Question 1

If a college enforces a new policy where anyone caught cheating is immediately expelled, the basic postulate of economics suggests that

Accepted Answer

A)  cheating will be completely eliminated. 
B)  fewer students will attempt to cheat. 
C)  the amount of cheating will be unaffected. 
D)  any of the above is possible because student behavior is unpredictable. 
A)  cheating will be completely eliminated. 
B)  fewer students will attempt to cheat. 
C)  the amount of cheating will be unaffected. 
D)  any of the above is possible because student behavior is unpredictable.

Question 2

For the typical student, taking an introductory course in economics should

Accepted Answer

A)  turn the student into an economist. 
B)  teach the student solutions to most social problems. 
C)  teach the student how to answer complex social questions. 
D)  help the student learn to rationally analyze social problems. 
E)  All of the above are correct. 
A)  turn the student into an economist. 
B)  teach the student solutions to most social problems. 
C)  teach the student how to answer complex social questions. 
D)  help the student learn to rationally analyze social problems. 
E)  All of the above are correct.

Question 3

"Mediocre economists often consider only the immediate apparent effects of a change, whereas a good economist will also consider effects that may only become observable over time." This statement most clearly emphasizes

Accepted Answer

A)  the fallacy of composition. 
B)  economizing behavior. 
C)  the importance of secondary effects. 
D)  the fact that association is not causation. 
A)  the fallacy of composition. 
B)  economizing behavior. 
C)  the importance of secondary effects. 
D)  the fact that association is not causation.

Question 4

In 1960, spending on income transfers and health care accounted for 21.5 percent of the federal budget. Today these two items account for

Accepted Answer

A)  less than 15 percent of the federal budget. 
B)  approximately 25 percent of the federal budget. 
C)  approximately 36 percent of the federal budget. 
D)  approximately 66 percent of the federal budget. 
A)  less than 15 percent of the federal budget. 
B)  approximately 25 percent of the federal budget. 
C)  approximately 36 percent of the federal budget. 
D)  approximately 66 percent of the federal budget.

Question 5

Ex-London School of Economics student Mick Jagger sang, "You can't always get what you want, but if you try sometime, you just might find you can get what you need." Another statement of the basic economic principle expressed in this lyric is that

Accepted Answer

A)  rational decisions are not always possible. 
B)  you can allocate your resources to what gives you the highest value. 
C)  you can create the supply to meet your own demand. 
D)  you can maximize social welfare by making optimal decisions. 
A)  rational decisions are not always possible. 
B)  you can allocate your resources to what gives you the highest value. 
C)  you can create the supply to meet your own demand. 
D)  you can maximize social welfare by making optimal decisions.

Question 6

The economic way of thinking suggests that if the government imposed a $500 tax on owners of red automobiles,

Accepted Answer

A)  fewer red automobiles would be produced and sold. 
B)  more red automobiles would be produced and sold. 
C)  there would be no change in the number of red automobiles produced and sold. 
D)  red automobiles would cease to exist. 
A)  fewer red automobiles would be produced and sold. 
B)  more red automobiles would be produced and sold. 
C)  there would be no change in the number of red automobiles produced and sold. 
D)  red automobiles would cease to exist.

Question 7

Expansion in the size of government relative to the market sector will eventually retard economic growth because

Accepted Answer

A)  larger governments will be more involved in activities for which they are ill-suited. 
B)  the higher taxes to finance a bigger government will lead to larger and larger deadweight losses from taxation. 
C)  the incentive to engage in innovative activities and respond to change is weaker in government than in the market sector. 
D)  all of the above are correct. 
A)  larger governments will be more involved in activities for which they are ill-suited. 
B)  the higher taxes to finance a bigger government will lead to larger and larger deadweight losses from taxation. 
C)  the incentive to engage in innovative activities and respond to change is weaker in government than in the market sector. 
D)  all of the above are correct.

Question 8

Which one of the following statements most accurately indicates the basic motivation for behavior?

