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: 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$

Q: Using the wage growth model $$W_n = 15.00 \times (1.1)^n$$, what is the predicted wage after 4 years of college?

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

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

Which statement about correlation and causality is correct?

Accepted Answer

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

Question 4

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 5

If each additional year of education increases wages by 10%, what is the formula for the wage after $$n$$ additional years, starting from $$W_0$$?

Accepted Answer

$$W_n = W_0$ 	imes (1.1)^n$$

Question 6

Using the wage growth model $$W_n = 15.00 	imes (1.1)^n$$, what is the predicted wage after 4 years of college?

Accepted Answer

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

Question 7

Why do economists use experiments to measure cause and effect?

Accepted Answer

Experiments allow economists to randomly assign subjects to treatment and control groups, helping to isolate the effect of a variable.

Question 8

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

Accepted Answer

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

Question 9

In the context of the Wright brothers, what was the key reason for their success in building a working airplane?

Accepted Answer

They built a wind tunnel and tested models before building the actual airplane.

Question 10

If the mean income in a sample 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 average upward, indicating inequality.

Question 11

Which of the following best explains the concept of opportunity cost in the context of attending university?

Accepted Answer

Opportunity cost is the value of the next best alternative forgone, such as the wages you could have earned if you were working instead of studying.

Question 12

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

Accepted Answer

There may be omitted variables that affect both correlated variables.

Question 13

If a study finds that seniors who gamble are healthier, which of the following is a possible explanation for reverse causality?

Accepted Answer

Healthier seniors are more likely to gamble, rather than gambling causing better health.

Question 14

Suppose you want to test the hypothesis that each additional year of education increases wages by 10%. Which method would best help you establish causality?

Accepted Answer

A controlled experiment where students are randomly assigned to receive more or less education.

Question 15

Given the wage model $$W_n = 15.00 	imes (1.1)^n$$, what is the percentage increase in wage after 4 years compared to the starting wage?

Accepted Answer

$$\frac{21.9615 - 15.00}{15.00} 	imes 100\% = 46.41\%$$

Question 16

Why might the average wage for college graduates not accurately reflect what all graduates earn?

Accepted Answer

Because the average can mask variation; not all graduates earn the same wage.

Question 17

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

Accepted Answer

It must be exact and apply to every individual.

Question 18

If a natural experiment is used to study the effect of an extra year of schooling, what is the key feature that makes it 'natural'?

Accepted Answer

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

Question 19

If the wage distribution in a sample is 30, 40, 50, 60, 250, what is the median and mean?

Accepted Answer

Median is 50, mean is 86.

Models, Data, and the Scientific Method in Microeconomics

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