Question 1

Carefully distinguish between an economic theory and economic model.

Accepted Answer

An economic theory is a deliberate simpl

Question 2

Dryden Press can produce 10,000 textbooks using 10 machines and 100 workers or using five machines and 300 workers.It can produce 20,000 textbooks using 10 machines and 300 workers or five machines and 600 workers.Construct a two-dimensional contour-type graph to show the relationship between the output of textbooks and the labor and machinery inputs.

Accepted Answer

@#IMG-DLM& 
 The labor and capital inputs are meas

Question 3

The dramatic increase in the standard of living since the Industrial Revolution

Accepted Answer

A)  means that societies and individuals face no constraints. 
B)  has not meant unlimited abundance for societies or persons. 
C)  means that "opportunity cost" is a meaningless concept. 
D)  has reduced the choices open to persons. 
E)  has made economics less useful to persons. 
A)  means that societies and individuals face no constraints. 
B)  has not meant unlimited abundance for societies or persons. 
C)  means that "opportunity cost" is a meaningless concept. 
D)  has reduced the choices open to persons. 
E)  has made economics less useful to persons.

Question 4

A theory is an untested assertion of alleged fact.

Accepted Answer

A) True 
 B)False

Question 5

It is impossible for both nations to gain when trading with one other.

Accepted Answer

A) True 
 B)False

Question 6

All economic transactions involve only buyers and sellers; no third parties are involved.

Accepted Answer

A) True 
 B)False

Question 7

A ray through the origin always has a slope of one.

Accepted Answer

A) True 
 B)False

Question 8

A large factory pours its toxic wastewater into a nearby river, and as a result, the residents of a downstream community experience high rates of illness and birth defects.The economic problem illustrated by this example is

Accepted Answer

A)  marginal thinking. 
B)  comparative advantage. 
C)  repealing the laws of supply and demand. 
D)  externalities. 
E)  productivity growth. 
A)  marginal thinking. 
B)  comparative advantage. 
C)  repealing the laws of supply and demand. 
D)  externalities. 
E)  productivity growth.

Question 9

Rent control is usually justified on the grounds that it protects moderate- to low-income families from the burden of rapidly rising rents and from eviction if they are unable to pay.It also prevents landlords from reaping windfalls as property values rise.Opponents note that rent controls usually lead to a reduced supply of rental housing and shortages.The proponents of rent controls support them primarily on the grounds of

Accepted Answer

A)  efficiency. 
B)  equality. 
C)  externalities. 
D)  cost disease of services. 
A)  efficiency. 
B)  equality. 
C)  externalities. 
D)  cost disease of services.

Question 10

Rational choice requires that opportunity cost be

Accepted Answer

A)  ignored in making a decision. 
B)  considered for individual choices, but not for societal choices. 
C)  computed, but not actually used in making a decision. 
D)  considered as part of making a decision. 
E)  used as the sole decision criterion. 
A)  ignored in making a decision. 
B)  considered for individual choices, but not for societal choices. 
C)  computed, but not actually used in making a decision. 
D)  considered as part of making a decision. 
E)  used as the sole decision criterion.

Question 11

How is a production indifference map helpful?

Accepted Answer

A production indifference map is a graph

Question 12

A horizontal line has a slope of 0.

Accepted Answer

A) True 
 B)False

Question 13

A graph conveys information about a cause-and-effect relationship.

Accepted Answer

A) True 
 B)False

Question 14

In the United States the distribution of income is relatively unequal, and output is relatively high, while in the former Soviet Union the distribution of income was more equal and output per worker was much lower.Give one possible explanation for this phenomenon.

Accepted Answer

This problem illustrates the trade-off b

Question 15

Many believe that fairness calls for higher income taxes on the wealthy.Using one of the "Ideas for Beyond the Final Exam," explain how higher taxes on the wealthy will affect output.

Accepted Answer

Greater equality comes at the expense of

Question 16

The tangent at point A on a curve has a positive slope.Therefore, the curve has a

Accepted Answer

A)  positive slope at all points. 
B)  positive slope at point A. 
C)  negative slope at all points. 
D)  negative slope at point A. 
A)  positive slope at all points. 
B)  positive slope at point A. 
C)  negative slope at all points. 
D)  negative slope at point A.

Question 17

When economists are critical of government regulations that prohibit free individuals from making certain kinds of contracts, for example, to purchase a good or service, they will usually invoke the concept of

Accepted Answer

A)  marginal analysis. 
B)  mutual gains from voluntary trade. 
C)  inflation-unemployment trade-off. 
D)  the need for abstraction. 
E)  externalities. 
A)  marginal analysis. 
B)  mutual gains from voluntary trade. 
C)  inflation-unemployment trade-off. 
D)  the need for abstraction. 
E)  externalities.

Question 18

A line that rises from left to right has a positive slope.

Accepted Answer

A) True 
 B)False

Question 19

In her calculation of the cost of going to college, an economist would include the amount of forgone earnings over the years spent at college.

Accepted Answer

A) True 
 B)False

Question 20

Jack buys a computer from Sam, knowing fully well that the technology used in it is obsolete.In this case, the trade is

Accepted Answer

A)  beneficial to both parties. 
B)  beneficial only to Sam. 
C)  beneficial only to Jack. 
D)  not beneficial to either of them. 
A)  beneficial to both parties. 
B)  beneficial only to Sam. 
C)  beneficial only to Jack. 
D)  not beneficial to either of them.

Exam 1: What Is Economics?

Carefully distinguish between an economic theory and economic model.

The dramatic increase in the standard of living since the Industrial Revolution

A theory is an untested assertion of alleged fact.

It is impossible for both nations to gain when trading with one other.

All economic transactions involve only buyers and sellers; no third parties are involved.

A ray through the origin always has a slope of one.

A large factory pours its toxic wastewater into a nearby river, and as a result, the residents of a downstream community experience high rates of illness and birth defects.The economic problem illustrated by this example is

Rational choice requires that opportunity cost be

How is a production indifference map helpful?

A horizontal line has a slope of 0.

A graph conveys information about a cause-and-effect relationship.

In the United States the distribution of income is relatively unequal, and output is relatively high, while in the former Soviet Union the distribution of income was more equal and output per worker was much lower.Give one possible explanation for this phenomenon.

Many believe that fairness calls for higher income taxes on the wealthy.Using one of the "Ideas for Beyond the Final Exam," explain how higher taxes on the wealthy will affect output.

The tangent at point A on a curve has a positive slope.Therefore, the curve has a

When economists are critical of government regulations that prohibit free individuals from making certain kinds of contracts, for example, to purchase a good or service, they will usually invoke the concept of

A line that rises from left to right has a positive slope.

In her calculation of the cost of going to college, an economist would include the amount of forgone earnings over the years spent at college.

Jack buys a computer from Sam, knowing fully well that the technology used in it is obsolete.In this case, the trade is

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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