)According to the Weber-Fechner law, when the change in
a stimulus is small in proportion to the original stimulus, the
perceived size of the change will be:
65)The relationship according to which the perceived change
in any stimulus varies according to the size of the change
measured as a proportion of the original stimulus is known
as:
66)Brandon is having difficulty deciding between two jobs,
X and Y. As shown in the accompanying diagram, X entails a
greater risk of injury than Y, but pays more. Ideally, Brandon
would like a job that both pays well and does not entail a
high risk of injury.

67)If Brandon behaves like most decision-makers, then the
addition of option Z would:
68)Suppose Alyssa is willing to drive across town to save 50
percent on a soccer ball with a list price of $40. If Alyssa is
rational, this implies that she should:
69)According to the Weber-Fechner law, the perceived size
of a change in a stimulus will be large when the change in the
stimulus:
70)Kendra is having difficulty deciding between two cars, A
and B. As shown in the accompanying diagram, A has more
cargo room than B, but lower gas mileage. Ideally Kendra
would like a car both with a lot of cargo room and good gas
mileage.

71)If Kendra behaves like most decision-makers, then the
72)The Weber-Fechner law is the relationship according to
which the perceived change in any stimulus:
===========================================
===

1)An economy has two workers, Paula and Ricardo. Every
the opportunity cost for Ricardo to produce one computer?
2)An economy has two workers, Paula and Ricardo. Every
the most of each good that can be produced each day if each
worker fully specializes according to his/her comparative
advantage?
3)An economy has two workers, Jen and Rich. Every day
they work, Jen can produce 2 TVs or 10 radios, and Rich can
produce 4 TVs or 12 radios. What is the opportunity cost for
Jen to produce one TV?
produce 4 TVs or 12 radios. What is the opportunity cost for
Rich to produce one radio?

5)Amy can produce either 5,000 pounds of cheese or 20 cars
10 cars per year. Amy has a comparative advantage in
producing _____, and Mike has a comparative advantage in
producing ______.
6)Amy can produce either 5,000 pounds of cheese or 20 cars
10 cars per year. By the principle of comparative advantage,
Amy should specialize in producing

7)The following graph is the production possibility curve
for a three-person economy, with workers Janna, Drew,
and Karl.
The slope of the PPC between points X and Y is determined
by _____ opportunity cost.
8)The country Happy Land claims that it is producing
everything its citizens consume. This situation is called

9)Autarky is a situation in which a country is economically
10)If the United States consumption possibilities are greater
than its production possibilities, then the United States must
have
11)The following graph shows the production possibilities
curve for the economy with only two members, Silvia and
Art. Silvia can produce either 50 pounds of beef or 2
computers per week, and Art can produce 100 pounds of beef
or 1 computer per week. Both of them work 40 weeks per
year.

If both Art and Silvia worked full-time producing beef, how
many pounds of beef can they produce per year?
year.
If this country has an open economy, Silvia and Art can get
_____ pounds of beef in exchange of a computer.

year.
With the opportunity to trade, Silvia can trade all the
computers she can produce per year if she specializes in
producing computers, for _____ pounds of beef.
year.

With the opportunity to trade Silvia and Art can _____ the
maximum consumption of computers by _____ units.
15)The accompanying figure shows the annual production
possibilities curve for a small country that is open to trade
with the rest of the world. Suppose the world price of
cashews is $12 per pound, and the world price of mangos is
$4 per pound. As indicated in the figure, at these prices, this
country will produce 21,000 pounds of mangos and 5,000
pounds of cashews each year.
At this country’s current level of production, what is the
opportunity cost of a pound of mangos in terms of cashews?

