Question 1

Economists often say that trade is a win-win situation.How do you justify this?

Accepted Answer

One of the fundamental ideas of economic

Question 2

Graphs are useful because of the way they

Accepted Answer

A)  facilitate interpretation and analysis of data. 
B)  clarify interpretation and analysis of ideas. 
C)  permit a person to easily see relationships. 
D)  convey an idea that might otherwise take many words. 
E)  All of the above are correct. 
A)  facilitate interpretation and analysis of data. 
B)  clarify interpretation and analysis of ideas. 
C)  permit a person to easily see relationships. 
D)  convey an idea that might otherwise take many words. 
E)  All of the above are correct.

Question 3

Economic theory simplifies relationships to explain how the relationships interact.

Accepted Answer

A) True 
 B)False

Question 4

A theory can best be defined as

Accepted Answer

A)  an untested assertion of untested fact. 
B)  a collection of assumptions that simplify the real world. 
C)  an opinion of a reliable person who studies a subject or discipline. 
D)  a deliberate simplification of factual relationships that attempts to explain how those relationships work. 
E)  the body of knowledge that has been scientifically verified by the scientific community. 
A)  an untested assertion of untested fact. 
B)  a collection of assumptions that simplify the real world. 
C)  an opinion of a reliable person who studies a subject or discipline. 
D)  a deliberate simplification of factual relationships that attempts to explain how those relationships work. 
E)  the body of knowledge that has been scientifically verified by the scientific community.

Question 5

Only economists and other "social" scientists have areas of dispute within their disciplines.

Accepted Answer

A) True 
 B)False

Question 6

Models are simplifications that are used to observe the workings of a system.

Accepted Answer

A) True 
 B)False

Question 7

Some college students think that because a college degree greatly increases their earning potential there is no opportunity cost of attending college.How would an economist look at the matter?

Accepted Answer

A)  There is no opportunity cost, assuming that future earnings actually increase as expected. 
B)  The opportunity cost is much less than it would appear, assuming that earnings increase. 
C)  Opportunity cost is a meaningless concept in this situation. 
D)  The college students are completely correct in all respects. 
E)  There is still an opportunity cost, even if it is justified by higher future earnings. 
A)  There is no opportunity cost, assuming that future earnings actually increase as expected. 
B)  The opportunity cost is much less than it would appear, assuming that earnings increase. 
C)  Opportunity cost is a meaningless concept in this situation. 
D)  The college students are completely correct in all respects. 
E)  There is still an opportunity cost, even if it is justified by higher future earnings.

Question 8

The high unemployment of 2008-2010 caused a substantial decrease in inflation which created fears of deflation.

Accepted Answer

A) True 
 B)False

Question 9

The United States has been willing to trade off greater efficiency for greater wage equality.

Accepted Answer

A) True 
 B)False

Question 10

To an economist, the cost of a college education

Accepted Answer

A)  includes the income that the student could have earned during the time spent in college. 
B)  can be measured solely by the dollar cost of tuition, books, and other fees. 
C)  includes only the cost of schooling, not the cost of housing and food. 
D)  excludes financial aid in computation of the cost of schooling. 
E)  All of the above are correct. 
A)  includes the income that the student could have earned during the time spent in college. 
B)  can be measured solely by the dollar cost of tuition, books, and other fees. 
C)  includes only the cost of schooling, not the cost of housing and food. 
D)  excludes financial aid in computation of the cost of schooling. 
E)  All of the above are correct.

Question 11

Two advisors to the president have given their policy recommendations, and they are in disagreement.Why do these economists disagree?

Accepted Answer

A)  because they do not have all relevant information about the problem 
B)  because they disagree on the nature of some cause-effect relationship 
C)  because they have different values and opinions 
D)  All of the above are reasons for disagreements among economists. 
A)  because they do not have all relevant information about the problem 
B)  because they disagree on the nature of some cause-effect relationship 
C)  because they have different values and opinions 
D)  All of the above are reasons for disagreements among economists.

Question 12

Economists may disagree about how to solve an economic problem because they

Accepted Answer

A)  use different models to analyze the problem and its solutions. 
B)  have different political and moral beliefs. 
C)  disagree about the facts of the situation. 
D)  All of the above are correct. 
A)  use different models to analyze the problem and its solutions. 
B)  have different political and moral beliefs. 
C)  disagree about the facts of the situation. 
D)  All of the above are correct.

Question 13

In the early 1800s, there was a smallpox outbreak in a remote part of Russia.The government sent in a large group of army doctors, but they were too late to stop the epidemic.Thirty years later, there was another smallpox scare.A local statistician cautioned the government against a similar response, noting the increased mortality and high number of army doctors during the earlier epidemic.Was the statistician providing good advice?

