Question 1

Which one of the following states a central element of the economic way of thinking?

Accepted Answer

A) Scarce goods are priceless. 
B) Incentives matter--human choice is influenced in predictable ways by changes in personal costs and benefits. 
C) The realism of the assumptions is the best test of an economic theory. 
D) When deciding how to allocate time, the concept of opportunity cost is meaningless. 
A) Scarce goods are priceless. 
B) Incentives matter--human choice is influenced in predictable ways by changes in personal costs and benefits. 
C) The realism of the assumptions is the best test of an economic theory. 
D) When deciding how to allocate time, the concept of opportunity cost is meaningless.

Question 2

Why would a radio station give money to listeners? Does this violate the economic way of thinking?

Accepted Answer

Radio stations do surveys to see what ty

Question 3

Your friend notices that U.S. auto production and U.S. population growth have moved together over several decades. He reasons that one way to slow population growth is for the government to order the auto makers to cut back on production. You gently point out to him that he

Accepted Answer

A) is correct only when the economy is in a recession 
B) has mistakenly inferred causation from observed correlation 
C) has ignored secondary effects 
D) has committed the fallacy of composition 
E) is correct only when the United States enjoys economic growth 
A) is correct only when the economy is in a recession 
B) has mistakenly inferred causation from observed correlation 
C) has ignored secondary effects 
D) has committed the fallacy of composition 
E) is correct only when the United States enjoys economic growth

Question 4

When economists say an individual has made a rational choice, they mean the individual has

Accepted Answer

A) made the choice by weighing their own subjective costs and benefits. 
B) made a "good" decision, one that reasonable outside observers would have also made. 
C) neglected to consider the unintended consequences arising from their decision. 
D) ignored their own personal interests and made the choice that is best for society. 
A) made the choice by weighing their own subjective costs and benefits. 
B) made a "good" decision, one that reasonable outside observers would have also made. 
C) neglected to consider the unintended consequences arising from their decision. 
D) ignored their own personal interests and made the choice that is best for society.

Question 5

A marginal change usually is a

Accepted Answer

A) change that involves little, if anything, that is important. 
B) large, significant adjustment. 
C) change for the worse, and so it is usually a short-term change. 
D) small, incremental adjustment. 
A) change that involves little, if anything, that is important. 
B) large, significant adjustment. 
C) change for the worse, and so it is usually a short-term change. 
D) small, incremental adjustment.

Question 6

Which of the following is true of resources?

Accepted Answer

A) Resources are inputs used to produce goods and services. 
B) Human resources reflect the skills and productive knowledge of human beings. 
C) With the passage of time, investment activities can increase the availability of resources. 
D) All of the above are true. 
A) Resources are inputs used to produce goods and services. 
B) Human resources reflect the skills and productive knowledge of human beings. 
C) With the passage of time, investment activities can increase the availability of resources. 
D) All of the above are true.

Question 7

In economics, man-made resources such as tools, equipment, and structures that are used to produce other goods and services are referred to as

Accepted Answer

A) consumer goods. 
B) capital. 
C) marginal goods. 
D) infrastructures. 
A) consumer goods. 
B) capital. 
C) marginal goods. 
D) infrastructures.

Question 8

Economic analysis assumes that

Accepted Answer

A) people act only out of selfish motives. 
B) people are motivated by a variety of forces; however, changes in personal benefits and costs affect behavior only when individuals are motivated by selfishness. 
C) people are basically unselfish, and their actions are, therefore, difficult to predict. 
D) changes in the personal benefits and costs associated with an activity will exert a predictable influence on the behavior of both those who are selfish and those who are unselfish. 
A) people act only out of selfish motives. 
B) people are motivated by a variety of forces; however, changes in personal benefits and costs affect behavior only when individuals are motivated by selfishness. 
C) people are basically unselfish, and their actions are, therefore, difficult to predict. 
D) changes in the personal benefits and costs associated with an activity will exert a predictable influence on the behavior of both those who are selfish and those who are unselfish.

Question 9

Which of the following could be considered to be a secondary effect caused by making drugs such as cocaine illegal?

Accepted Answer

A) The higher prices that result from making them illegal results in more property theft by users to afford the drugs. 
B) The usage of police and law enforcement resources to enforce drug laws leads to lower enforcement (and thus a higher amount) of other crimes. 
C) Without the ability to use the legal system to enforce contracts, violence often results when one party to a drug deal does not live up to their end of the bargain, thus the amount of violence increases by making drugs illegal. 
D) All of the above would be considered secondary effects of making drugs illegal. 
A) The higher prices that result from making them illegal results in more property theft by users to afford the drugs. 
B) The usage of police and law enforcement resources to enforce drug laws leads to lower enforcement (and thus a higher amount) of other crimes. 
C) Without the ability to use the legal system to enforce contracts, violence often results when one party to a drug deal does not live up to their end of the bargain, thus the amount of violence increases by making drugs illegal. 
D) All of the above would be considered secondary effects of making drugs illegal.

