Question 1

People can reasonably expect that an economic system will decide all of the following except:

Accepted Answer

A)  what goods to produce. 
B)  how to produce the goods. 
C)  how to assign initial property rights. 
D)  for whom to produce the goods. 
A)  what goods to produce. 
B)  how to produce the goods. 
C)  how to assign initial property rights. 
D)  for whom to produce the goods.

Question 2

Which of the following is not an economic institution?

Accepted Answer

A)  Corporations 
B)  Government 
C)  Cultural norms 
D)  None of the answers is correct. 
A)  Corporations 
B)  Government 
C)  Cultural norms 
D)  None of the answers is correct.

Question 3

Dorm rooms usually are not allocated by markets. Allocating dorm rooms is:

Accepted Answer

A)  not an economic problem. 
B)  an economic problem. 
C)  not affected by economic forces. 
D)  determined by prices. 
A)  not an economic problem. 
B)  an economic problem. 
C)  not affected by economic forces. 
D)  determined by prices.

Question 4

Deciding what the distribution of income should be is an example of normative economics.

Accepted Answer

A) True 
 B)False

Question 5

The marginal cost of consuming another unit of a good:

Accepted Answer

A)  must equal the marginal benefit or the unit will not be consumed. 
B)  must exceed the marginal benefit or the unit will not be consumed. 
C)  equals the increase in total cost when another unit is consumed. 
D)  equals the total cost of consuming all prior units. 
A)  must equal the marginal benefit or the unit will not be consumed. 
B)  must exceed the marginal benefit or the unit will not be consumed. 
C)  equals the increase in total cost when another unit is consumed. 
D)  equals the total cost of consuming all prior units.

Question 6

A natural experiment is:

Accepted Answer

A)  a naturally occurring event that approximates a controlled experiment. 
B)  not possible given that economists study real-world events. 
C)  a branch of economics that studies the economy through controlled lab experiments. 
D)  what all economists do when they develop their models. 
A)  a naturally occurring event that approximates a controlled experiment. 
B)  not possible given that economists study real-world events. 
C)  a branch of economics that studies the economy through controlled lab experiments. 
D)  what all economists do when they develop their models.

Question 7

Your opportunity cost of taking this course is the:

Accepted Answer

A)  tuition you paid for the course. 
B)  net benefit of the activity you would have chosen if you had not taken the course. 
C)  net benefit of taking this course. 
D)  cost of the activity you would have chosen if you had not taken the course. 
A)  tuition you paid for the course. 
B)  net benefit of the activity you would have chosen if you had not taken the course. 
C)  net benefit of taking this course. 
D)  cost of the activity you would have chosen if you had not taken the course.

Question 8

Identifying the effect of an increase in the money supply on prices requires the use of:

Accepted Answer

A)  positive economics. 
B)  the art of economics. 
C)  normative economics. 
D)  subjective economics. 
A)  positive economics. 
B)  the art of economics. 
C)  normative economics. 
D)  subjective economics.

Question 9

The marginal benefit from consuming another unit of a good:

Accepted Answer

A)  must equal the marginal cost or the unit will not be consumed. 
B)  must be less than the marginal cost or the unit will not be consumed. 
C)  equals the increase in total benefits from consuming the unit. 
D)  equals the total benefit obtained from the consumption of all prior units. 
A)  must equal the marginal cost or the unit will not be consumed. 
B)  must be less than the marginal cost or the unit will not be consumed. 
C)  equals the increase in total benefits from consuming the unit. 
D)  equals the total benefit obtained from the consumption of all prior units.

Question 10

The art of economics is:

Accepted Answer

A)  the application of the knowledge gained by positive economics to the goals set in normative economics. 
B)  purely technical and therefore more objective than positive or normative economics. 
C)  purely subjective so that the economist does not have to strive for the same level of objectivity that positive or normative economists do. 
D)  the branch of economics farthest removed from practical application, since its goal is to create the most elegant mathematical models. 
A)  the application of the knowledge gained by positive economics to the goals set in normative economics. 
B)  purely technical and therefore more objective than positive or normative economics. 
C)  purely subjective so that the economist does not have to strive for the same level of objectivity that positive or normative economists do. 
D)  the branch of economics farthest removed from practical application, since its goal is to create the most elegant mathematical models.

Question 11

An economist who is studying the relationship between the money supply, interest rates, and the rate of inflation is engaged in:

Accepted Answer

A)  microeconomic research. 
B)  macroeconomic research. 
C)  theoretical research because there is no data on these variables. 
D)  empirical research because there is no economic theory related to these variables. 
A)  microeconomic research. 
B)  macroeconomic research. 
C)  theoretical research because there is no data on these variables. 
D)  empirical research because there is no economic theory related to these variables.

Question 12

An economic policy is:

Accepted Answer

A)  a generalization about the workings of an abstract economy. 
B)  a physical or mental structure that significantly influences economic decisions. 
C)  an action taken by the government to influence the course of economic events. 
D)  a standard people use when they determine whether a particular activity or behavior is acceptable. 
A)  a generalization about the workings of an abstract economy. 
B)  a physical or mental structure that significantly influences economic decisions. 
C)  an action taken by the government to influence the course of economic events. 
D)  a standard people use when they determine whether a particular activity or behavior is acceptable.

