Question 1

Statistical correlation always implies causation.

Accepted Answer

A) True 
 B)False

Question 2

The use of abstraction in economic analysis is one of its primary weaknesses.

Accepted Answer

A) True 
 B)False

Question 3

Tools used by economists include

Accepted Answer

A) historical study. 
B) mathematical reasoning. 
C) statistical inference. 
D) All of these responses are correct. 
A) historical study. 
B) mathematical reasoning. 
C) statistical inference. 
D) All of these responses are correct.

Question 4

In economics, the true cost of making a choice is the value of what must be given up.

Accepted Answer

A) True 
 B)False

Question 5

What is the "right" degree of abstraction necessary to analyze an economic problem?

Accepted Answer

A) Simple abstraction of only minor details 
B) Simple abstraction of only irrelevant details 
C) Total abstraction of all variables 
D) Total abstraction of all irrelevant details 
E) There is no "right" degree of abstraction to analyze an economic problem. 
A) Simple abstraction of only minor details 
B) Simple abstraction of only irrelevant details 
C) Total abstraction of all variables 
D) Total abstraction of all irrelevant details 
E) There is no "right" degree of abstraction to analyze an economic problem.

Question 6

If trade between two countries is voluntary, one can expect that

Accepted Answer

A) one country's gain is necessarily the other's loss. 
B) one country will exploit the other one. 
C) neither country really gains from trade. 
D) the larger country will always gain at the expense of the smaller. 
E) both countries expect to gain something. 
A) one country's gain is necessarily the other's loss. 
B) one country will exploit the other one. 
C) neither country really gains from trade. 
D) the larger country will always gain at the expense of the smaller. 
E) both countries expect to gain something.

Question 7

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 8

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

Accepted Answer

A) True 
 B)False

Question 9

Unemployment and inflation are important determinants of short-run material welfare, whereas productivity growth is an important determinant of long-run material well-being.

Accepted Answer

A) True 
 B)False

Question 10

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 11

Externalities can only involve the imposition of harm on a party not directly involved in an economic transaction.

Accepted Answer

A) True 
 B)False

Question 12

"Correlation" is a measure of how one variable causes another to change.

Accepted Answer

A) True 
 B)False

Question 13

Economists and others use economic theory

Accepted Answer

A) only to analyze situations in which money changes hands. 
B) as a partial basis for public policy recommendations. 
C) to confuse their enemies. 
D) instead of using value judgments concerning important policy issues. 
A) only to analyze situations in which money changes hands. 
B) as a partial basis for public policy recommendations. 
C) to confuse their enemies. 
D) instead of using value judgments concerning important policy issues.

Question 14

Inaccurate prediction generally invalidates the use of theory in economics.

Accepted Answer

A) True 
 B)False

Question 15

Throughout the 1980s, accounting departments in U.S.universities were unable to fill many available faculty positions.This fact suggests that the salaries offered by these departments

Accepted Answer

A) suffered from the cost disease of the service sector. 
B) were below the market price for qualified accountants. 
C) created externalities. 
D) failed to reflect productivity growth in teaching. 
A) suffered from the cost disease of the service sector. 
B) were below the market price for qualified accountants. 
C) created externalities. 
D) failed to reflect productivity growth in teaching.

Question 16

You just purchased a lawn mower from your next-door neighbor.How can we measure the gains from this transaction?

Accepted Answer

A) The actual benefit that you receive plus the actual benefit to your neighbor 
B) The gains to your neighbor minus the amount that you paid her 
C) The gains to you minus the amount that your neighbor paid for the mower 
D) The gains to you cancel out the gains received by your neighbor 
E) Just the benefit to your neighbor 
A) The actual benefit that you receive plus the actual benefit to your neighbor 
B) The gains to your neighbor minus the amount that you paid her 
C) The gains to you minus the amount that your neighbor paid for the mower 
D) The gains to you cancel out the gains received by your neighbor 
E) Just the benefit to your neighbor

Question 17

The market price of a transaction always includes all of the costs and benefits associated with the transaction.

Accepted Answer

A) True 
 B)False

Question 18

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 19

Marginal analysis involves looking at the extra costs involved in a decision.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 1: What Is Economics

Statistical correlation always implies causation.

The use of abstraction in economic analysis is one of its primary weaknesses.

Tools used by economists include

In economics, the true cost of making a choice is the value of what must be given up.

What is the "right" degree of abstraction necessary to analyze an economic problem?

If trade between two countries is voluntary, one can expect that

Which of the following statements is true?

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

Unemployment and inflation are important determinants of short-run material welfare, whereas productivity growth is an important determinant of long-run material well-being.

The opportunity cost of any good or service is the

Externalities can only involve the imposition of harm on a party not directly involved in an economic transaction.

"Correlation" is a measure of how one variable causes another to change.

Economists and others use economic theory

Inaccurate prediction generally invalidates the use of theory in economics.

Throughout the 1980s, accounting departments in U.S.universities were unable to fill many available faculty positions.This fact suggests that the salaries offered by these departments

You just purchased a lawn mower from your next-door neighbor.How can we measure the gains from this transaction?

The market price of a transaction always includes all of the costs and benefits associated with the transaction.

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

Marginal analysis involves looking at the extra costs involved in a decision.

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

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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