Question 1

Government controls over market prices frequently "backfire."

Accepted Answer

A) True 
 B)False

Question 2

The marginal cost of an airline ticket is the total cost of flying the plane divided by the number of passengers.

Accepted Answer

A) True 
 B)False

Question 3

Economists are often perceived as disagreeing with each other.Is this the way things really are?

Accepted Answer

A)  No, economists agree on much more than is commonly supposed. 
B)  No, the problem is that some economists are smarter than others. 
C)  No, economists "stage" disagreements for public amusement. 
D)  Yes, economists rarely agree on much of anything. 
E)  Yes, economists are unable to analyze problems dispassionately. 
A)  No, economists agree on much more than is commonly supposed. 
B)  No, the problem is that some economists are smarter than others. 
C)  No, economists "stage" disagreements for public amusement. 
D)  Yes, economists rarely agree on much of anything. 
E)  Yes, economists are unable to analyze problems dispassionately.

Question 4

If an airline company has several empty seats on a flight and the full price of an air ticket is $500 and the marginal cost per passenger is $100, then it will be profitable for the airline to

Accepted Answer

A)  charge a stand-by passenger no less than the full fare of $500. 
B)  charge a stand-by passenger less than $100. 
C)  charge a stand-by passenger more than $500. 
D)  charge a stand-by passenger more than $100. 
E)  fill the seats at the last minute for any price. 
A)  charge a stand-by passenger no less than the full fare of $500. 
B)  charge a stand-by passenger less than $100. 
C)  charge a stand-by passenger more than $500. 
D)  charge a stand-by passenger more than $100. 
E)  fill the seats at the last minute for any price.

Question 5

In 1980, in order to stimulate agricultural production, Fidel Castro allowed Cuban farmers to sell their goods directly to consumers and keep whatever profit they made.Some farmers were earning $50,000 per year, compared with the average worker income of $2,400.The workers resented this.Castro denounced the farmers as "capitalist gangsters" and closed the free markets.Cuban cash income declined five percent and fresh vegetables were in short supply.This illustrates the economic concept of the

Accepted Answer

A)  law of comparative advantage. 
B)  equality-efficiency trade-off. 
C)  cost disease of the service sector. 
D)  unemployment-inflation trade-off. 
E)  All of the above are correct. 
A)  law of comparative advantage. 
B)  equality-efficiency trade-off. 
C)  cost disease of the service sector. 
D)  unemployment-inflation trade-off. 
E)  All of the above are correct.

Question 6

The relatively low rate of inflation coupled with a low unemployment rate that occurred in the 1990s represented a "normal" economic situation.

Accepted Answer

A) True 
 B)False

Question 7

Over the past century, the main factor responsible for rising living standards in the United States has been productivity growth.

Accepted Answer

A) True 
 B)False

Question 8

In 1971, a bank worker could process 265 checks in 1 hour.Currently, computers with built-in reader-sorter processing capacity have pushed that number above 100,000 checks per hour.Economists describe this type of activity as

Accepted Answer

A)  exploitation of labor. 
B)  an increase in labor productivity. 
C)  speed-up. 
D)  comparative advantage. 
E)  mutual gains from voluntary trade. 
A)  exploitation of labor. 
B)  an increase in labor productivity. 
C)  speed-up. 
D)  comparative advantage. 
E)  mutual gains from voluntary trade.

Question 9

Opportunity cost is the value of the next best alternative to a given choice.

Accepted Answer

A) True 
 B)False

Question 10

If a decision maker uses marginal analysis, then the relevant costs are the

Accepted Answer

A)  full costs of a particular activity or product. 
B)  fixed costs which do not vary with the extra activity or output. 
C)  profits obtained on the activity or product. 
D)  average costs for a particular activity or product. 
E)  additional costs of a particular activity or product. 
A)  full costs of a particular activity or product. 
B)  fixed costs which do not vary with the extra activity or output. 
C)  profits obtained on the activity or product. 
D)  average costs for a particular activity or product. 
E)  additional costs of a particular activity or product.