Question 10

Which of the following is true?

Accepted Answer

A) Changes in personal costs and benefits will exert a predictable influence on the choices of people. 
B) If one individual gains from an economic activity, then someone else must lose. 
C) If a good is provided free to an individual by government, its production will not consume valuable scarce resources. 
D) If the intentions behind a policy are good, you can be assured that the outcome will be desirable. 
A) Changes in personal costs and benefits will exert a predictable influence on the choices of people. 
B) If one individual gains from an economic activity, then someone else must lose. 
C) If a good is provided free to an individual by government, its production will not consume valuable scarce resources. 
D) If the intentions behind a policy are good, you can be assured that the outcome will be desirable.

Question 11

Deciding how to make the best use of limited resources to satisfy virtually unlimited wants is known in economics as

Accepted Answer

A) economizing behavior. 
B) the fallacy of composition. 
C) ceteris paribus. 
D) the fallacy that good intentions do not guarantee the desired outcome. 
A) economizing behavior. 
B) the fallacy of composition. 
C) ceteris paribus. 
D) the fallacy that good intentions do not guarantee the desired outcome.

Question 12

Which one of the following is a positive economic statement?

Accepted Answer

A) An increase in the minimum wage will reduce employment. 
B) The minimum wage should be increased. 
C) Social justice will be served by increasing the minimum wage. 
D) Thoughtful people oppose an increase in the minimum wage. 
A) An increase in the minimum wage will reduce employment. 
B) The minimum wage should be increased. 
C) Social justice will be served by increasing the minimum wage. 
D) Thoughtful people oppose an increase in the minimum wage.

Question 13

The three major categories of resources are

Accepted Answer

A) human resources, physical resources, and natural resources. 
B) scarce resources, capital resources, and abundant resources. 
C) financial resources, global resources, and local resources. 
D) common resources, private resources, and capital resources. 
A) human resources, physical resources, and natural resources. 
B) scarce resources, capital resources, and abundant resources. 
C) financial resources, global resources, and local resources. 
D) common resources, private resources, and capital resources.

Question 14

Which of the following best describes the difference between an objective concept and a subjective concept?

Accepted Answer

A) A subjective concept is a fact based on observation that is not subject to personal opinion, while an objective concept is based on personal preferences and value judgments. 
B) An objective concept is a fact based on observation that is not subject to personal opinion, while a subjective concept is based on personal preferences and value judgments. 
C) A subjective concept relates to issues in microeconomics, while an objective concept relates to issues in macroeconomics. 
D) An objective concept can only be illustrated in words, while a subjective concept can usually be illustrated with a graph. 
A) A subjective concept is a fact based on observation that is not subject to personal opinion, while an objective concept is based on personal preferences and value judgments. 
B) An objective concept is a fact based on observation that is not subject to personal opinion, while a subjective concept is based on personal preferences and value judgments. 
C) A subjective concept relates to issues in microeconomics, while an objective concept relates to issues in macroeconomics. 
D) An objective concept can only be illustrated in words, while a subjective concept can usually be illustrated with a graph.

Question 15

The benefit (or satisfaction) that an individual expects to derive from an activity is called

Accepted Answer

A) opportunity cost. 
B) utility. 
C) marginal cost. 
D) scarcity. 
A) opportunity cost. 
B) utility. 
C) marginal cost. 
D) scarcity.

Question 16

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

Accepted Answer

A) The inflation rate in the United States decreased from 4 percent last year to 3 percent this year as a result of lower energy prices. 
B) The economy grew at an annual rate of 5 percent during the first quarter of this year. 
C) If two automobile companies merge, it is likely that the price of automobiles will rise. 
D) An increase in international trade benefits some workers but hurts others. 
E) The minimum wage should be increased so that low income workers can afford to keep up with the cost of living. 
A) The inflation rate in the United States decreased from 4 percent last year to 3 percent this year as a result of lower energy prices. 
B) The economy grew at an annual rate of 5 percent during the first quarter of this year. 
C) If two automobile companies merge, it is likely that the price of automobiles will rise. 
D) An increase in international trade benefits some workers but hurts others. 
E) The minimum wage should be increased so that low income workers can afford to keep up with the cost of living.

Question 17

Which of the following best illustrates the fallacy of composition?

