Question 1

A market

Accepted Answer

A) is often a physical place 
B) facilitates exchanges between buyers and sellers 
C) typically involves monetary transactions 
D) might not have well-defined geographical limits 
E) all of the above 
A) is often a physical place 
B) facilitates exchanges between buyers and sellers 
C) typically involves monetary transactions 
D) might not have well-defined geographical limits 
E) all of the above

Question 2

Economists believe that individuals respond in a predictable way to changes in costs and benefits.The term that best describes this belief is

Accepted Answer

A) opportunity cost 
B) demand 
C) supply 
D) scarcity 
E) rational behavior 
A) opportunity cost 
B) demand 
C) supply 
D) scarcity 
E) rational behavior

Question 3

Profit is the payment received by resource owners for the use of their capital.

Accepted Answer

A) True 
 B)False

Question 4

Economics is best described as the

Accepted Answer

A) study of choice when scarcity exists 
B) study of the production of goods and services 
C) theory of consumer behavior 
D) science of money 
E) art of spending money wisely 
A) study of choice when scarcity exists 
B) study of the production of goods and services 
C) theory of consumer behavior 
D) science of money 
E) art of spending money wisely

Question 5

In economics, "capital" refers to

Accepted Answer

A) money 
B) stocks, bonds, and other financial assets 
C) the seat of government 
D) machines, buildings, tools, and knowledge 
E) net worth (assets minus liabilities) 
A) money 
B) stocks, bonds, and other financial assets 
C) the seat of government 
D) machines, buildings, tools, and knowledge 
E) net worth (assets minus liabilities)

Question 6

One might commit the fallacy of composition by concluding that

Accepted Answer

A) statements that are true during prosperity are necessarily true during depression 
B) what is good for the individual is necessarily good for the group 
C) an event that precedes another is necessarily the cause of the latter 
D) intentions need not coincide with actions 
E) the composition of a complex product is not revealed by its exterior appearance 
A) statements that are true during prosperity are necessarily true during depression 
B) what is good for the individual is necessarily good for the group 
C) an event that precedes another is necessarily the cause of the latter 
D) intentions need not coincide with actions 
E) the composition of a complex product is not revealed by its exterior appearance

Question 7

Economic theories are

Accepted Answer

A) useful because they are as exact as theories in the physical sciences 
B) useless because they are based on abstractions 
C) useful because they allow us to make predictions 
D) too complex to understand because they include all of reality 
E) useful in predicting events only if their assumptions are realistic 
A) useful because they are as exact as theories in the physical sciences 
B) useless because they are based on abstractions 
C) useful because they allow us to make predictions 
D) too complex to understand because they include all of reality 
E) useful in predicting events only if their assumptions are realistic

Question 8

"There should be less discrimination against women" is an example of a positive statement.

Accepted Answer

A) True 
 B)False

Question 9

A fallacy of composition is to assume that

Accepted Answer

A) you can determine the composition of a complex product just by examining its exterior properties 
B) consumer durable goods today do not last as long as they did a generation ago 
C) any mistakes made in producing a product using an assembly line technique will lead to a compounding of errors as the product moves down the line 
D) what is true for any individual component in a group is true for the group as a whole 
E) when I was young I liked cotton candy, but now that I'm older I no longer like it 
A) you can determine the composition of a complex product just by examining its exterior properties 
B) consumer durable goods today do not last as long as they did a generation ago 
C) any mistakes made in producing a product using an assembly line technique will lead to a compounding of errors as the product moves down the line 
D) what is true for any individual component in a group is true for the group as a whole 
E) when I was young I liked cotton candy, but now that I'm older I no longer like it

Question 10

'Which of the following is the best definition of economics?

Accepted Answer

A) An investigation of the quantities and prices of the various goods produced by the nations of the world. 
B) A study of why inflation and unemployment periodically plague the U.S.economy. 
C) An analysis of how individuals and societies deal with the problem of scarcity. 
D) An examination of the role that money plays in the economy. 
E) A study of how goods and services are distributed throughout the world. 
A) An investigation of the quantities and prices of the various goods produced by the nations of the world. 
B) A study of why inflation and unemployment periodically plague the U.S.economy. 
C) An analysis of how individuals and societies deal with the problem of scarcity. 
D) An examination of the role that money plays in the economy. 
E) A study of how goods and services are distributed throughout the world.

