Question 1

A diagram is a good example of a(n)

Accepted Answer

A) hypothesis. 
B) abstraction. 
C) theory. 
D) concept. 
E) instrumentation. 
A) hypothesis. 
B) abstraction. 
C) theory. 
D) concept. 
E) instrumentation.

Question 2

Why do economists tend to create models in diagrammatic form?

Accepted Answer

A) Diagrams distort reality, and theory is an attempt to avoid reality. 
B) Because they are unable to construct physical models of their theories. 
C) Economic reality can only be represented in diagrams. 
D) Most economists like to draw as much as possible. 
E) All of these responses are correct. 
A) Diagrams distort reality, and theory is an attempt to avoid reality. 
B) Because they are unable to construct physical models of their theories. 
C) Economic reality can only be represented in diagrams. 
D) Most economists like to draw as much as possible. 
E) All of these responses are correct.

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

A graph with a positive slope indicates that the variables depicted on the axes move in the same directions.

Accepted Answer

A) True 
 B)False

Question 5

Externalities are costs to society, which have an impact on parties not directly involved into a particular economic transaction.

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

Economic models

Accepted Answer

A) are always based on realistic assumptions. 
B) usually predict perfectly. 
C) can never be tested with real-world data. 
D) are used to describe cause-and-effect relationships. 
E) are too simple to be of much use. 
A) are always based on realistic assumptions. 
B) usually predict perfectly. 
C) can never be tested with real-world data. 
D) are used to describe cause-and-effect relationships. 
E) are too simple to be of much use.

Question 8

In both the 1970s and the 1990s, extreme economic events caused unemployment to move in the same direction as inflation.

Accepted Answer

A) True 
 B)False

Question 9

There is no trade-off between efficiency and equality.

Accepted Answer

A) True 
 B)False

Question 10

If you go to the movies on Thursday night, the only cost to you is the price you pay for the movie ticket.

Accepted Answer

A) True 
 B)False

Question 11

In the calculation of the cost of going to college, an economist would always include the cost of room and board.

Accepted Answer

A) True 
 B)False

Question 12

A graph's origin is the point of intersection of all lines or curves in the graph.

Accepted Answer

A) True 
 B)False

Question 13

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 these responses 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 these responses are correct.

Question 14

The opportunity cost to you of an action is

Accepted Answer

A) how much you must pay for the opportunity to take the action. 
B) the value to you of the next best action you could have taken. 
C) the cost to society of giving you the opportunity to take the action. 
D) the dollar cost to you of the action. 
A) how much you must pay for the opportunity to take the action. 
B) the value to you of the next best action you could have taken. 
C) the cost to society of giving you the opportunity to take the action. 
D) the dollar cost to you of the action.

Question 15

A price floor on the sale of wheat would be likely to benefit

Accepted Answer

A) bread buyers. 
B) bread producers. 
C) wheat farmers. 
D) flour mills. 
A) bread buyers. 
B) bread producers. 
C) wheat farmers. 
D) flour mills.

Question 16

The law of comparative advantages explains why

Accepted Answer

A) advanced nations will not trade with less-developed countries. 
B) an advanced nation will not trade with other countries. 
C) less-developed countries only trade among themselves. 
D) nations trade with each other, regardless of their relative levels of economic development. 
E) nations erect trade barriers. 
A) advanced nations will not trade with less-developed countries. 
B) an advanced nation will not trade with other countries. 
C) less-developed countries only trade among themselves. 
D) nations trade with each other, regardless of their relative levels of economic development. 
E) nations erect trade barriers.

Question 17

Economic analysis requires both mathematical reasoning and historical study.

Accepted Answer

A) True 
 B)False

Question 18

All two-dimensional graphs must have an origin, a horizontal axis, and a vertical axis.

Accepted Answer

A) True 
 B)False

Question 19

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 20

The term opportunity cost refers to the

Accepted Answer

A) value of what is gained when a choice is made. 
B) difference between the value of what is gained and the value of what is forgone when a choice is made. 
C) value of what is forgone when a choice is made. 
D) direct costs involved in making a choice. 
A) value of what is gained when a choice is made. 
B) difference between the value of what is gained and the value of what is forgone when a choice is made. 
C) value of what is forgone when a choice is made. 
D) direct costs involved in making a choice.

Exam 1: What Is Economics

A diagram is a good example of a(n)

Why do economists tend to create models in diagrammatic form?

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

A graph with a positive slope indicates that the variables depicted on the axes move in the same directions.

Externalities are costs to society, which have an impact on parties not directly involved into a particular economic transaction.

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

Economic models

In both the 1970s and the 1990s, extreme economic events caused unemployment to move in the same direction as inflation.

There is no trade-off between efficiency and equality.

If you go to the movies on Thursday night, the only cost to you is the price you pay for the movie ticket.

In the calculation of the cost of going to college, an economist would always include the cost of room and board.

A graph's origin is the point of intersection of all lines or curves in the graph.

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

The opportunity cost to you of an action is

A price floor on the sale of wheat would be likely to benefit

The law of comparative advantages explains why

Economic analysis requires both mathematical reasoning and historical study.

All two-dimensional graphs must have an origin, a horizontal axis, and a vertical axis.

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

The term opportunity cost refers to the

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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