Accepted Answer

A) If Jamal had more money, he could afford to buy more goods. 
B) If Aisha stood up at a basketball game, she could get a better view of the game; if everyone stood up at a basketball game, everyone could have a better view of the game. 
C) If the price of bread rose, consumers would buy less; if consumers bought less bread, the price of bread would rise. 
D) High housing prices cause people to buy less housing, but an increase in income might cause them to buy more housing. 
A) If Jamal had more money, he could afford to buy more goods. 
B) If Aisha stood up at a basketball game, she could get a better view of the game; if everyone stood up at a basketball game, everyone could have a better view of the game. 
C) If the price of bread rose, consumers would buy less; if consumers bought less bread, the price of bread would rise. 
D) High housing prices cause people to buy less housing, but an increase in income might cause them to buy more housing.

Question 18

Modern economics as a field of study is usually thought to have begun with

Accepted Answer

A) Adam Smith and the writing of The Wealth of Nations. 
B) David Ricardo and the writing of The Principles of Political Economy and Taxation. 
C) Aristotle and the writing of Politics and Ethics. 
D) Moses and the Ten Commandments. 
A) Adam Smith and the writing of The Wealth of Nations. 
B) David Ricardo and the writing of The Principles of Political Economy and Taxation. 
C) Aristotle and the writing of Politics and Ethics. 
D) Moses and the Ten Commandments.

Question 19

The most fundamental concept in economics is that

Accepted Answer

A) changes in incentives influence behavior in a predictable way--people will be less likely to choose an option as it becomes more expensive. 
B) changes in incentives generally do not influence human behavior. 
C) goods that are provided by government are free for society. 
D) individuals generally do not consider other alternatives when making a choice. 
A) changes in incentives influence behavior in a predictable way--people will be less likely to choose an option as it becomes more expensive. 
B) changes in incentives generally do not influence human behavior. 
C) goods that are provided by government are free for society. 
D) individuals generally do not consider other alternatives when making a choice.

Question 20

The basic ingredients in any economic decision are

Accepted Answer

A) scarcity and choice. 
B) surpluses and shortages. 
C) market prices and the use of efficient production methods. 
D) needs and wants. 
A) scarcity and choice. 
B) surpluses and shortages. 
C) market prices and the use of efficient production methods. 
D) needs and wants.

Which one of the following states a central element of the economic way of thinking?

Why would a radio station give money to listeners? Does this violate the economic way of thinking?

Your friend notices that U.S. auto production and U.S. population growth have moved together over several decades. He reasons that one way to slow population growth is for the government to order the auto makers to cut back on production. You gently point out to him that he

When economists say an individual has made a rational choice, they mean the individual has

A marginal change usually is a

Which of the following is true of resources?

In economics, man-made resources such as tools, equipment, and structures that are used to produce other goods and services are referred to as

Economic analysis assumes that

Which of the following could be considered to be a secondary effect caused by making drugs such as cocaine illegal?

Which of the following is true?

Deciding how to make the best use of limited resources to satisfy virtually unlimited wants is known in economics as

Which one of the following is a positive economic statement?

The three major categories of resources are

Which of the following best describes the difference between an objective concept and a subjective concept?

The benefit (or satisfaction) that an individual expects to derive from an activity is called

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

Which of the following best illustrates the fallacy of composition?

Modern economics as a field of study is usually thought to have begun with

The most fundamental concept in economics is that

The basic ingredients in any economic decision are

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy, Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Filters

Exam 1: The Economic Approach

Which one of the following states a central element of the economic way of thinking?

Why would a radio station give money to listeners? Does this violate the economic way of thinking?

Your friend notices that U.S. auto production and U.S. population growth have moved together over several decades. He reasons that one way to slow population growth is for the government to order the auto makers to cut back on production. You gently point out to him that he

When economists say an individual has made a rational choice, they mean the individual has

A marginal change usually is a

Which of the following is true of resources?

In economics, man-made resources such as tools, equipment, and structures that are used to produce other goods and services are referred to as

Economic analysis assumes that

Which of the following could be considered to be a secondary effect caused by making drugs such as cocaine illegal?

Which of the following is true?

Deciding how to make the best use of limited resources to satisfy virtually unlimited wants is known in economics as

Which one of the following is a positive economic statement?

The three major categories of resources are

Which of the following best describes the difference between an objective concept and a subjective concept?

The benefit (or satisfaction) that an individual expects to derive from an activity is called

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

Which of the following best illustrates the fallacy of composition?

Modern economics as a field of study is usually thought to have begun with

The most fundamental concept in economics is that

The basic ingredients in any economic decision are

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy, Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Filters