Question 1

Abstraction is used in economics to omit unnecessary details and focus on the essence of the problem being studied.

Accepted Answer

A) True 
 B)False

Question 2

There are never any adverse consequences of government attempts to modify the laws of supply and demand.

Accepted Answer

A) True 
 B)False

Question 3

Both parties gain in a voluntary exchange.

Accepted Answer

A) True 
 B)False

Question 4

Productivity growth is the main cause of rising living standards.

Accepted Answer

A) True 
 B)False

Question 5

Economic analysis and policy are made more difficult by

Accepted Answer

A)  having so much data to work with. 
B)  inadequate and imperfect information. 
C)  an incomplete consensus on the basic goals of social policy. 
D)  the lack of public interest and opinion on economic questions. 
E)  the major economic problems society faces. 
A)  having so much data to work with. 
B)  inadequate and imperfect information. 
C)  an incomplete consensus on the basic goals of social policy. 
D)  the lack of public interest and opinion on economic questions. 
E)  the major economic problems society faces.

Question 6

You have just bought a used car, and drive away satisfied that you've made a good deal on the purchase.What would an economist say about your "gain" on the deal?

Accepted Answer

A)  Your gain has clearly meant that the seller lost on the deal. 
B)  The seller has clearly gained, and you have actually lost on the deal. 
C)  Both you and the seller have gained something. 
D)  If your gain is too large, then the deal should be re-negotiated. 
E)  If the seller's loss is too large, then the deal should be re-negotiated. 
A)  Your gain has clearly meant that the seller lost on the deal. 
B)  The seller has clearly gained, and you have actually lost on the deal. 
C)  Both you and the seller have gained something. 
D)  If your gain is too large, then the deal should be re-negotiated. 
E)  If the seller's loss is too large, then the deal should be re-negotiated.

Question 7

Economic theory is a necessity, not a luxury.This statement is true because theory

Accepted Answer

A)  always leads to practical and useful policy. 
B)  can prevent depressions in the economy. 
C)  substitutes for vast amounts of data. 
D)  provides a structure for organizing and analyzing data. 
E)  always leads to accurate predictions. 
A)  always leads to practical and useful policy. 
B)  can prevent depressions in the economy. 
C)  substitutes for vast amounts of data. 
D)  provides a structure for organizing and analyzing data. 
E)  always leads to accurate predictions.

Question 8

How useful is economic analysis in solving complex social problems?

Accepted Answer

A)  It is reliable in analyzing problems, and can usefully serve as the "final word" on solutions. 
B)  It is unreliable for understanding much of anything about social problems, and cannot offer much advice. 
C)  It is useful in clarifying options, but the final decision often rests on ethical decisions about which people differ. 
D)  It is useful in understanding economic problems but is only useful within that very narrow boundary. 
E)  It is not useful because economists agree on so little when they use their analysis. 
A)  It is reliable in analyzing problems, and can usefully serve as the "final word" on solutions. 
B)  It is unreliable for understanding much of anything about social problems, and cannot offer much advice. 
C)  It is useful in clarifying options, but the final decision often rests on ethical decisions about which people differ. 
D)  It is useful in understanding economic problems but is only useful within that very narrow boundary. 
E)  It is not useful because economists agree on so little when they use their analysis.

Question 9

Suppose that one can read a graph that shows information about price and quantity of some product.Relying solely on the graph, is it possible to explain the relationship between the two variables?

Accepted Answer

No.The graph does not, by itse

Question 10

A line that rises at a 45 degree angle has a slope of

Accepted Answer

A)  0.45. 
B)  1. 
C)  45. 
D)  1/45. 
A)  0.45. 
B)  1. 
C)  45. 
D)  1/45.

Question 11

Models are used to describe cause-and-effect relationships.

Accepted Answer

A) True 
 B)False

Question 12

If a government enacts a price floor on agricultural products to protect wheat farmers, the result is likely going to be

Accepted Answer

A)  an increase in price with a surplus of wheat. 
B)  an increase in price with a shortage of wheat. 
C)  a decrease in price with a surplus of wheat. 
D)  a decrease in price with a shortage of wheat. 
A)  an increase in price with a surplus of wheat. 
B)  an increase in price with a shortage of wheat. 
C)  a decrease in price with a surplus of wheat. 
D)  a decrease in price with a shortage of wheat.

