Question 1

In terms of the competing claims of equality and efficiency, in the United States we have

Accepted Answer

A)  chosen greater wage inequality for lower unemployment. 
B)  chosen higher unemployment for less wage inequality. 
C)  both greater wage inequality and higher unemployment. 
D)  not faced a trade-off between wage inequality and unemployment. 
E)  been able to choose both less wage inequality and lower unemployment. 
A)  chosen greater wage inequality for lower unemployment. 
B)  chosen higher unemployment for less wage inequality. 
C)  both greater wage inequality and higher unemployment. 
D)  not faced a trade-off between wage inequality and unemployment. 
E)  been able to choose both less wage inequality and lower unemployment.

Question 2

A horizontal line always has a slope of one.

Accepted Answer

A) True 
 B)False

Question 3

Probably the most important factor affecting material well-being is

Accepted Answer

A)  inflation rates. 
B)  unemployment rates. 
C)  budget deficits. 
D)  growth in productivity. 
E)  monopoly power. 
A)  inflation rates. 
B)  unemployment rates. 
C)  budget deficits. 
D)  growth in productivity. 
E)  monopoly power.

Question 4

When the economy experiences a bust, the government knows exactly which policies will spur an economic recovery.

Accepted Answer

A) True 
 B)False

Question 5

How do markets respond to price ceilings and price floors? Do attempts to repeal the laws of supply and demand meet their objectives?

Accepted Answer

Attempts to repeal the laws of supply an

Question 6

When variable A rises by 10 units, variable B rises by 15 units.The slope of the line describing this relationship is

Accepted Answer

A)  always 2/3. 
B)  either 2/3 or 1.5, depending on which variable goes on which axis of the graph. 
C)  either 1.5 or -1.5, depending on which variable goes on which axis. 
D)  always -1.5. 
A)  always 2/3. 
B)  either 2/3 or 1.5, depending on which variable goes on which axis of the graph. 
C)  either 1.5 or -1.5, depending on which variable goes on which axis. 
D)  always -1.5.

Question 7

To an economist, theory can be thought of as

Accepted Answer

A)  abstraction for the sake of argument. 
B)  one person's opinion, which is just as good as another's. 
C)  another term for the description of a situation. 
D)  beliefs which cannot necessarily be verified. 
E)  explanation of mechanisms behind observed phenomena. 
A)  abstraction for the sake of argument. 
B)  one person's opinion, which is just as good as another's. 
C)  another term for the description of a situation. 
D)  beliefs which cannot necessarily be verified. 
E)  explanation of mechanisms behind observed phenomena.

Question 8

Slope is measured as rise/run.

Accepted Answer

A) True 
 B)False

Question 9

If you leave your money in the bank at a fixed interest rate and allow for compounding of interest, show what will happen to your savings over time.Indicate with a graph whether there is a negative or positive slope between savings and time and what happens to the slope over time.

Accepted Answer

Figure 1-3
 @#IMG-DLM& 
Placing time on the horizo

Question 10

Standby passengers on airlines who pay low rates for seats benefit from the low price.How are the airlines affected?

Accepted Answer

A)  They lose, because the standby passengers do not cover the full cost of the seats. 
B)  They gain, because the additional revenue covers the "fixed costs" of the flight. 
C)  They lose, because the gain of the passengers must necessarily come at the expense of the airline. 
D)  They benefit as long as the additional revenue from the passengers exceeds the marginal cost. 
E)  Uncertain, because economic theory says nothing about this sort of situation. 
A)  They lose, because the standby passengers do not cover the full cost of the seats. 
B)  They gain, because the additional revenue covers the "fixed costs" of the flight. 
C)  They lose, because the gain of the passengers must necessarily come at the expense of the airline. 
D)  They benefit as long as the additional revenue from the passengers exceeds the marginal cost. 
E)  Uncertain, because economic theory says nothing about this sort of situation.

Question 11

If a voluntary trade takes place,

Accepted Answer

A)  both parties will benefit from the transaction. 
B)  only one party will benefit from the transaction. 
C)  neither party will benefit from the transaction. 
D)  both parties will benefit only if the government regulates the transaction. 
A)  both parties will benefit from the transaction. 
B)  only one party will benefit from the transaction. 
C)  neither party will benefit from the transaction. 
D)  both parties will benefit only if the government regulates the transaction.

Question 12

The statement "saccharine causes cancer" is not a theory; it is a hypothesis.