Accepted Answer

A)  Individuals are motivated primarily by selfish desires; thus, personal costs and benefits influence their actions. 
B)  Individuals are motivated primarily by humanitarian concerns; therefore, personal costs and benefits exert little influence on most of their actions. 
C)  Individuals are motivated by a variety of forces; however, changes in personal benefits and costs influence the choices of both selfish and humanitarian individuals. 
D)  Individuals are motivated by a variety of forces; however, changes in personal benefits and costs affect behavior only when individuals are motivated by selfishness. 
A)  Individuals are motivated primarily by selfish desires; thus, personal costs and benefits influence their actions. 
B)  Individuals are motivated primarily by humanitarian concerns; therefore, personal costs and benefits exert little influence on most of their actions. 
C)  Individuals are motivated by a variety of forces; however, changes in personal benefits and costs influence the choices of both selfish and humanitarian individuals. 
D)  Individuals are motivated by a variety of forces; however, changes in personal benefits and costs affect behavior only when individuals are motivated by selfishness.

Question 9

Government expenditures as a share of the U.S. economy are

Accepted Answer

A)  the largest in the world. 
B)  the smallest in the world. 
C)  smaller than most Western European countries but larger than a number of high-growth Asian economies. 
D)  larger than Canada, France, and the United Kingdom but slightly smaller than Germany and Italy. 
A)  the largest in the world. 
B)  the smallest in the world. 
C)  smaller than most Western European countries but larger than a number of high-growth Asian economies. 
D)  larger than Canada, France, and the United Kingdom but slightly smaller than Germany and Italy.

Question 10

Increased spending on which of the following items is most likely to increase the size of government during the years following 2016?

Accepted Answer

A)  education 
B)  Social Security and Medicare 
C)  agricultural subsidies 
D)  transportation (roads and airports) 
A)  education 
B)  Social Security and Medicare 
C)  agricultural subsidies 
D)  transportation (roads and airports)

Question 11

Capital is a term economists use to refer to

Accepted Answer

A)  man-made resources used to produce other goods and services. 
B)  resources that are available in nature such as mineral deposits. 
C)  money that is used to consume goods and services, to distinguish it from money that is saved. 
D)  the value of the best alternative to an action. 
A)  man-made resources used to produce other goods and services. 
B)  resources that are available in nature such as mineral deposits. 
C)  money that is used to consume goods and services, to distinguish it from money that is saved. 
D)  the value of the best alternative to an action.

Question 12

The statement, "John buys more of good X as his income increases, ceteris paribus," means

Accepted Answer

A)  John's income is being held constant. 
B)  John's purchases of good X are being held constant. 
C)  John's income and purchases of this good are being held constant. 
D)  John's income is the only influence that is being allowed to change. 
E)  the price of this good is being allowed to change. 
A)  John's income is being held constant. 
B)  John's purchases of good X are being held constant. 
C)  John's income and purchases of this good are being held constant. 
D)  John's income is the only influence that is being allowed to change. 
E)  the price of this good is being allowed to change.

Question 13

The Secretary of Labor states that wage rates in the country have risen by 2 percent this past year. The head of a local labor union states that wage gains should have been higher. The Secretary's statement is a(n) ____ economic statement, and the labor head's statement is a(n) ____ economic statement.

Accepted Answer

A)  normative; normative 
B)  normative; positive 
C)  positive; normative 
D)  positive; positive 
E)  proper; improper 
A)  normative; normative 
B)  normative; positive 
C)  positive; normative 
D)  positive; positive 
E)  proper; improper

Question 14

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 15

The difference between a positive economic statement and a normative statement is that

Accepted Answer

A)  a positive statement must be true; a normative statement is often not true 
B)  a normative statement must be true; a positive statement is often not true 
C)  a positive statement can be proved; a normative statement cannot 
D)  a normative statement can be proved; a positive statement cannot 
E)  a positive economic statement is a moral judgment; a normative economic statement is not a moral judgment 
A)  a positive statement must be true; a normative statement is often not true 
B)  a normative statement must be true; a positive statement is often not true 
C)  a positive statement can be proved; a normative statement cannot 
D)  a normative statement can be proved; a positive statement cannot 
E)  a positive economic statement is a moral judgment; a normative economic statement is not a moral judgment

Question 16

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 17

In the most recent fiscal year, federal expenditures on income transfers, health care, national defense, and interest on the national debt accounted for

Accepted Answer

A)  less than 20 percent of federal spending. 
B)  about 40 percent of federal spending. 
C)  approximately 50 percent of federal spending. 
D)  more than 85 percent of federal spending. 
A)  less than 20 percent of federal spending. 
B)  about 40 percent of federal spending. 
C)  approximately 50 percent of federal spending. 
D)  more than 85 percent of federal spending.

