Quiz 1

Quiz 1 - Economics 153 Quiz # 1 Hubbard and O'Brien explain...

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Economics 153 Quiz # 1 Hubbard and O’Brien explain why managers of Commerce bank ignored the advice of the New York City police department to install security devices designed to reduce the possibility of robberies. Explain the bank’s decision. What economic idea, or principle, does this decision illustrate? (10 points) People respond to incentives . The textbook reports that the average loss from a bank robbery is about \$1,200. The cost of installing the security measures – including \$10-20 thousand for bullet-resistant plastic and \$50 thousand annually for salary and benefits for a security guard – is well above this. Therefore, the banks chose to risk a bank robbery (which, obviously, may not happen) and avoid the certain security costs. If an economist tested a model and found that the data she used did not support the model, what should she do next? (5 points) She should revise her model. She can then test the revised model The following are values for Gross Domestic Product (GDP) for the United States. Use the formula for computing a percentage change to show how the percentage change in GDP from 2001 to 2002 would be computed. (Do not calculate the percentage change!). (5 points) GDP Year (in billions) 2000 9,817.0 2001 10,100.8 2002 10,480.8 2003 10,987.9 ( 29 100 x GDP GDP - GDP 2001 2001 2002 ( 29 100 x 10,100.8 10,100.8 - ,480.8 10 Use the price and quantity graph below to calculate the area (show your work) of: ABC Area = ½ x (\$15-\$5) x (30-10) = ½ x \$10 x 20 = \$100 BCED Area = \$5 x (30-10) = \$5 x 20 = \$100 (10 points)

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The following page contains two production possibilities frontiers, one for Marge and one for Marty. (You may detach this page if you wish. It does not have to be handed in with your quiz). Fill in the blanks (10 points):
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This note was uploaded on 04/29/2008 for the course ECO 153 taught by Professor Scahill during the Fall '08 term at Scranton.

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Quiz 1 - Economics 153 Quiz # 1 Hubbard and O'Brien explain...

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