Question 1

Economic theory is necessary and extremely important because of its relationship to economic policy.

Accepted Answer

A) True 
 B)False

Question 2

Economic models are rarely constructed using

Accepted Answer

A) equations. 
B) words. 
C) graphs. 
D) physical objects. 
A) equations. 
B) words. 
C) graphs. 
D) physical objects.

Question 3

Which of the following statements is NOT true?

Accepted Answer

A) Economic theory often makes unrealistic assumptions. 
B) Economists ignore details to focus on complex problems. 
C) Abstraction is not an important part of economic analysis. 
D) The word theory means different things to economists and to ordinary people. 
A) Economic theory often makes unrealistic assumptions. 
B) Economists ignore details to focus on complex problems. 
C) Abstraction is not an important part of economic analysis. 
D) The word theory means different things to economists and to ordinary people.

Question 4

Value judgments are based on people's tastes, preferences, and ethical opinions.

Accepted Answer

A) True 
 B)False

Question 5

A theory is an untested assertion of alleged fact.

Accepted Answer

A) True 
 B)False

Question 6

Economic theory is a necessity, not a luxury.This statement is true because theory

Accepted Answer

A) always leads to practical and useful policy. 
B) can prevent depressions in the economy. 
C) substitutes for vast amounts of data. 
D) provides a structure for organizing and analyzing data. 
E) always leads to accurate predictions. 
A) always leads to practical and useful policy. 
B) can prevent depressions in the economy. 
C) substitutes for vast amounts of data. 
D) provides a structure for organizing and analyzing data. 
E) always leads to accurate predictions.

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

An "opportunity cost" may be described as

Accepted Answer

A) the value of what must be given up. 
B) the opportunity foregone. 
C) the value of the next best alternative. 
D) the correct measure of cost. 
E) All of these responses are correct. 
A) the value of what must be given up. 
B) the opportunity foregone. 
C) the value of the next best alternative. 
D) the correct measure of cost. 
E) All of these responses are correct.

Question 9

Economics is a social science in the sense that it

Accepted Answer

A) rigorously examines human behavior. 
B) is not as scientific as physics. 
C) relies on historical data instead of mathematical data. 
D) relies on statistics instead of mathematics. 
E) All of these responses are correct. 
A) rigorously examines human behavior. 
B) is not as scientific as physics. 
C) relies on historical data instead of mathematical data. 
D) relies on statistics instead of mathematics. 
E) All of these responses are correct.

Question 10

The marginal cost of an airline ticket is the total cost of operating a flight divided by the number of passengers who buy tickets.

Accepted Answer

A) True 
 B)False

Question 11

The slope of a line with rise of five and run of two is positive.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

A ____ is a graph whose axes show the quantities of two inputs that are used to produce some output.

Accepted Answer

A) production indifference map 
B) two-variable diagram 
C) scalar diagram 
D) time-series graph 
A) production indifference map 
B) two-variable diagram 
C) scalar diagram 
D) time-series graph

Question 14

Over the last 40 years, the gap between the rich and the poor in the United States has been increasing.Economists have justified this outcome by noting that

Accepted Answer

A) efficiency can never be achieved without greater inequality. 
B) inequality is not a problem. 
C) inequality is a desirable policy outcome. 
D) inequality is a necessary consequence of achieving greater efficiency. 
E) efficiency should be achieved regardless of the cost. 
A) efficiency can never be achieved without greater inequality. 
B) inequality is not a problem. 
C) inequality is a desirable policy outcome. 
D) inequality is a necessary consequence of achieving greater efficiency. 
E) efficiency should be achieved regardless of the cost.

Question 15

Abstraction can lead to gross distortions of pertinent facts.

Accepted Answer

A) True 
 B)False

Question 16

In 1981, the US government passed a law that significantly lowered tax rates on high-income individuals.The premise was that high tax rates deter high-income individuals from working and investing, reducing the growth of the economy.This is an example of

Accepted Answer

A) the equality-efficiency trade-off. 
B) usury. 
C) the effects of budget deficits on future generations. 
D) the cost disease of the public sector. 
E) the importance of externalities. 
A) the equality-efficiency trade-off. 
B) usury. 
C) the effects of budget deficits on future generations. 
D) the cost disease of the public sector. 
E) the importance of externalities.

Question 17

In international trade, one country's gain is another country's loss.

Accepted Answer

A) True 
 B)False

Question 18

In her calculation of the cost of going to college, an economist would include the amount of forgone earnings over the years spent at college.

Accepted Answer

A) True 
 B)False

Question 19

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 5 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 these responses 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 these responses are correct.

Question 20

What is the role of value judgments in economic analysis?

Accepted Answer

Economists employ value judgments in mak

Exam 1: What Is Economics

Economic theory is necessary and extremely important because of its relationship to economic policy.

Economic models are rarely constructed using

Which of the following statements is NOT true?

Value judgments are based on people's tastes, preferences, and ethical opinions.

A theory is an untested assertion of alleged fact.

Economic theory is a necessity, not a luxury.This statement is true because theory

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

An "opportunity cost" may be described as

Economics is a social science in the sense that it

The marginal cost of an airline ticket is the total cost of operating a flight divided by the number of passengers who buy tickets.

The slope of a line with rise of five and run of two is positive.

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

A ____ is a graph whose axes show the quantities of two inputs that are used to produce some output.

Over the last 40 years, the gap between the rich and the poor in the United States has been increasing.Economists have justified this outcome by noting that

Abstraction can lead to gross distortions of pertinent facts.

In 1981, the US government passed a law that significantly lowered tax rates on high-income individuals.The premise was that high tax rates deter high-income individuals from working and investing, reducing the growth of the economy.This is an example of

In international trade, one country's gain is another country's loss.

In her calculation of the cost of going to college, an economist would include the amount of forgone earnings over the years spent at college.

What is the role of value judgments in economic analysis?

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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