Question 1

Individuals will have different value judgments about the appropriate rate of unemployment and the appropriate rate of inflation.

Accepted Answer

A) True 
 B)False

Question 2

Economists use models in order to

Accepted Answer

A) experiment with alternative circumstances. 
B) make educated guesses about real-life events. 
C) predict outcomes under various hypothetical conditions. 
D) increase understanding of how a relationship actually works. 
E) All of these responses are correct. 
A) experiment with alternative circumstances. 
B) make educated guesses about real-life events. 
C) predict outcomes under various hypothetical conditions. 
D) increase understanding of how a relationship actually works. 
E) All of these responses are correct.

Question 3

Economists make assumptions because

Accepted Answer

A) this is a way of incorporating value judgments into their models. 
B) their use allows complex situations to be analyzed. 
C) this permits imperfect information to describe reality. 
D) assumptions are the final product of careful economic analysis. 
E) assumptions allow economists to avoid facts that contradict their theories. 
A) this is a way of incorporating value judgments into their models. 
B) their use allows complex situations to be analyzed. 
C) this permits imperfect information to describe reality. 
D) assumptions are the final product of careful economic analysis. 
E) assumptions allow economists to avoid facts that contradict their theories.

Question 4

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 5

A theory is an explanation of the causal mechanism behind observed phenomena.

Accepted Answer

A) True 
 B)False

Question 6

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 7

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

Accepted Answer

A) True 
 B)False

Question 8

Why might well-educated economists disagree on appropriate public policy in some situations?

Accepted Answer

Economists might disagree beca

Question 9

Externalities affect only the buyer and seller involved in an exchange.

Accepted Answer

A) True 
 B)False

Question 10

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 11

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

Accepted Answer

A) True 
 B)False

Question 12

It has been found that people die at a much higher rate in hospitals than in most other environments, leading some to conclude that hospitals cause death.What is the problem with this reasoning?

Accepted Answer

This illustrates a confusion of correlat

Question 13

Both parties gain in a voluntary exchange.

Accepted Answer

A) True 
 B)False

Question 14

In the twentieth 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 15

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 16

"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 an example 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) ignore reality. 
E) use unrealistic assumptions to develop theory. 
A) apply the law of supply and demand. 
B) employ marginal analysis. 
C) are prevented from getting correct answers. 
D) ignore reality. 
E) use unrealistic assumptions to develop theory.

Question 17

There is an inverse relationship between inflation and unemployment in the short run and this can be seen as an

Accepted Answer

A) example of the equality-efficiency trade-off. 
B) example of the impact of comparative advantage. 
C) example of macroeconomic policy choices. 
D) example of an externality. 
E) example of the use of abstraction in economic analysis. 
A) example of the equality-efficiency trade-off. 
B) example of the impact of comparative advantage. 
C) example of macroeconomic policy choices. 
D) example of an externality. 
E) example of the use of abstraction in economic analysis.

Question 18

If Taiwanese workers can produce all goods at lower wages than American workers, then

Accepted Answer

A) Americans can still gain by trading with Taiwan. 
B) Americans can only lose if they import from Taiwan. 
C) Taiwan can only lose if it trades with America. 
D) there are no gains from trade that are possible in this case. 
E) Americans should be self-sufficient. 
A) Americans can still gain by trading with Taiwan. 
B) Americans can only lose if they import from Taiwan. 
C) Taiwan can only lose if it trades with America. 
D) there are no gains from trade that are possible in this case. 
E) Americans should be self-sufficient.

Question 19

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) the exploitation of labor. 
B) an increase in labor productivity. 
C) the displacement of labor. 
D) the effects of comparative advantage. 
E) the mutual gains received through voluntary trade. 
A) the exploitation of labor. 
B) an increase in labor productivity. 
C) the displacement of labor. 
D) the effects of comparative advantage. 
E) the mutual gains received through voluntary trade.

Question 20

Economists probably agree more often than they disagree.

Accepted Answer

A) True 
 B)False

Exam 1: What Is Economics

Individuals will have different value judgments about the appropriate rate of unemployment and the appropriate rate of inflation.

Economists use models in order to

Economists make assumptions because

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

A theory is an explanation of the causal mechanism behind observed phenomena.

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

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

Why might well-educated economists disagree on appropriate public policy in some situations?

Externalities affect only the buyer and seller involved in an exchange.

Economic analysis and policy are made more difficult by

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

It has been found that people die at a much higher rate in hospitals than in most other environments, leading some to conclude that hospitals cause death.What is the problem with this reasoning?

Both parties gain in a voluntary exchange.

In the twentieth 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

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.

"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 an example of how economists

There is an inverse relationship between inflation and unemployment in the short run and this can be seen as an

If Taiwanese workers can produce all goods at lower wages than American workers, then

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

Economists probably agree more often than they disagree.

The Economony: 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

The Financial Markets and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

The Case for Free Markets: the Price System

Monopoly

Between Competition and Monopoly

Limiting Market Power: Antitrust and Regulation

The Shortcomings of Free Markets

The Economics of 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

Contemporary Issues in the Useconomy

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