Question 1

Which of the following topics is best categorized as a macroeconomic issue?

Accepted Answer

A)  The choices a student makes in selecting college courses 
B)  The decision by Apple to produce fewer Macintosh computers 
C)  The effect of a drought on the price of corn 
D)  The effect of an increase in federal spending on the unemployment rate 
A)  The choices a student makes in selecting college courses 
B)  The decision by Apple to produce fewer Macintosh computers 
C)  The effect of a drought on the price of corn 
D)  The effect of an increase in federal spending on the unemployment rate

Question 2

A cultural norm is a(n):

Accepted Answer

A)  economic force. 
B)  social force. 
C)  political force. 
D)  market force. 
A)  economic force. 
B)  social force. 
C)  political force. 
D)  market force.

Question 3

Economics is primarily:

Accepted Answer

A)  a normative science. 
B)  an observational science. 
C)  a laboratory science. 
D)  a natural science. 
A)  a normative science. 
B)  an observational science. 
C)  a laboratory science. 
D)  a natural science.

Question 4

An economic principle:

Accepted Answer

A)  should be used to make every individual decision. 
B)  generally is stated as a normative statement. 
C)  can be combined with knowledge of economic institutions to make policy proposals. 
D)  is an action taken to influence the course of economic events. 
A)  should be used to make every individual decision. 
B)  generally is stated as a normative statement. 
C)  can be combined with knowledge of economic institutions to make policy proposals. 
D)  is an action taken to influence the course of economic events.

Question 5

Experimental economics:

Accepted Answer

A)  includes naturally occurring events that approximates a controlled experiment. 
B)  is not possible given that economists study real-world events. 
C)  creates its own data rather than using data from the real world. 
D)  is what all economists do when they develop their models. 
A)  includes naturally occurring events that approximates a controlled experiment. 
B)  is not possible given that economists study real-world events. 
C)  creates its own data rather than using data from the real world. 
D)  is what all economists do when they develop their models.

Question 6

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

Accepted Answer

A)  How does the market for corn work? 
B)  How do prices affect the market for coffee? 
C)  Will increasing the money supply affect interest rates? 
D)  Will the redistribution of income make society better off? 
A)  How does the market for corn work? 
B)  How do prices affect the market for coffee? 
C)  Will increasing the money supply affect interest rates? 
D)  Will the redistribution of income make society better off?

Question 7

Which of the following best defines rational behavior?

Accepted Answer

A)  Analyzing the total gains from a decision 
B)  Improving net gain by pursuing decisions as long as the marginal benefits exceed the marginal costs 
C)  Seeking to gain by choosing to undertake actions as long as the marginal costs exceed the associated marginal benefits 
D)  Seeking to maximize total gain regardless of cost 
A)  Analyzing the total gains from a decision 
B)  Improving net gain by pursuing decisions as long as the marginal benefits exceed the marginal costs 
C)  Seeking to gain by choosing to undertake actions as long as the marginal costs exceed the associated marginal benefits 
D)  Seeking to maximize total gain regardless of cost

Question 8

A theorem is:

Accepted Answer

A)  the application of models combined with judgment. 
B)  a policy rule that concludes that a particular course of action is preferable. 
C)  a proposition that is logically true based on the assumptions of a model. 
D)  a set of equations that define a model. 
A)  the application of models combined with judgment. 
B)  a policy rule that concludes that a particular course of action is preferable. 
C)  a proposition that is logically true based on the assumptions of a model. 
D)  a set of equations that define a model.

Question 9

Alexandra has determined that studying an hour for her economics quiz will improve her grade on the quiz from a 75 to a 100. She also determines that this improvement is worth $20. To study for an hour for her economics quiz, however, she will have to work one fewer hour at her part-time job. Alexandra should:

Accepted Answer

A)  study for the quiz as long as her hourly wage rate is less than $20. 
B)  study for the quiz as long as her hourly wage rate is more than $20. 
C)  study for the quiz only if her hourly wage rate is exactly $20. 
D)  not study for the quiz because earning a higher grade cannot have a dollar value. 
A)  study for the quiz as long as her hourly wage rate is less than $20. 
B)  study for the quiz as long as her hourly wage rate is more than $20. 
C)  study for the quiz only if her hourly wage rate is exactly $20. 
D)  not study for the quiz because earning a higher grade cannot have a dollar value.

Question 10

A necessary assumption behind the invisible hand theorem is that:

Accepted Answer

A)  market forces are determined by cultural norms. 
B)  market forces produce inefficient outcomes. 
C)  the price mechanism is not constrained by political or social forces. 
D)  people behave rationally. 
A)  market forces are determined by cultural norms. 
B)  market forces produce inefficient outcomes. 
C)  the price mechanism is not constrained by political or social forces. 
D)  people behave rationally.

Question 11

Which of the following is a normative statement?

Accepted Answer

A)  Reducing the budget deficit will also reduce the balance of trade deficit. 
B)  Tariffs on imported cars result in higher prices for domestic auto consumers. 
C)  A tax cut will cause higher inflation. 
D)  The government should spend more to help the poor. 
A)  Reducing the budget deficit will also reduce the balance of trade deficit. 
B)  Tariffs on imported cars result in higher prices for domestic auto consumers. 
C)  A tax cut will cause higher inflation. 
D)  The government should spend more to help the poor.

