Question 1

Consumers need information to make good choices.Which of the following is correct regarding this information?

Accepted Answer

A) Advertising is always harmful to consumers. 
B) Information is scarce and therefore valuable. 
C) Brand names offer no informational content. 
D) Acquiring more information is always rational. 
E) Marginal analysis does not apply to the acquisition of information. 
A) Advertising is always harmful to consumers. 
B) Information is scarce and therefore valuable. 
C) Brand names offer no informational content. 
D) Acquiring more information is always rational. 
E) Marginal analysis does not apply to the acquisition of information.

Question 2

A good economic theory

Accepted Answer

A) has realistic assumptions 
B) contains as much detail as possible 
C) cannot be proven false 
D) predicts well 
E) can only be presented in mathematical terms 
A) has realistic assumptions 
B) contains as much detail as possible 
C) cannot be proven false 
D) predicts well 
E) can only be presented in mathematical terms

Question 3

When economists say that people act as rational decision makers, that means

Accepted Answer

A) they gather all relevant information before making their purchases 
B) once a pattern of behavior has been established, people tend to become set in their ways 
C) people respond in predictable ways to changes in costs and benefits 
D) people rarely make errors when they are permitted to make transactions 
E) once made, decisions are never reversed 
A) they gather all relevant information before making their purchases 
B) once a pattern of behavior has been established, people tend to become set in their ways 
C) people respond in predictable ways to changes in costs and benefits 
D) people rarely make errors when they are permitted to make transactions 
E) once made, decisions are never reversed

Question 4

Scarcity

Accepted Answer

A) exists because people have wants that are unlimited relative to the availability of resources to satisfy those wants 
B) applies when a resource is not freely available 
C) means that each society and each individual must make choices 
D) exists in all societies 
E) all of the above are true 
A) exists because people have wants that are unlimited relative to the availability of resources to satisfy those wants 
B) applies when a resource is not freely available 
C) means that each society and each individual must make choices 
D) exists in all societies 
E) all of the above are true

Question 5

Theory in economics

Accepted Answer

A) involves some simplification of reality 
B) bears no relation to reality 
C) approaches reality in all its complexity 
D) involves so much distortion of reality that it is worthless 
E) focuses on the unique aspects of each situation 
A) involves some simplification of reality 
B) bears no relation to reality 
C) approaches reality in all its complexity 
D) involves so much distortion of reality that it is worthless 
E) focuses on the unique aspects of each situation

Question 6

Some individuals or families can become completely saturated with a service such as television.This suggests that

Accepted Answer

A) wants are limited 
B) desires for a single commodity can be satisfied but then the focus will switch to other goods and services 
C) a highly productive economy may someday be able to satisfy all human desires 
D) resources are not truly fixed in supply as we generally assume 
E) scarcity does not exist 
A) wants are limited 
B) desires for a single commodity can be satisfied but then the focus will switch to other goods and services 
C) a highly productive economy may someday be able to satisfy all human desires 
D) resources are not truly fixed in supply as we generally assume 
E) scarcity does not exist

Question 7

The assumption that individuals act rationally implies that

Accepted Answer

A) people think only of themselves and disregard the well-being of others 
B) people undertake all those activities that yield benefits to themselves 
C) people only consider the costs of an activity to decide whether it is worthwhile 
D) the greater the cost of a charitable deed to a benefactor, the more likely he or she is to perform that deed 
E) people implicitly calculate the costs and benefits of an activity to decide if it is worthwhile 
A) people think only of themselves and disregard the well-being of others 
B) people undertake all those activities that yield benefits to themselves 
C) people only consider the costs of an activity to decide whether it is worthwhile 
D) the greater the cost of a charitable deed to a benefactor, the more likely he or she is to perform that deed 
E) people implicitly calculate the costs and benefits of an activity to decide if it is worthwhile

Question 8

In economics, capital is defined as

Accepted Answer

A) natural resources, such as water, oil, and iron ore 
B) the natural, unskilled abilities of people 
C) human creations used in the production process 
D) money and other financial assets 
E) the willingness of business owners to take risks 
A) natural resources, such as water, oil, and iron ore 
B) the natural, unskilled abilities of people 
C) human creations used in the production process 
D) money and other financial assets 
E) the willingness of business owners to take risks

Question 9

Michigan has an abundant supply of fresh water.However, an economist would consider it a scarce resource because

Accepted Answer

A) water is necessary for humans' physical survival 
B) pollution will eventually destroy all life in the Great Lakes 
C) water is limited relative to people's unlimited wants 
D) water commands a very high price 
E) nature can destroy water as well as create it 
A) water is necessary for humans' physical survival 
B) pollution will eventually destroy all life in the Great Lakes 
C) water is limited relative to people's unlimited wants 
D) water commands a very high price 
E) nature can destroy water as well as create it

Question 10

It is always rational to acquire more information before making a decision.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is an example of capital?

