Q: If the average wage for college graduates is $$56,182 and for high school graduates is 39$$,152, what is the percentage difference in wages between the two groups? 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: Suppose the opportunity cost of attending university is $$17.60 per hour, 50 hours per week, for 28 weeks per year. What is the total opportunity cost for one year? Use the formula $$\text{Opportunity Cost} = \text{Hourly Wage} \times \text{Hours per Week} \times \text{Weeks per Year}$.

$$17.60 \times 50 \times 28 = 24$$,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 difference in wages between the two groups? 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 is the formula for the wage after $$n$$ additional years, starting from $$15.00$$ per hour?

Accepted Answer

$$15.00 	imes (1.1)^n$$

Question 5

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

Accepted Answer

Correlation means two variables move together, but does not necessarily mean one causes the other.

Question 6

Suppose the opportunity cost of attending university is $$17.60 per hour, 50 hours per week, for 28 weeks per year. What is the total opportunity cost for one year? Use the formula $$	ext{Opportunity Cost} = 	ext{Hourly Wage} 	imes 	ext{Hours per Week} 	imes 	ext{Weeks per Year}$.

Accepted Answer

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

Question 7

Why did the Wright brothers succeed in building a working airplane when others failed?

Accepted Answer

They used models and wind tunnel experiments to test designs before building a real airplane.

Question 8

If a model predicts that college increases wages by 46% and the actual data shows a 43.5% increase, what does this tell us about the model?

Accepted Answer

The model is reasonably accurate, as its prediction is close to the observed data.

Question 9

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

Accepted Answer

US spending on science, space, and technology correlates with suicides by hanging.

Question 10

What is the difference between the mean and the median in a data set?

Accepted Answer

The mean is the average of all values, while the median is the middle value when data is ordered.

Question 11

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

Accepted Answer

Median: $$50$$, Mean: $$86$$

Question 12

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

Accepted Answer

Omitted variables and reverse causality can make correlated variables appear causally related when they are not.

Question 13

A natural experiment in economics occurs when:

Accepted Answer

Subjects end up in treatment or control groups due to factors not purposefully determined by the researcher.

Question 14

If the wage after 4 years of college is calculated as $$15.00 	imes (1.1)^4$, what is the wage?

Accepted Answer

$$21.9615$$

Question 15

Which of the following best explains why the average wage may not accurately represent what most people earn?

Accepted Answer

The average can be skewed by extreme values, while the median is less affected by outliers.

Question 16

If a model predicts that each year of education increases wages by 10%, but not everyone experiences this increase, what does this illustrate?

Accepted Answer

Models are simplifications and their predictions represent averages, not individual outcomes.

Question 17

Which of the following is an example of reverse causality?

Accepted Answer

Higher income causes people to exercise more, but the study assumes exercise causes higher income.

Question 18

If the wage for 13 years of education is $$15.00$$ per hour, what is the wage after 2 more years, assuming a 10% increase per year? Use $$15.00 	imes (1.1)^2$.

Accepted Answer

$$18.15$$

Question 19

Why are controlled experiments difficult to conduct in economics?

Accepted Answer

Because it is hard to randomly assign people to treatment and control groups for many economic questions.

Question 20

If a fishing boat brings in 5,000 pounds of fish, selling cod at $$2.00 per pound and haddock at 1.50 $$per pound, and the total revenue is $$9,000, how many pounds of each fish were caught? Let x$ be pounds of cod and y$ be pounds of haddock. Solve the system: x + y = 5$$,000$$ and 2x + 1.5y = 9$$,000$.

Accepted Answer

Cod: 2,000 lbs, Haddock: 3,000 lbs

Lecture 2: Models, Data, and the Scientific Method in Microeconomics

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