Accepted Answer

A) True 
 B)False

Question 13

The principle of comparative advantage explains how

Accepted Answer

A)  one nation can take advantage of another one through international trade. 
B)  two nations may engage in mutually beneficial trade, even though one of them is more productive than the other. 
C)  one individual can take advantage of another through international trade. 
D)  some people are good at producing everything, while others have no comparative advantages. 
E)  some nations end up with large trade surpluses. 
A)  one nation can take advantage of another one through international trade. 
B)  two nations may engage in mutually beneficial trade, even though one of them is more productive than the other. 
C)  one individual can take advantage of another through international trade. 
D)  some people are good at producing everything, while others have no comparative advantages. 
E)  some nations end up with large trade surpluses.

Question 14

Because there is a trade-off between inflation and unemployment in the short run,

Accepted Answer

A)  lower unemployment will typically cause inflation to fall. 
B)  policies designed to reduce unemployment will typically set off a recession. 
C)  policies designed to reduce inflation will cause unemployment to fall as well. 
D)  higher inflation will generally be associated with higher unemployment. 
E)  lower inflation will generally be associated with higher unemployment. 
A)  lower unemployment will typically cause inflation to fall. 
B)  policies designed to reduce unemployment will typically set off a recession. 
C)  policies designed to reduce inflation will cause unemployment to fall as well. 
D)  higher inflation will generally be associated with higher unemployment. 
E)  lower inflation will generally be associated with higher unemployment.

Question 15

Opportunity cost is the

Accepted Answer

A)  cost incurred when one fails to take advantage of an opportunity. 
B)  cost incurred in order to increase the availability of attractive opportunities. 
C)  cost of the best option forgone as a result of choosing an alternative. 
D)  drudgery of the undesirable aspects of an option. 
A)  cost incurred when one fails to take advantage of an opportunity. 
B)  cost incurred in order to increase the availability of attractive opportunities. 
C)  cost of the best option forgone as a result of choosing an alternative. 
D)  drudgery of the undesirable aspects of an option.

Question 16

The opportunity cost of any good or service is the

Accepted Answer

A)  actual dollar cost of doing or making it. 
B)  highest price that a seller can get for the item. 
C)  value of the next best alternative. 
D)  cost associated with a value judgment. 
E)  cost of producing the good or service. 
A)  actual dollar cost of doing or making it. 
B)  highest price that a seller can get for the item. 
C)  value of the next best alternative. 
D)  cost associated with a value judgment. 
E)  cost of producing the good or service.

Question 17

It has been said that "economics is the science of common sense." Is economics synonymous with common sense?

Accepted Answer

A large portion of economics will agree

Question 18

An economic model is a realistic depiction of the operation of the economy.

Accepted Answer

A) True 
 B)False

Question 19

In economic theorizing, common sense will always lead to the correct answer.

Accepted Answer

A) True 
 B)False

Question 20

The use of abstraction in economics is analogous to the use of a road map providing directions to a location.

Accepted Answer

A) True 
 B)False

Exam 1: What Is Economics?

In terms of the competing claims of equality and efficiency, in the United States we have

A horizontal line always has a slope of one.

Probably the most important factor affecting material well-being is

When the economy experiences a bust, the government knows exactly which policies will spur an economic recovery.

How do markets respond to price ceilings and price floors? Do attempts to repeal the laws of supply and demand meet their objectives?

When variable A rises by 10 units, variable B rises by 15 units.The slope of the line describing this relationship is

To an economist, theory can be thought of as

Slope is measured as rise/run.

If you leave your money in the bank at a fixed interest rate and allow for compounding of interest, show what will happen to your savings over time.Indicate with a graph whether there is a negative or positive slope between savings and time and what happens to the slope over time.

Standby passengers on airlines who pay low rates for seats benefit from the low price.How are the airlines affected?

If a voluntary trade takes place,

The statement "saccharine causes cancer" is not a theory; it is a hypothesis.

The principle of comparative advantage explains how

Because there is a trade-off between inflation and unemployment in the short run,

Opportunity cost is the

The opportunity cost of any good or service is the

It has been said that "economics is the science of common sense." Is economics synonymous with common sense?

An economic model is a realistic depiction of the operation of the economy.

In economic theorizing, common sense will always lead to the correct answer.

The use of abstraction in economics is analogous to the use of a road map providing directions to a location.

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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