Question 11

Goods and services are exchanged in

Accepted Answer

A) product markets 
B) resource markets 
C) inventory markets 
D) classified markets 
E) government markets 
A) product markets 
B) resource markets 
C) inventory markets 
D) classified markets 
E) government markets

Question 12

An entrepreneur is a(n)

Accepted Answer

A) individual who has much education 
B) organizer who seeks profitable opportunities and is willing to accept risks 
C) business organization that uses inputs to produce output 
D) administrator who runs an enterprise without accepting any risk of financial loss 
E) depot or storehouse for commercial products 
A) individual who has much education 
B) organizer who seeks profitable opportunities and is willing to accept risks 
C) business organization that uses inputs to produce output 
D) administrator who runs an enterprise without accepting any risk of financial loss 
E) depot or storehouse for commercial products

Question 13

Economics is best defined as the study of how individuals decide to use limited resources in an attempt to satisfy unlimited wants.

Accepted Answer

A) True 
 B)False

Question 14

To say that people make marginal decisions means that

Accepted Answer

A) they usually wait until the last minute before making a decision to buy 
B) they weigh the additional costs and additional benefits of various activities before they make a decision 
C) most people just barely get by on the incomes they earn and live from day to day on the very edge of subsistence 
D) given a choice, most people would prefer to make their own decisions concerning the things that affect their lives 
E) they consider the total cost and benefit of various activities before they make a purchase 
A) they usually wait until the last minute before making a decision to buy 
B) they weigh the additional costs and additional benefits of various activities before they make a decision 
C) most people just barely get by on the incomes they earn and live from day to day on the very edge of subsistence 
D) given a choice, most people would prefer to make their own decisions concerning the things that affect their lives 
E) they consider the total cost and benefit of various activities before they make a purchase

Question 15

Economists believe that

Accepted Answer

A) people who choose to promote the interests of others cannot be acting rationally in their own self-interest 
B) people show concern only for those whom they know personally 
C) charitable donations would disappear if tax deductions for charitable giving were eliminated 
D) the notion of self-interest rules out concern for others 
E) concern for the welfare of others is consistent with the concept of self-interest 
A) people who choose to promote the interests of others cannot be acting rationally in their own self-interest 
B) people show concern only for those whom they know personally 
C) charitable donations would disappear if tax deductions for charitable giving were eliminated 
D) the notion of self-interest rules out concern for others 
E) concern for the welfare of others is consistent with the concept of self-interest

Question 16

The assumption of rational self-interest does not rule out the possibility of concern for other individuals.

Accepted Answer

A) True 
 B)False

Question 17

Economists generally believe that

Accepted Answer

A) buyers and sellers have all the information they can use 
B) additional information is costly to acquire 
C) decision makers have complete knowledge of all the alternatives available 
D) economic decisions result from random behavior 
E) decision makers never make mistakes 
A) buyers and sellers have all the information they can use 
B) additional information is costly to acquire 
C) decision makers have complete knowledge of all the alternatives available 
D) economic decisions result from random behavior 
E) decision makers never make mistakes

Question 18

When economists refer to capital, they might mean

Accepted Answer

A) money 
B) human skills used in production 
C) stocks 
D) bonds 
E) bank loans 
A) money 
B) human skills used in production 
C) stocks 
D) bonds 
E) bank loans

Question 19

A good or service is considered scarce if

Accepted Answer

A) any quantity of it can be consumed at a zero price 
B) the amount people desire exceeds the amount available at a zero price 
C) the amount people desire exceeds the amount available at any price 
D) the amount people desire is less than the amount available at any price 
E) the amount people desire is less than the amount available at a zero price 
A) any quantity of it can be consumed at a zero price 
B) the amount people desire exceeds the amount available at a zero price 
C) the amount people desire exceeds the amount available at any price 
D) the amount people desire is less than the amount available at any price 
E) the amount people desire is less than the amount available at a zero price

Question 20

"There should be less discrimination against the elderly." This is an example of a

Accepted Answer

A) normative statement 
B) positive statement 
C) forecast 
D) hypothesis 
E) prediction 
A) normative statement 
B) positive statement 
C) forecast 
D) hypothesis 
E) prediction

Exam 1: The Art and Science of Economic Analysis

A market

Economists believe that individuals respond in a predictable way to changes in costs and benefits.The term that best describes this belief is

Profit is the payment received by resource owners for the use of their capital.

Economics is best described as the

In economics, "capital" refers to

One might commit the fallacy of composition by concluding that

Economic theories are

"There should be less discrimination against women" is an example of a positive statement.

A fallacy of composition is to assume that

'Which of the following is the best definition of economics?

Goods and services are exchanged in

An entrepreneur is a(n)

Economics is best defined as the study of how individuals decide to use limited resources in an attempt to satisfy unlimited wants.

To say that people make marginal decisions means that

Economists believe that

The assumption of rational self-interest does not rule out the possibility of concern for other individuals.

Economists generally believe that

When economists refer to capital, they might mean

A good or service is considered scarce if

"There should be less discrimination against the elderly." This is an example of a

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