Question 13

Macroeconomics is the study of how individual choices are affected by economic forces.

Accepted Answer

A) True 
 B)False

Question 14

"Government should not use price controls" is an example of:

Accepted Answer

A)  positive economics. 
B)  normative economics. 
C)  the art of economics. 
D)  Marshallian economics. 
A)  positive economics. 
B)  normative economics. 
C)  the art of economics. 
D)  Marshallian economics.

Question 15

If it takes you an hour to make a rational decision and the opportunity cost of that hour is $100, you will:

Accepted Answer

A)  always make rational decisions. 
B)  make rational decisions only if the benefit from doing so exceeds $100. 
C)  make rational decisions only if the benefit from doing so is less than $100. 
D)  never make rational decisions. 
A)  always make rational decisions. 
B)  make rational decisions only if the benefit from doing so exceeds $100. 
C)  make rational decisions only if the benefit from doing so is less than $100. 
D)  never make rational decisions.

Question 16

Which of the following is the best example of a positive question?

Accepted Answer

A)  How should the government deal with the next recession? 
B)  Should the government reduce inflation? 
C)  How are price and quantity demanded related? 
D)  Should government allow two large companies to merge? 
A)  How should the government deal with the next recession? 
B)  Should the government reduce inflation? 
C)  How are price and quantity demanded related? 
D)  Should government allow two large companies to merge?

Question 17

The marginal benefit of you going to a movie during the week is currently $6. Assume that the $4 price of going to the movies measures its marginal cost. Following the economic decision rule, you will:

Accepted Answer

A)  continue going to movies until the marginal benefit of doing so falls to zero. 
B)  choose not to go to any movies during the week. 
C)  continue going to movies until the marginal benefit of doing so falls below $4. 
D)  not be able to enjoy a net gain from going to the movies during the week. 
A)  continue going to movies until the marginal benefit of doing so falls to zero. 
B)  choose not to go to any movies during the week. 
C)  continue going to movies until the marginal benefit of doing so falls below $4. 
D)  not be able to enjoy a net gain from going to the movies during the week.

Question 18

Economic systems:

Accepted Answer

A)  can eliminate scarcity. 
B)  address the questions what is produced, how it is produced, and for whom it is produced. 
C)  provide all the goods people want and desire. 
D)  provide equal distribution of well-being among its participants. 
A)  can eliminate scarcity. 
B)  address the questions what is produced, how it is produced, and for whom it is produced. 
C)  provide all the goods people want and desire. 
D)  provide equal distribution of well-being among its participants.

Question 19

To engage in economic reasoning, one must compare:

Accepted Answer

A)  total cost and total benefit. 
B)  marginal cost, sunk cost, and total benefit. 
C)  sunk cost and marginal cost. 
D)  marginal cost and marginal benefit. 
A)  total cost and total benefit. 
B)  marginal cost, sunk cost, and total benefit. 
C)  sunk cost and marginal cost. 
D)  marginal cost and marginal benefit.

Question 20

What relates positive economics to normative economics?

Accepted Answer

A)  Microeconomics 
B)  Macroeconomics 
C)  The art of economics 
D)  The science of economics 
A)  Microeconomics 
B)  Macroeconomics 
C)  The art of economics 
D)  The science of economics

Exam 1: Economics and Economic Reasoning

People can reasonably expect that an economic system will decide all of the following except:

Which of the following is not an economic institution?

Dorm rooms usually are not allocated by markets. Allocating dorm rooms is:

Deciding what the distribution of income should be is an example of normative economics.

The marginal cost of consuming another unit of a good:

A natural experiment is:

Your opportunity cost of taking this course is the:

Identifying the effect of an increase in the money supply on prices requires the use of:

The marginal benefit from consuming another unit of a good:

The art of economics is:

An economist who is studying the relationship between the money supply, interest rates, and the rate of inflation is engaged in:

An economic policy is:

Macroeconomics is the study of how individual choices are affected by economic forces.

"Government should not use price controls" is an example of:

If it takes you an hour to make a rational decision and the opportunity cost of that hour is $100, you will:

Which of the following is the best example of a positive question?

The marginal benefit of you going to a movie during the week is currently $6. Assume that the $4 price of going to the movies measures its marginal cost. Following the economic decision rule, you will:

Economic systems:

To engage in economic reasoning, one must compare:

What relates positive economics to normative economics?

The Production Possibility Model, Trade, and Globalization

Economic Institutions

Supply and Demand

Using Supply and Demand

Describing Supply and Demand: Elasticities

Taxation and Government Intervention

Market Failure Versus Government Failure

Comparative Advantage, Exchange Rates, and Globalization

International Trade Policy

Production and Cost Analysis I

Production and Cost Analysis II

Perfect Competition

Monopoly and Monopolistic Competition

Oligopoly and Antitrust Policy

Real-World Competition and Technology

Work and the Labor Market

Who Gets What the Distribution of Income

The Logic of Individual Choice: the Foundation of Supply and Demand

Game Theory, Strategic Decision Making, and Behavioral Economics

Thinking Like a Modern Economist

Behavioral Economics and Modern Economic Policy

Microeconomic Policy, Economic Reasoning, and Beyond

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