Accepted Answer

The statistician confused correlation wi

Question 14

In the fall of 1992, candidate Bill Clinton's campaign office had a large sign which read, "It's the economy, stupid." This was meant to say that

Accepted Answer

A)  economic problems were the most important in the campaign. 
B)  there is no agreement on economic goals. 
C)  economists have let the country down. 
D)  economic theory is too abstract for people to understand. 
E)  there has been a loss of comparative advantage. 
A)  economic problems were the most important in the campaign. 
B)  there is no agreement on economic goals. 
C)  economists have let the country down. 
D)  economic theory is too abstract for people to understand. 
E)  there has been a loss of comparative advantage.

Question 15

The slope of a curved line differs from that of a straight line in that

Accepted Answer

A)  the numerical value of the slope of a straight line is different at every point, but is the same at every point for a curved line. 
B)  the numerical value of the slope of a straight line is always higher than the numerical value of the slope of a curved line. 
C)  the numerical value of the slope of a curved line is different at every point, but is the same at every point for a straight line. 
D)  the numerical value of the slope of a curved line is an irrational number, but the numerical value of the slope of a straight line is always a rational number. 
E)  straight lines are more realistic, but curved lines are not descriptively accurate for the real world. 
A)  the numerical value of the slope of a straight line is different at every point, but is the same at every point for a curved line. 
B)  the numerical value of the slope of a straight line is always higher than the numerical value of the slope of a curved line. 
C)  the numerical value of the slope of a curved line is different at every point, but is the same at every point for a straight line. 
D)  the numerical value of the slope of a curved line is an irrational number, but the numerical value of the slope of a straight line is always a rational number. 
E)  straight lines are more realistic, but curved lines are not descriptively accurate for the real world.

Question 16

In the 19th century, Russian peasants noticed that during cholera epidemics there were lots of doctors around; in an attempt to eliminate cholera, they killed all the doctors.This is an example of

Accepted Answer

A)  mistaking correlation with causation. 
B)  the fallacy of opportunism. 
C)  excessive abstraction. 
D)  rationality. 
E)  marginal analysis. 
A)  mistaking correlation with causation. 
B)  the fallacy of opportunism. 
C)  excessive abstraction. 
D)  rationality. 
E)  marginal analysis.

Question 17

Inaccurate prediction generally invalidates the use of theory in economics.

Accepted Answer

A) True 
 B)False

Question 18

Consider the following information regarding a person's decision to go to college: college tuition is $20,000 per year, room and board is $10,000 per year, and books and materials are $2,000 per year.Suppose that instead of going to college this person could have earned $18,000 working in a store.An economist would calculate the cost of going to college as

Accepted Answer

A)  $20,000. 
B)  $30,000. 
C)  $32,000. 
D)  $50,000. 
E)  $18,000. 
A)  $20,000. 
B)  $30,000. 
C)  $32,000. 
D)  $50,000. 
E)  $18,000.

Question 19

The United States has chosen to balance the competing claims of efficiency versus equality by emphasizing greater efficiency over greater equality.

Accepted Answer

A) True 
 B)False

Question 20

Economists make assumptions because

Accepted Answer

A)  they need to incorporate value judgments into their models. 
B)  analysis without assumptions would be impossibly complex. 
C)  they always have imperfect information about reality. 
D)  assumptions are the final product of careful economic analysis. 
E)  assumptions allow economists to ignore things that they cannot explain. 
A)  they need to incorporate value judgments into their models. 
B)  analysis without assumptions would be impossibly complex. 
C)  they always have imperfect information about reality. 
D)  assumptions are the final product of careful economic analysis. 
E)  assumptions allow economists to ignore things that they cannot explain.

Exam 1: What Is Economics?

Economists often say that trade is a win-win situation.How do you justify this?

Graphs are useful because of the way they

Economic theory simplifies relationships to explain how the relationships interact.

A theory can best be defined as

Only economists and other "social" scientists have areas of dispute within their disciplines.

Models are simplifications that are used to observe the workings of a system.

Some college students think that because a college degree greatly increases their earning potential there is no opportunity cost of attending college.How would an economist look at the matter?

The high unemployment of 2008-2010 caused a substantial decrease in inflation which created fears of deflation.

The United States has been willing to trade off greater efficiency for greater wage equality.

To an economist, the cost of a college education

Two advisors to the president have given their policy recommendations, and they are in disagreement.Why do these economists disagree?

Economists may disagree about how to solve an economic problem because they

In the fall of 1992, candidate Bill Clinton's campaign office had a large sign which read, "It's the economy, stupid." This was meant to say that

The slope of a curved line differs from that of a straight line in that

In the 19th century, Russian peasants noticed that during cholera epidemics there were lots of doctors around; in an attempt to eliminate cholera, they killed all the doctors.This is an example of

Inaccurate prediction generally invalidates the use of theory in economics.

The United States has chosen to balance the competing claims of efficiency versus equality by emphasizing greater efficiency over greater equality.

Economists make assumptions because

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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