Question 11

Economics is a social science rather than a "hard" science like physics because

Accepted Answer

A)  economists abstract from reality when creating their theories. 
B)  economics is easier to study than physics. 
C)  economists must explain their theories to policy makers who lack formal mathematical training. 
D)  economists study human behavior, which is affected by an unpredictable and vast range of influences. 
A)  economists abstract from reality when creating their theories. 
B)  economics is easier to study than physics. 
C)  economists must explain their theories to policy makers who lack formal mathematical training. 
D)  economists study human behavior, which is affected by an unpredictable and vast range of influences.

Question 12

Abstraction can be thought of as

Accepted Answer

A)  ignoring reality in order to build theory. 
B)  omitting unimportant details in order to understand complex phenomena. 
C)  creating absurdity in order to explain simplicity. 
D)  assuming complexity when simplicity will do. 
E)  stylizing reality rather than analyzing cause and effect. 
A)  ignoring reality in order to build theory. 
B)  omitting unimportant details in order to understand complex phenomena. 
C)  creating absurdity in order to explain simplicity. 
D)  assuming complexity when simplicity will do. 
E)  stylizing reality rather than analyzing cause and effect.

Question 13

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 14

Abstraction can lead to gross distortions of pertinent facts.

Accepted Answer

A) True 
 B)False

Question 15

Comparative advantage explains how two nations can benefit from trade.

Accepted Answer

A) True 
 B)False

Question 16

If Japan is twice as good at producing cameras and three times as good at producing TV sets as the United States, Japan is said to have a comparative advantage in TV sets and the United States has a comparative advantage in cameras.

Accepted Answer

A) True 
 B)False

Question 17

Opportunity cost can best be defined as the

Accepted Answer

A)  value of what must be given up in order to acquire an item. 
B)  money cost to the buyer to acquire a good or service. 
C)  total value of all the other items that otherwise could be acquired. 
D)  cost to the seller to produce an item. 
E)  time cost to obtain the money to buy an item. 
A)  value of what must be given up in order to acquire an item. 
B)  money cost to the buyer to acquire a good or service. 
C)  total value of all the other items that otherwise could be acquired. 
D)  cost to the seller to produce an item. 
E)  time cost to obtain the money to buy an item.

Question 18

A horizontal line has a slope of

Accepted Answer

A)  one. 
B)  zero. 
C)  infinity. 
D)  undefined. 
A)  one. 
B)  zero. 
C)  infinity. 
D)  undefined.

Question 19

Which of the following statements is true?

Accepted Answer

A)  Economic theory does not make unrealistic assumptions. 
B)  Economists should not ignore details while focusing on complex problems. 
C)  Abstraction forms an important part of economic analysis. 
D)  The word theory means same for both economists and laymen. 
A)  Economic theory does not make unrealistic assumptions. 
B)  Economists should not ignore details while focusing on complex problems. 
C)  Abstraction forms an important part of economic analysis. 
D)  The word theory means same for both economists and laymen.

Question 20

The terms "correlation" and "causation" are synonymous.

Accepted Answer

A) True 
 B)False

Exam 1: What Is Economics?

Government controls over market prices frequently "backfire."

The marginal cost of an airline ticket is the total cost of flying the plane divided by the number of passengers.

Economists are often perceived as disagreeing with each other.Is this the way things really are?

If an airline company has several empty seats on a flight and the full price of an air ticket is $500 and the marginal cost per passenger is $100, then it will be profitable for the airline to

The relatively low rate of inflation coupled with a low unemployment rate that occurred in the 1990s represented a "normal" economic situation.

Over the past century, the main factor responsible for rising living standards in the United States has been productivity growth.

In 1971, a bank worker could process 265 checks in 1 hour.Currently, computers with built-in reader-sorter processing capacity have pushed that number above 100,000 checks per hour.Economists describe this type of activity as

Opportunity cost is the value of the next best alternative to a given choice.

If a decision maker uses marginal analysis, then the relevant costs are the

Economics is a social science rather than a "hard" science like physics because

Abstraction can be thought of as

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

Abstraction can lead to gross distortions of pertinent facts.

Comparative advantage explains how two nations can benefit from trade.

If Japan is twice as good at producing cameras and three times as good at producing TV sets as the United States, Japan is said to have a comparative advantage in TV sets and the United States has a comparative advantage in cameras.

Opportunity cost can best be defined as the

A horizontal line has a slope of

Which of the following statements is true?

The terms "correlation" and "causation" are synonymous.

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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