Question 1

The "invisible hand" is the price mechanism that guides people's actions in the market.

Accepted Answer

A) True 
 B)False

Question 2

Describe the difference between positive economics,normative economics,and the art of economics.

Accepted Answer

Positive economics is the study of what

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

How are the three central economic questions-What,How,and For Whom-related to the concept of scarcity?

Accepted Answer

Given that we have scarce resources and

Question 5

Which of the following is not one of the three central coordination problems of the economy given in the book?

Accepted Answer

A) What 
B) Whether 
C) For whom 
D) How 
A) What 
B) Whether 
C) For whom 
D) How

Question 6

What role does coercion play in an economy?

Accepted Answer

Coercion has historically been a part of

Question 7

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 8

"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 9

Social and political forces affect the way in which the invisible hand works.

Accepted Answer

A) True 
 B)False

Question 10

Explain how microeconomics differs from macroeconomics.Explain why the following headlines,taken from various issues of The Wall Street Journal,deal with either microeconomics or macroeconomics.
(a)"Microsoft posted a 26% increase in sales"
(b)"Housing starts soared 13.3% in September"
(c)"Honeywell Plans to Slash More Jobs"
(d)"Germany to Breach Key Deficit Target it Helped to Create"
(e)"China's Output Grew 8.1%"
(f)"Washington Is Urging Canada to Increase Military Spending"

Accepted Answer

Microeconomics is the study of individua

Question 11

Propositions that are logically true based on the assumptions of a model are known as:

Accepted Answer

A) precepts. 
B) theorems. 
C) insights. 
D) policies. 
A) precepts. 
B) theorems. 
C) insights. 
D) policies.

Question 12

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 13

Macroeconomics includes the study of:

Accepted Answer

A) inflation. 
B) firm pricing policies. 
C) the relative prices of oil and coal. 
D) individual choice. 
A) inflation. 
B) firm pricing policies. 
C) the relative prices of oil and coal. 
D) individual choice.

Question 14

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 15

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 16

What is a natural experiment?

Accepted Answer

A natural experiment

Question 17

You are trying to decide which professor to take for Economics.(You don't want to take it at all,but you have to. )Professor A is known to have great classes (fascinating lectures with lots of fun stuff thrown in),but she gives very challenging exams.Professor B's classes are quite dull,but his exams are quite easy.What are the marginal costs and benefits of taking Economics from Professor A rather than from Professor B? Who would you pick?

Accepted Answer

I would choose that class for which the

Question 18

Opportunity cost:

Accepted Answer

A) includes only monetary expenses. 
B) is the net benefit forgone by not undertaking the next best alternative. 
C) is nonexistent for some choices. 
D) is the same as sunk cost. 
A) includes only monetary expenses. 
B) is the net benefit forgone by not undertaking the next best alternative. 
C) is nonexistent for some choices. 
D) is the same as sunk cost.

Question 19

Even though 80,000 individuals in the United States wait for kidney transplants and, for a price, there are many individuals who would be willing to supply a kidney (a healthy person can donate one kidney without any problems), it remains illegal to buy and sell organs in the United States. A market for kidneys does not exist because of:

Accepted Answer

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

Question 20

Suppose the marginal cost of dating Perry is $30 and the marginal benefit is worth $40 to you. Following economic reasoning, you should:

Accepted Answer

A) date Perry. 
B) not date Perry. 
C) determine what your sunk costs are. 
D) determine what your total benefits and total costs are. 
A) date Perry. 
B) not date Perry. 
C) determine what your sunk costs are. 
D) determine what your total benefits and total costs are.

Exam 1: Economics and Economic Reasoning

The "invisible hand" is the price mechanism that guides people's actions in the market.

Describe the difference between positive economics,normative economics,and the art of economics.

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

How are the three central economic questions-What,How,and For Whom-related to the concept of scarcity?

Which of the following is not one of the three central coordination problems of the economy given in the book?

What role does coercion play in an economy?

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

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

Social and political forces affect the way in which the invisible hand works.

Propositions that are logically true based on the assumptions of a model are known as:

Sunk costs:

Macroeconomics includes the study of:

Which of the following best defines rational behavior?

Which of the following is a normative statement?

What is a natural experiment?

Opportunity cost:

Suppose the marginal cost of dating Perry is $30 and the marginal benefit is worth $40 to you. Following economic reasoning, you should:

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

Economic Growth, Business Cycles, and Unemployment

Measuring and Describing the Aggregate Economy

The Keynesian Short-Run Policy Model: Demand-Side Policies

The Classical Long-Run Policy Model: Growth and Supply-Side Policies

The Financial Sector and the Economy

Monetary Policy

Financial Crises, Panics, and Unconventional Monetary Policy

Deficits and Debt: the Austerity Debate

The Fiscal Policy Dilemma

Jobs and Unemployment

Inflation, Deflation, and Macro Policy

International Financial Policy

Macro Policy in a Global Setting

Structural Stagnation and Globalization

Macro Policy in Developing Countries

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