Question 18

An opinion based on personal preferences and value judgments is called

Accepted Answer

A)  an objective concept. 
B)  a subjective concept. 
C)  an unintended consequence. 
D)  ceteris paribus. 
A)  an objective concept. 
B)  a subjective concept. 
C)  an unintended consequence. 
D)  ceteris paribus.

Question 19

A tradeoff exists between a clean environment and a higher level of income in that

Accepted Answer

A)  studies show that individuals with higher levels of income actually pollute less than low-income individuals. 
B)  efforts to reduce pollution typically are not completely successful. 
C)  laws that reduce pollution raise costs of production and reduce incomes. 
D)  by employing individuals to clean up pollution, employment and income both rise. 
A)  studies show that individuals with higher levels of income actually pollute less than low-income individuals. 
B)  efforts to reduce pollution typically are not completely successful. 
C)  laws that reduce pollution raise costs of production and reduce incomes. 
D)  by employing individuals to clean up pollution, employment and income both rise.

Question 20

The consequences of an economic change that are not immediately identifiable but are felt only with the passage of time are known in economics as

Accepted Answer

A)  opportunity costs. 
B)  utility curves. 
C)  secondary effects. 
D)  comparative advantages. 
A)  opportunity costs. 
B)  utility curves. 
C)  secondary effects. 
D)  comparative advantages.

If a college enforces a new policy where anyone caught cheating is immediately expelled, the basic postulate of economics suggests that

For the typical student, taking an introductory course in economics should

"Mediocre economists often consider only the immediate apparent effects of a change, whereas a good economist will also consider effects that may only become observable over time." This statement most clearly emphasizes

In 1960, spending on income transfers and health care accounted for 21.5 percent of the federal budget. Today these two items account for

Ex-London School of Economics student Mick Jagger sang, "You can't always get what you want, but if you try sometime, you just might find you can get what you need." Another statement of the basic economic principle expressed in this lyric is that

The economic way of thinking suggests that if the government imposed a $500 tax on owners of red automobiles,

Expansion in the size of government relative to the market sector will eventually retard economic growth because

Which one of the following statements most accurately indicates the basic motivation for behavior?

Government expenditures as a share of the U.S. economy are

Increased spending on which of the following items is most likely to increase the size of government during the years following 2016?

Capital is a term economists use to refer to

The statement, "John buys more of good X as his income increases, ceteris paribus," means

The Secretary of Labor states that wage rates in the country have risen by 2 percent this past year. The head of a local labor union states that wage gains should have been higher. The Secretary's statement is a(n) economic statement, and the labor head's statement is a(n) economic statement.

Which of the following best illustrates the fallacy of composition?

The difference between a positive economic statement and a normative statement is that

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

In the most recent fiscal year, federal expenditures on income transfers, health care, national defense, and interest on the national debt accounted for

An opinion based on personal preferences and value judgments is called

A tradeoff exists between a clean environment and a higher level of income in that

The consequences of an economic change that are not immediately identifiable but are felt only with the passage of time are known in economics as

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

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Gaining From International Trade

Filters

Exam 1: The Economic Approach

If a college enforces a new policy where anyone caught cheating is immediately expelled, the basic postulate of economics suggests that

For the typical student, taking an introductory course in economics should

"Mediocre economists often consider only the immediate apparent effects of a change, whereas a good economist will also consider effects that may only become observable over time." This statement most clearly emphasizes

In 1960, spending on income transfers and health care accounted for 21.5 percent of the federal budget. Today these two items account for

Ex-London School of Economics student Mick Jagger sang, "You can't always get what you want, but if you try sometime, you just might find you can get what you need." Another statement of the basic economic principle expressed in this lyric is that

The economic way of thinking suggests that if the government imposed a $500 tax on owners of red automobiles,

Expansion in the size of government relative to the market sector will eventually retard economic growth because

Which one of the following statements most accurately indicates the basic motivation for behavior?

Government expenditures as a share of the U.S. economy are

Increased spending on which of the following items is most likely to increase the size of government during the years following 2016?

Capital is a term economists use to refer to

The statement, "John buys more of good X as his income increases, ceteris paribus," means

Which of the following best illustrates the fallacy of composition?

The difference between a positive economic statement and a normative statement is that

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

In the most recent fiscal year, federal expenditures on income transfers, health care, national defense, and interest on the national debt accounted for

An opinion based on personal preferences and value judgments is called

A tradeoff exists between a clean environment and a higher level of income in that

The consequences of an economic change that are not immediately identifiable but are felt only with the passage of time are known in economics as

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

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Gaining From International Trade

Filters