15)Trade within a country typically involves ______, while
trade between countries normally involves _____.
16)The following table provides nominal exchange rates for
the U.S. dollar.
Country Foreign currency/dollar Dollar/foreign
currency
Switzerland (franc) 1.730 0.578
Brazil (real) 1.821 0.549

Based on these data, the nominal exchange rate equals
approximately ______ reals per Swiss franc or, equivalently,
______ Swiss francs per real.
17)An increase in the value of a currency relative to other
18)A country's nominal exchange rate, e, is defined as the
number of units of:

19)A decrease in the nominal exchange rate, e, defined as the
number of units of the foreign currency that one unit of the
domestic currency will buy, indicates that the domestic
20)When the nominal exchange rate changes from 4 francs
per dollar to 6 francs per dollar, the dollar has:
21)If the exchange rate moves from 10 Mexican pesos per

22)A flexible exchange rate is an exchange rate whose value:
23)A fixed exchange rate is an exchange rate whose value:
24)The price of the average domestic good or service relative
to the price of the average foreign good or service, when
prices are expressed in terms of a common currency is called
the ______ exchange rate.

25)An increase in the real exchange rate will tend to ______
26)A decrease in the real exchange rate will tend to ______
27)Net exports will tend to be low when the real exchange
rate:

28)For a given nominal exchange rate and domestic price
level, a decrease in the foreign price level ______ the real
exchange rate.
29)If a certain automotive part can be purchased in Mexico
for 32 pesos or in the United States for $5.25, and if the
automotive part:
30)Sheila and Jim live in an island where they are the only
two workers. Sheila can either catch 10 fish or gather 40
pounds of berries each day, and Jim can either catch 8 fish or
gather 24 pounds of berries each day. Both of them work 200
days per year. At current world prices 1 fish trades for 3.5
pounds of berries. Who has the comparative advantage in
producing berries?

31)The following graph is the production possibility curve
for a three-person economy, with workers Janna, Drew, and
Kari.
Who has the greatest comparative advantage in shoe
production?

32)Refer to the following graph.
The maximum amount of good A can be consumed in this
economy without trade is
33)Amy can produce either 5,000 pounds of cheese or 20
cars per year. Mike can produce either 5,000 pounds of
cheese or 10 cars per year. If both Amy and Mike produce
the good in which they have comparative advantage, the total
annual output of this economy will be _______.

produce 4 TVs or 12 radios. _______ has the comparative
advantage in TVs and _______ has the comparative
advantage in radios.
produce 4 TVs or 12 radios. To maximize total output, Jen
should specialize in producing _____ while Rich should
specialize in producing _______.

36)A decrease in the value of a currency relative to other
37)A decrease in the nominal exchange rate, e, defined as the
number of units of the foreign currency that one unit of the
domestic currency will buy, indicates that the domestic
38)An increase in the nominal exchange rate, e, defined as
the number of units of the foreign currency that one unit of
the domestic currency will buy, indicates that the domestic

39)For a given domestic and foreign price level, an increase
in the nominal exchange rate ______ the real exchange rate.
40)If a certain automotive part can be purchased in Mexico
for 60 pesos or in the United States for $6.25 and if the
automotive part:
41)There is ______ connection between the strength of a
country’s currency and the strength of its ______.

42)If the nominal exchange rate were to be expressed as the
number of units of domestic currency per unit of foreign
currency, and that rate increases, then the domestic currency
has:
43)If the exchange rate moves from 10 Mexican pesos per
===========================================
===

1)How is real output per person calculated?
2)Y/POP=Y/N xN/POP is an:
3)The most important factor for long run economic growth is:
4)If the share of the population employed is unchanged and
real output per person increases by 20 percent,then it means
that:
5)In the last 50years,the share of population employed in the
U.S. has increased because:
6)If Y/N equals $3,000/person and N/Pop equals 0.9,then real
output per person is:
7)An open economy is characterized by:
8)Who are the suppliers in the saving and investment market
of an open economy?