Question 12

"Price controls in competitive markets cause shortages" is an example of:

Accepted Answer

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

Question 13

Normative economics seeks to:

Accepted Answer

A)  determine the most appropriate economic goals for a society. 
B)  determine how government policies affect the economy. 
C)  objectively explain how the economy functions. 
D)  objectively explain economic problems such as inflation and unemployment. 
A)  determine the most appropriate economic goals for a society. 
B)  determine how government policies affect the economy. 
C)  objectively explain how the economy functions. 
D)  objectively explain economic problems such as inflation and unemployment.

Question 14

Which of the following tools did Adam Smith argue provided a reasonable way to address normative questions objectively?

Accepted Answer

A)  The impartial spectator tool 
B)  The invisible observer tool 
C)  The scientific observer tool 
D)  The reasoned spectator tool 
A)  The impartial spectator tool 
B)  The invisible observer tool 
C)  The scientific observer tool 
D)  The reasoned spectator tool

Question 15

For a given benefit, a rational person chooses the option that has:

Accepted Answer

A)  the lowest opportunity cost. 
B)  the highest opportunity cost. 
C)  the average opportunity cost. 
D)  no opportunity cost. 
A)  the lowest opportunity cost. 
B)  the highest opportunity cost. 
C)  the average opportunity cost. 
D)  no opportunity cost.

Question 16

Which statement best summarizes the invisible hand theorem?

Accepted Answer

A)  Government policies direct people's selfish desires (tempered by social and economic forces) to the benefit of society. 
B)  Cultural norms direct people's selfish desires (tempered by political and economic forces) to the common good. 
C)  Markets direct people's selfish desires (tempered by political and social forces) to the common good. 
D)  Social, political, and economic forces act against people's selfish desires to promote the common good. 
A)  Government policies direct people's selfish desires (tempered by social and economic forces) to the benefit of society. 
B)  Cultural norms direct people's selfish desires (tempered by political and economic forces) to the common good. 
C)  Markets direct people's selfish desires (tempered by political and social forces) to the common good. 
D)  Social, political, and economic forces act against people's selfish desires to promote the common good.

Question 17

The quantity of goods and services available to society:

Accepted Answer

A)  is fixed. 
B)  depends on human action. 
C)  is not of economic importance. 
D)  will always grow to meet individuals' wants and desires. 
A)  is fixed. 
B)  depends on human action. 
C)  is not of economic importance. 
D)  will always grow to meet individuals' wants and desires.

Question 18

Someone using the reasoning process consistent with the impartial spectator tool would argue that the minimum wage is a:

Accepted Answer

A)  bad policy since, based on one's reasoned judgment, it will cause unemployment. 
B)  good policy since based on one's reasoned judgment, it will raise one's wage. 
C)  bad policy because, based on one's reasoned judgment, it interferes with the market. 
D)  good policy because, based on one's reasoned judgment, it would lead to the greatest good for the greatest number. 
A)  bad policy since, based on one's reasoned judgment, it will cause unemployment. 
B)  good policy since based on one's reasoned judgment, it will raise one's wage. 
C)  bad policy because, based on one's reasoned judgment, it interferes with the market. 
D)  good policy because, based on one's reasoned judgment, it would lead to the greatest good for the greatest number.

Question 19

Sunk costs:

Accepted Answer

A)  are an essential part of economic decision making. 
B)  are irrelevant to economic decision making. 
C)  should be considered, but only when marginal cost is less than marginal benefit. 
D)  should be considered only when there is no information about marginal cost and marginal benefit. 
A)  are an essential part of economic decision making. 
B)  are irrelevant to economic decision making. 
C)  should be considered, but only when marginal cost is less than marginal benefit. 
D)  should be considered only when there is no information about marginal cost and marginal benefit.

Question 20

The price mechanism is:

Accepted Answer

A)  not affected by social and political forces. 
B)  affected by social but not political forces. 
C)  affected by political but not social forces. 
D)  affected by both political and social forces. 
A)  not affected by social and political forces. 
B)  affected by social but not political forces. 
C)  affected by political but not social forces. 
D)  affected by both political and social forces.

Exam 1: Economics and Economic Reasoning

Which of the following topics is best categorized as a macroeconomic issue?

A cultural norm is a(n):

Economics is primarily:

An economic principle:

Experimental economics:

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

Which of the following best defines rational behavior?

A theorem is:

A necessary assumption behind the invisible hand theorem is that:

Which of the following is a normative statement?

"Price controls in competitive markets cause shortages" is an example of:

Normative economics seeks to:

Which of the following tools did Adam Smith argue provided a reasonable way to address normative questions objectively?

For a given benefit, a rational person chooses the option that has:

Which statement best summarizes the invisible hand theorem?

The quantity of goods and services available to society:

Someone using the reasoning process consistent with the impartial spectator tool would argue that the minimum wage is a:

Sunk costs:

The price mechanism is:

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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