Question 1

An entrepreneur

Accepted Answer

A) always makes a profit 
B) generally avoids risky situations 
C) claims the residual (i.e., whatever is left over)after other resource suppliers are compensated 
D) is a parasite that benefits by not paying other resources for their services 
E) is the manager who runs an enterprise and keeps the customers happy 
A) always makes a profit 
B) generally avoids risky situations 
C) claims the residual (i.e., whatever is left over)after other resource suppliers are compensated 
D) is a parasite that benefits by not paying other resources for their services 
E) is the manager who runs an enterprise and keeps the customers happy

Question 2

Rent is the payment received by resource owners for the use of their natural resources.

Accepted Answer

A) True 
 B)False

Question 3

Economics employs a scientific methodology.In part, this means that

Accepted Answer

A) all economic laws have been proven true by laboratory tests 
B) there is a single economic theory accepted by all economists 
C) economic hypotheses are tested to determine their validity 
D) personal values never enter into economic policy recommendations 
E) assumptions are not necessary in economic science 
A) all economic laws have been proven true by laboratory tests 
B) there is a single economic theory accepted by all economists 
C) economic hypotheses are tested to determine their validity 
D) personal values never enter into economic policy recommendations 
E) assumptions are not necessary in economic science

Question 4

One of the difficulties with an economic policy such as rent control is that

Accepted Answer

A) politicians do not consider its secondary effects 
B) economists disagree about the impacts of the policy 
C) it is difficult to enforce antidiscrimination laws in the rental housing market 
D) it makes landlords wealthy at the expense of renters 
E) pressure from landlords resulted in its repeal in many cities 
A) politicians do not consider its secondary effects 
B) economists disagree about the impacts of the policy 
C) it is difficult to enforce antidiscrimination laws in the rental housing market 
D) it makes landlords wealthy at the expense of renters 
E) pressure from landlords resulted in its repeal in many cities

Question 5

Natural resources are

Accepted Answer

A) not considered scarce because no one pays for them 
B) only desired for use in producing other goods 
C) included in the category of resources called gifts of nature 
D) available in unlimited quantities 
E) not considered scarce because they are not produced by society 
A) not considered scarce because no one pays for them 
B) only desired for use in producing other goods 
C) included in the category of resources called gifts of nature 
D) available in unlimited quantities 
E) not considered scarce because they are not produced by society

Question 6

An example of a positive economic statement is, "An increase in the price of a product causes consumers to purchase more of that product."

Accepted Answer

A) True 
 B)False

Question 7

All economic models must involve simplifications because

Accepted Answer

A) economists would be unable to command high salaries if their models were so simple that anyone could understand them 
B) human behavior is very erratic and unpredictable 
C) reality is too complex to understand in its entirety, so we must reduce it to a level that we can understand 
D) they always try to duplicate all possible information and cover all possible variables that might influence decision making 
E) we must rely on value judgments and ignore reality 
A) economists would be unable to command high salaries if their models were so simple that anyone could understand them 
B) human behavior is very erratic and unpredictable 
C) reality is too complex to understand in its entirety, so we must reduce it to a level that we can understand 
D) they always try to duplicate all possible information and cover all possible variables that might influence decision making 
E) we must rely on value judgments and ignore reality

Question 8

Economics studies how decision makers use scarce resources to satisfy unlimited wants.

Accepted Answer

A) True 
 B)False

Question 9

An economic model will produce poor predictions if it includes unrealistic assumptions.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is a positive statement?

Accepted Answer

A) An unemployment rate of 7 percent or higher is a national disgrace. 
B) Unemployment is a less important problem than inflation. 
C) When the national unemployment rate is 7 percent, the unemployment rate for inner-city youth is often close to 40 percent. 
D) Unemployment and inflation are equally important problems. 
E) An inflation rate of 7 percent is too high. 
A) An unemployment rate of 7 percent or higher is a national disgrace. 
B) Unemployment is a less important problem than inflation. 
C) When the national unemployment rate is 7 percent, the unemployment rate for inner-city youth is often close to 40 percent. 
D) Unemployment and inflation are equally important problems. 
E) An inflation rate of 7 percent is too high.

Question 11

To tell a compelling story, an economist relies on

Accepted Answer

A) case studies 
B) anecdotes 
C) irrelevant data 
D) anecdotes and irrelevant data 
E) case studies and anecdotes 
A) case studies 
B) anecdotes 
C) irrelevant data 
D) anecdotes and irrelevant data 
E) case studies and anecdotes

Question 12

Resources are divided into the following broad categories:

Accepted Answer

A) people, money, and machines 
B) saving, spending, investment, and capital 
C) human, technological, and government 
D) natural resources, labor, capital, and entrepreneurial ability 
E) free, scarce, abundant, and unlimited 
A) people, money, and machines 
B) saving, spending, investment, and capital 
C) human, technological, and government 
D) natural resources, labor, capital, and entrepreneurial ability 
E) free, scarce, abundant, and unlimited

Question 13

Behavioral assumptions

Accepted Answer

A) make economic models more complex than if these assumptions were removed 
B) pertain only to consumers 
C) hold all other things constant 
D) are ways to test a hypothesis 
E) describe how individuals are expected to behave 
A) make economic models more complex than if these assumptions were removed 
B) pertain only to consumers 
C) hold all other things constant 
D) are ways to test a hypothesis 
E) describe how individuals are expected to behave