9)In the following figure,the equilibrium interest rate is ------
and the equilibrium saving investment is ----- compared to a
closed economy
10)The introduction of new a technology in an economy
implies:
11)The introduction of new technologies in the given figure
will shift which curve and in which direction?
12)In either an open or a closed economy,the introduction of
new technologies ------ the domestic interest rate and ---------
the equilibrium saving investment
13)Average labor productivity times the proportion of the
population employed equals:
14)Growth of real GDP per person is totally determined by
the growth of average:
15)A nation’s standard of living as measured by real GDP
per person,increases:
16)If the share of population employed in two countries is the
same,average living standards will be higher in the country
with:

17)If average labor productivity in two countries is the same,
average living standards will be lower in the country with:
18)If 50 percent of the population in a country is employed
and average labor productivity equals $30,000, then real
GDP per person equals:
19)Return to questionItem 6Item 6 0.33 points
If 50 percent of the population in a country is employed and
average labor productivity equals $30,000, then real GDP per
person equals:
20)In Macroland, 500,000 of the 1 million people in the
country are employed. Average labor productivity in
Macroland is $20,000 per worker. Real GDP per person in
Macroland totals:

21)The growth of real GDP per person in the United States
between 1960 and 2016 was the result of:
22)Assume that the share of population employed in all
countries is 50 percent. Based on the information in the table,
which country has the smallest real GDP per capita?
Country Population (millions) Average Labor
Productivity ($)
A 100 2,000
B 150 10,000
C 75 25,000
D 250 50,000
E 95 60,000

23)Assume that average labor productivity is the same in
each country. Based on the information in the table, which
country has the highest real GDP per capita?
Employed (%)
A 100 60
B 150 55
C 75 50
D 250 45
E 95 40
24)Assume that average labor productivity is the same in
each country. Based on the information in the table, which
country has the smallest real GDP per capita?

Employed (%)
A 100 60
B 150 55
C 75 50
D 250 45
E 95 40
25)Suppose that average labor productivity in Country C is
$5,000, and that Countries C and E have the same real GDP
per capita. Based on the information in the table, what must
be the average labor productivity in Country E?
Employed (%)

A 100 60
B 150 55
C 75 50
D 250 45
E 95 40
26)In the long run, increases in output per person arise
primarily from:
27)Long-run increases in living standards, as measured by
real GDP per person, are primarily the result of increases in:

28)Privately-owned firms that accept deposits from
individuals and businesses and use those deposits to make
loans are called:
29)Banks help savers find productive uses for their funds
because banks are specialized in:
30)Financial intermediaries, such as commercial banks,
provide benefits to:
31)Savers may prefer to use financial intermediaries rather
than lending directly to borrowers because financial
intermediaries:
32)The interest rate promised when a bond is issued is called
the:

33)The coupon rate on newly issued bonds is usually higher
for bonds with ______ terms and ______ risk that the
borrower will go bankrupt.
34)Fred purchases a bond, newly issued by the Big Time
Corporation, for $10,000. The bond pays $400 to its holder at
the end of the first, second, and third years and pays $10,400
upon its maturity at the end of four years. The principal
amount of this bond is ___, the coupon rate is ____, and the
term of this bond is _____.
35)Fred purchases a bond, newly issued by the Big Time
Corporation, for $20,000. The bond pays $1,000 to its holder
at the end of the first, second, and third years and pays
$21,000 upon its maturity at the end of four years. The
principal amount of this bond is ___, the coupon rate is ____,
and the term of this bond is _____.

36)The rate of return that financial investors require to hold a
risky asset minus the rate of return on a safe asset is called
the:
37)An increase in the perceived riskiness of Company A
stock ______ the risk premium investors require to purchase
Company A stock and ______ the price of Company A stock.
38)A decrease in the perceived riskiness of Company A stock
______ the risk premium investors require to purchase
Company A stock and ______ the price of Company A stock.
39)An increase in interest rates results in a(n) ______ in the
required rate of return to hold stocks and ______ current
stock prices.
40)ou expect a share of EconNews.Com to sell for $65 a year
from now. If you are willing to pay $65.74 for one share of

the stock today, and you require a return of 8 percent, what
dividend payment must you expect to receive from the stock?
41)Stock prices increase when expected future dividends
____, interest rates _____, and/or the risk premium ______.
42)Shares of stock are:
===========================================
===

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