Accepted Answer

A) pizza ovens 
B) bulldozers 
C) a college education 
D) carpentry skills 
E) all of the above 
A) pizza ovens 
B) bulldozers 
C) a college education 
D) carpentry skills 
E) all of the above

Question 12

In macroeconomics, we analyze

Accepted Answer

A) all of the following 
B) the overall performance of the economy as a whole 
C) arrangements through which specific products are exchanged 
D) influences on the decision making of particular households 
E) the factors that affect the decisions of individual firms 
A) all of the following 
B) the overall performance of the economy as a whole 
C) arrangements through which specific products are exchanged 
D) influences on the decision making of particular households 
E) the factors that affect the decisions of individual firms

Question 13

Theory seeks to

Accepted Answer

A) simplify a complex reality 
B) confront reality in all its complexity by focusing on the unique aspects of each phenomenon 
C) explain phenomena without predicting them 
D) predict phenomena without explaining them 
E) distort reality in order to improve forecasting ability 
A) simplify a complex reality 
B) confront reality in all its complexity by focusing on the unique aspects of each phenomenon 
C) explain phenomena without predicting them 
D) predict phenomena without explaining them 
E) distort reality in order to improve forecasting ability

Question 14

Economic information

Accepted Answer

A) is usually scarce and costly to acquire 
B) is usually available free to any decision maker 
C) is usually not required for rational decision making 
D) must be complete before any decision is made 
E) is usually useful only to governments 
A) is usually scarce and costly to acquire 
B) is usually available free to any decision maker 
C) is usually not required for rational decision making 
D) must be complete before any decision is made 
E) is usually useful only to governments

Question 15

The problem of scarce resources

Accepted Answer

A) means that in some cities there are not enough jobs 
B) could be solved if the unemployment rate fell 
C) is that there are not enough resources to satisfy people's unlimited wants 
D) is that resources are used inefficiently 
E) can be solved by lowering taxes 
A) means that in some cities there are not enough jobs 
B) could be solved if the unemployment rate fell 
C) is that there are not enough resources to satisfy people's unlimited wants 
D) is that resources are used inefficiently 
E) can be solved by lowering taxes

Question 16

Which of the following is a service?

Accepted Answer

A) anything that is scarce and that satisfies unlimited human wants 
B) a thing for which people pay money 
C) an intangible activity that satisfies human wants 
D) any output produced by a service-sector industry, such as fast food 
E) something less desirable than a good 
A) anything that is scarce and that satisfies unlimited human wants 
B) a thing for which people pay money 
C) an intangible activity that satisfies human wants 
D) any output produced by a service-sector industry, such as fast food 
E) something less desirable than a good

Question 17

In a circular-flow model, households supply all of the following except

Accepted Answer

A) labor 
B) goods and services 
C) capital 
D) entrepreneurial ability 
E) natural resources 
A) labor 
B) goods and services 
C) capital 
D) entrepreneurial ability 
E) natural resources

Question 18

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

Accepted Answer

A) The moon is made of green cheese. 
B) Women should earn the same income as men. 
C) When the price of a good rises, people will buy more of it. 
D) The more time you spend studying, the higher your economics test scores will be. 
E) The more time you spend studying for chemistry, the higher your economics test score will be. 
A) The moon is made of green cheese. 
B) Women should earn the same income as men. 
C) When the price of a good rises, people will buy more of it. 
D) The more time you spend studying, the higher your economics test scores will be. 
E) The more time you spend studying for chemistry, the higher your economics test score will be.

Question 19

The expression "There's no such thing as a free lunch" means

Accepted Answer

A) that even if the lunch is free, we pay for it in extra calories 
B) that resources used up in producing the lunch are not available to satisfy other wants 
C) the same thing as "The best things in life are free" 
D) you can eat only if you work first 
E) neither sea water nor air is free 
A) that even if the lunch is free, we pay for it in extra calories 
B) that resources used up in producing the lunch are not available to satisfy other wants 
C) the same thing as "The best things in life are free" 
D) you can eat only if you work first 
E) neither sea water nor air is free

Question 20

Japan has more vending machines per capita than any other country in the world.One explanation for this phenomenon is that

Accepted Answer

A) vending machines are expensive in Japan 
B) the Japanese sales clerks' union requires that vending machines be used wherever possible 
C) labor is scarce in Japan, and vending machines help conserve on labor 
D) labor is abundant in Japan, and vending machines help conserve on labor 
E) vending machines were invented in Japan 
A) vending machines are expensive in Japan 
B) the Japanese sales clerks' union requires that vending machines be used wherever possible 
C) labor is scarce in Japan, and vending machines help conserve on labor 
D) labor is abundant in Japan, and vending machines help conserve on labor 
E) vending machines were invented in Japan

Exam 1: The Art and Science of Economic Analysis

Consumers need information to make good choices.Which of the following is correct regarding this information?

A good economic theory

When economists say that people act as rational decision makers, that means

Scarcity

Theory in economics

Some individuals or families can become completely saturated with a service such as television.This suggests that

The assumption that individuals act rationally implies that

In economics, capital is defined as

Michigan has an abundant supply of fresh water.However, an economist would consider it a scarce resource because

It is always rational to acquire more information before making a decision.

Which of the following is an example of capital?

In macroeconomics, we analyze

Theory seeks to

Economic information

The problem of scarce resources

Which of the following is a service?

In a circular-flow model, households supply all of the following except

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

The expression "There's no such thing as a free lunch" means

Japan has more vending machines per capita than any other country in the world.One explanation for this phenomenon is that

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