Econ 120
What are the 4 main types of market structures?
Perfect competition, oligopoly, monopoly, and monopolistic competition.
What's the formula for GDP?
GPD = Consumption + Investments + Government spending + Net Exports (Exports-Imports)
Suppose we are trying to find out whether having a college degree increases earnings. What is the naive comparison?
Comparing the earnings of those with a college degree vs those without a college degree.
What is the state in a game where no player can improve their outcome by unilaterally changing their strategy, assuming all other players keep theirs unchanged?
The Nash Equilibrium
Who wrote The Wealth of Nations?
Adam Smith (the father!)
Suppose you have a market for concert tickets:
The equilibrium quantity is 40 tickets, the equilibrium price is $50 per ticket, and the maximum willingness to pay (Q=0) is $70 per ticket. What's the consumer surplus? (Hint: It helps to draw the graph.)
$400
What are the 3 main types of unemployment?
1. Structural Unemployment
2. Frictional Unemployment
3. Cyclical Unemployment
What is the main assumption for a Difference-in-Differences experiment?
Parallel Trends
What is not an example of game theory: A. Mating markets, B. Auction bidders, C. Poker, D. Lottery Numbers
D. Lottery Numbers
Who is the current chair of the Federal Reserve's Board of Governors?
Kevin Warsh
What is the difference between the substitution effect and the income effect?
Substitution effect: When a change in the price of a product leads consumers to buy more of a relatively cheaper substitute and less of the more expensive product.
Income effect: The change in a consumer’s quantity demanded for a good or service caused by an increase or decrease in income.
Within an aggregate supply and demand graph, what curve would shift when expected future income goes up?
Aggregate demand would shift up/ left.
What is the difference between internal validity and external validity?
Internal validity is the causal relationship between the independent and dependent variables. External validity is how the experiment can be generalized to other populations.
What is one of the most famous thought experiments used in game theory called?
What year did President Roosevelt sign the original Social Security Act?
1935
How do you calculate price elasticity of demand (PED)?
Percentage change in quantity demanded/Percentage change in price
What happens when the central bank increases the reserve requirement?
A. Money supply increases; thus, interest rates decrease.
B. The money supply increases, so interest rates increase.
C. The money supply decreases, so interest rates decrease.
D.The money supply decreases, so interest rates increase.
D.The money supply decreases, so interest rates increase.
What are the three main types of data we see in econometrics, and how are they collected?
1. Cross-sectional data: data collected from multiple entities at a single point in time.
2. Time series data: data collected from a single entity recorded over multiple, regular time periods.
3. Longitudinal/panel data: data collected from multiple entities at different points in time.
Two coffee shops must decide whether to Lower or Maintain their prices. What is the Nash equilibrium?
Shop B: L Shop B: M
Shop A: L 50,50 80,20
Shop A: M 20,80 70,70
(Lower, Lower) or (50, 50)
What is the highest US inflation rate recorded in modern history?
23.7%
Explain the steps to finding the price a monopoly charges on a graph.
Find the intersection of the marginal revenue and the marginal cost curves to get the monopoly's profit-maximizing quantity. Then, draw a vertical line upward till you hit the demand curve. Finally, mark the corresponding price at that point on the demand curve on the y-axis.
If the face value of a bond is $10000, and the initial price is $7500, what is the interest rate on the bond?
33%
Suppose we want to study whether medical school attendance reduces smoking. We randomly assign medical school attendance to individuals by lottery. Propose an instrumental variable approach to study whether medical school attendance reduces smoking rates.
Specify the instrument, the treatment variable, the outcome variable, explain the first stage, independence, and exclusion in this setting.
Instrument: Whether you win the lottery.
Treatment: Whether you attend medical school.
Outcome variable: Whether you smoke.
First Stage: Winning the lottery significantly increases the probability of attending medical school.
Independence: Winning the lottery is random or as good as randomly assigned.
Exclusion: Winning the lottery only affects smoking through medical school attendance.
How do you solve a sequential game, and what is the outcome of this game called?
Backwards induction and the subgame perfect Nash equilibrium.
Who coined the term Ceteris Paribus? Bonus: if you get the year
First traces in 1295 by Peter Olivi.