THE GEORGE WASHINGTON UNIVERSITY

Department of Economics

Economics 1011 Prof. Steve Suranovic

Section 10 Fall 2011

Quiz #1 - Answers

 

Write the term or answer each question in the box provided on the right.

Each answer 1s worth | point (13 points total).

1. Of Micro or Macro economics, this field involves

the study of the decisions of individual firms and 

households.

answer. micro

2. This type of reasoning draws conclusions from a

given set of assumptions.

answer. Deductive OR a priori

3. Economists generally use this word to denote the 

happiness or satisfaction that consumers maximize.

answer. Utility

4. Assuming diminishing marginal utility, if the first

unit consumed gives a person 5 utils and the second 

unit gives an additional 4 utils, how much may the third

answer. Any x such that x<4 (eg 3,2,1 all are OK)

 

5. of none, one or two, the number of people who

benefit when two people willingly exchange one thing 

for another.

answer. Two

6. Of increase, decrease or stay the same, this will

happen to a person’s butter demand if MUp/Ps < 

MUc/Pc, where B refers to butter, C refers to cream

cheese and MU means marginal utility.

answer. decrease

7. the price of a bag of peanuts in dollars if 12 bags of

peanuts trades for 12 glasses of beer and the price of 

beer is $4 per glass

answer. $4.00

8. Of self-interest or benevolence, what Adam Smith .

argues motivates brewing activity.

answer. Self-interest

9. Friedrich Hayek called this process the spontaneous

economic order, but Adam Smith called the process 

this.

answer. The invisible hand

10. Name two assumptions in the map model presented

in class

answer. Lines are roads

To the right is north

Rectabgles are buildings

Arrows are the direction to travel

Names at line endfs are street names 

Etc.

11. Name one simplifying assumption in the pure

exchange model with Smith and Jones.

answer. Only two people

Only two goods

Goods are not produced

Apples and oranges are homogeneous 

Etc.

 

 

12. Of somewhat, mostly, or perfectly, this is how well

economic models generally assume Smith and Jones 

know their own preferences.

answer. Perfectly

13. Pop rocks candy can be used to remind us that this 

will happen whenever a transaction between two people

occurs. 

answer. Happiness bursts for both or utility increase surplus value created . etc