Question 13

When a teacher in a private school points out to her high school principal that since there are empty seats in all classrooms, the cost of additional students is really zero, she is using the

Accepted Answer

A)  law of comparative advantage. 
B)  principle of marginal analysis. 
C)  theory of externalities. 
D)  notion of the cost decreases of the service sector. 
E)  concept of opportunity cost. 
A)  law of comparative advantage. 
B)  principle of marginal analysis. 
C)  theory of externalities. 
D)  notion of the cost decreases of the service sector. 
E)  concept of opportunity cost.

Question 14

The concept of economic efficiency refers to the size of the "economic pie" whereas the concept of equality refers to how the "pie" is distributed.

Accepted Answer

A) True 
 B)False

Question 15

Suppose that a curve has a slope equal to zero at some point A.To the right of A, the curve may

Accepted Answer

A)  have a positive slope. 
B)  have a negative slope. 
C)  be a straight line. 
D)  All of the above are correct. 
A)  have a positive slope. 
B)  have a negative slope. 
C)  be a straight line. 
D)  All of the above are correct.

Question 16

Explain why an airline may decide to sell an air ticket to a stand-by passenger at less than the full-fare if there are empty seats on the airplane?

Accepted Answer

The decision depends on the marginal, or

Question 17

A diagram is a good example of a(n)

Accepted Answer

A)  hypothesis. 
B)  abstraction. 
C)  theory. 
D)  concept. 
E)  instrumentation. 
A)  hypothesis. 
B)  abstraction. 
C)  theory. 
D)  concept. 
E)  instrumentation.

Question 18

If an economic curve has a negative slope, then one variable

Accepted Answer

A)  falls as the other rises. 
B)  changes at a slower rate than another. 
C)  has a smaller value than another. 
D)  changes after another variable. 
A)  falls as the other rises. 
B)  changes at a slower rate than another. 
C)  has a smaller value than another. 
D)  changes after another variable.

Question 19

In international trade, one country's gain is another country's loss.

Accepted Answer

A) True 
 B)False

Question 20

"Assume that all individuals have perfect information about prices now and in the future, that they have identical tastes, that all markets are competitive, and that there is no government." This statement is indicative of how economists

Accepted Answer

A)  apply the law of supply and demand. 
B)  employ marginal analysis. 
C)  are prevented from getting correct answers. 
D)  abstract for analytic purposes. 
E)  use realistic assumptions to develop theory. 
A)  apply the law of supply and demand. 
B)  employ marginal analysis. 
C)  are prevented from getting correct answers. 
D)  abstract for analytic purposes. 
E)  use realistic assumptions to develop theory.

Exam 1: What Is Economics?

Abstraction is used in economics to omit unnecessary details and focus on the essence of the problem being studied.

There are never any adverse consequences of government attempts to modify the laws of supply and demand.

Both parties gain in a voluntary exchange.

Productivity growth is the main cause of rising living standards.

Economic analysis and policy are made more difficult by

You have just bought a used car, and drive away satisfied that you've made a good deal on the purchase.What would an economist say about your "gain" on the deal?

Economic theory is a necessity, not a luxury.This statement is true because theory

How useful is economic analysis in solving complex social problems?

Suppose that one can read a graph that shows information about price and quantity of some product.Relying solely on the graph, is it possible to explain the relationship between the two variables?

A line that rises at a 45 degree angle has a slope of

Models are used to describe cause-and-effect relationships.

If a government enacts a price floor on agricultural products to protect wheat farmers, the result is likely going to be

When a teacher in a private school points out to her high school principal that since there are empty seats in all classrooms, the cost of additional students is really zero, she is using the

The concept of economic efficiency refers to the size of the "economic pie" whereas the concept of equality refers to how the "pie" is distributed.

Suppose that a curve has a slope equal to zero at some point A.To the right of A, the curve may

Explain why an airline may decide to sell an air ticket to a stand-by passenger at less than the full-fare if there are empty seats on the airplane?

A diagram is a good example of a(n)

If an economic curve has a negative slope, then one variable

In international trade, one country's gain is another country's loss.

"Assume that all individuals have perfect information about prices now and in the future, that they have identical tastes, that all markets are competitive, and that there is no government." This statement is indicative of how economists

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: The Importance of Marginal Analysis

Securities: Business Finance, and the Economy: The Tail that Wags the Dog?

The Firm and the Industry under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

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