Question 14

An economic model is useful if it

Accepted Answer

A) includes every detail of reality 
B) involves no unproven assumptions 
C) is expressed in equations 
D) makes accurate predictions 
E) is simple enough to be understood by a child 
A) includes every detail of reality 
B) involves no unproven assumptions 
C) is expressed in equations 
D) makes accurate predictions 
E) is simple enough to be understood by a child

Question 15

Households

Accepted Answer

A) own and sell resources 
B) play a very minor role in the economy 
C) supply goods and services 
D) are the largest purchasers of resources 
E) none of the above 
A) own and sell resources 
B) play a very minor role in the economy 
C) supply goods and services 
D) are the largest purchasers of resources 
E) none of the above

Question 16

According to a 2011 PayScale.com survey, the college major whose median earnings showed the biggest increase from workers with 0-5 years of experience to workers with 10-20 years of experience was:

Accepted Answer

A) Economics 
B) Criminal Justice 
C) Mathematics 
D) Mechanical Engineering 
E) History 
A) Economics 
B) Criminal Justice 
C) Mathematics 
D) Mechanical Engineering 
E) History

Question 17

Which of the following is an accurate list, in order, of the steps of the scientific process?

Accepted Answer

A) define variables; state assumptions; form a hypothesis; test 
B) state assumptions; define variables; form a hypothesis; test 
C) identify variables; state assumptions; test; form a hypothesis 
D) identify variables; form "other things equal" assumptions; form behavioral assumptions; test 
E) form "other things equal" assumptions; form behavioral assumptions; form hypothesis; test 
A) define variables; state assumptions; form a hypothesis; test 
B) state assumptions; define variables; form a hypothesis; test 
C) identify variables; state assumptions; test; form a hypothesis 
D) identify variables; form "other things equal" assumptions; form behavioral assumptions; test 
E) form "other things equal" assumptions; form behavioral assumptions; form hypothesis; test

Question 18

When labor is relatively expensive, as it is in Japan,

Accepted Answer

A) manufacturers will employ lots of labor 
B) the unemployment rate will be high 
C) vending machines displace labor, causing unemployment 
D) businesses will substitute capital -- such as vending machines -- in place of labor 
E) alcohol and cigarettes must be sold through vending machines 
A) manufacturers will employ lots of labor 
B) the unemployment rate will be high 
C) vending machines displace labor, causing unemployment 
D) businesses will substitute capital -- such as vending machines -- in place of labor 
E) alcohol and cigarettes must be sold through vending machines

Question 19

Which of the following is an example of a positive statement?

Accepted Answer

A) Workers with families should be paid at least the minimum wage. 
B) If crime rates were reduced, the world would be a better place in which to live. 
C) Marginal tax rates should be reduced for individuals in the highest tax brackets. 
D) An increase in the price of gasoline will cause a reduction in the amount purchased. 
E) Corrupt politicians ought to be voted out of office. 
A) Workers with families should be paid at least the minimum wage. 
B) If crime rates were reduced, the world would be a better place in which to live. 
C) Marginal tax rates should be reduced for individuals in the highest tax brackets. 
D) An increase in the price of gasoline will cause a reduction in the amount purchased. 
E) Corrupt politicians ought to be voted out of office.

Question 20

Most real economic choices involve small (or marginal)changes, rather than all-or-nothing decisions.

Accepted Answer

A) True 
 B)False

Exam 1: The Art and Science of Economic Analysis

An entrepreneur

Rent is the payment received by resource owners for the use of their natural resources.

Economics employs a scientific methodology.In part, this means that

One of the difficulties with an economic policy such as rent control is that

Natural resources are

An example of a positive economic statement is, "An increase in the price of a product causes consumers to purchase more of that product."

All economic models must involve simplifications because

Economics studies how decision makers use scarce resources to satisfy unlimited wants.

An economic model will produce poor predictions if it includes unrealistic assumptions.

Which of the following is a positive statement?

To tell a compelling story, an economist relies on

Resources are divided into the following broad categories:

Behavioral assumptions

An economic model is useful if it

Households

According to a 2011 PayScale.com survey, the college major whose median earnings showed the biggest increase from workers with 0-5 years of experience to workers with 10-20 years of experience was:

Which of the following is an accurate list, in order, of the steps of the scientific process?

When labor is relatively expensive, as it is in Japan,

Which of the following is an example of a positive statement?

Most real economic choices involve small (or marginal)changes, rather than all-or-nothing decisions.

Appendix--Understanding Graphs

Economic Tools and Economics Systems

Economic Decision Makers

Demand, Supply, and Markets

Elasticity of Demand and Supply

Appendix--Price Elasticity and Tax Incidence

Consumer Choice and Demand

Appendix--Indifference Curves and Utility Maximization

Production and Cost in the Firm

A--Perfect Competition

B--Perfect Competition

A--Monopoly

B--Monopoly

Monopolistic Competition and Oligopoly

Resource Markets

Labor Markets and Labor Unions

Capital, Interest, and Corporate Finance

Transaction Costs, Imperfect Information, and Behavioral Economics

Economic Regulation and Antitrust Policy

Public Goods and Public Choice

Externalities and the Environment

Income Distribution and Poverty

International Trade

International Finance

Economic Development

Filters