Question 1

You have just bought a used car and drive away satisfied that you've made a good deal on the purchase. What would an economist say about your "gain" on the deal?

Accepted Answer

A)  Your gain has clearly meant that the seller lost on the deal. 
B)  The seller has clearly gained, and you have actually lost on the deal. 
C)  Both you and the seller have gained something. 
D)  If your gain is too large, then the deal should be renegotiated. 
E)  If the seller's loss is too large, then the deal should be renegotiated. 
A)  Your gain has clearly meant that the seller lost on the deal. 
B)  The seller has clearly gained, and you have actually lost on the deal. 
C)  Both you and the seller have gained something. 
D)  If your gain is too large, then the deal should be renegotiated. 
E)  If the seller's loss is too large, then the deal should be renegotiated.

Question 2

The lower left-hand corner of a graph where the two axes meet is called the graph's origin.

Accepted Answer

A) True 
 B)False

Question 3

What are the tools available to governments to mitigate cycles of boom and bust? Why do these tools fail?

Accepted Answer

Some of the tools available to the gover

Question 4

As a student, one of the costs of sleeping in rather than going to class is likely to be a lower grade in the class.

Accepted Answer

A) True 
 B)False

Question 5

Greater economic efficiency often leads to greater economic inequality.

Accepted Answer

A) True 
 B)False

Question 6

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 7

Carefully define the following terms, and explain their importance in economics. 
a. Opportunity cost 
b. Abstraction 
c. Theory 
d. Model 
e. Marginal analysis

Accepted Answer

a. Opportunity cost for a decision is th

Question 8

There is no trade-off between efficiency and equality.

Accepted Answer

A) True 
 B)False

Question 9

Economists are often required to make unrealistic assumptions concerning the problems they are investigating.

Accepted Answer

A) True 
 B)False

Question 10

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 11

The beginning point of a graph (the 0,0 point) is known as

Accepted Answer

A)  ground zero. 
B)  mother lode. 
C)  the origin. 
D)  square one. 
E)  the beginning. 
A)  ground zero. 
B)  mother lode. 
C)  the origin. 
D)  square one. 
E)  the beginning.

Question 12

"The hotter it gets, the more water people drink." This statement implies that the relationship between temperature and water consumption must have a

Accepted Answer

A)  negative slope. 
B)  positive slope. 
C)  slope always equal to one. 
D)  slope always equal to 45 degrees. 
A)  negative slope. 
B)  positive slope. 
C)  slope always equal to one. 
D)  slope always equal to 45 degrees.

Question 13

Using economic theory to analyze policy issues

Accepted Answer

A)  is a way to avoid inconvenient facts. 
B)  allows researchers to disprove a hypothesis. 
C)  relies on simplifications to conduct studies. 
D)  always includes the inclusion of political ideals. 
A)  is a way to avoid inconvenient facts. 
B)  allows researchers to disprove a hypothesis. 
C)  relies on simplifications to conduct studies. 
D)  always includes the inclusion of political ideals.

Question 14

Inaccurate prediction generally invalidates the use of theory in economics.

Accepted Answer

A) True 
 B)False

Question 15

A recent article about the US economy asked, "What is the price of low inflation?" In this context, the price is likely to be measured by

Accepted Answer

A)  the value of comparative advantage. 
B)  the cost of externalities. 
C)  the increase in unemployment. 
D)  the drop in market value. 
E)  the opportunity cost of higher interest rates. 
A)  the value of comparative advantage. 
B)  the cost of externalities. 
C)  the increase in unemployment. 
D)  the drop in market value. 
E)  the opportunity cost of higher interest rates.

Question 16

How does the United States differ from the European Union in how it balances the competing claims of equality and efficiency?

Accepted Answer

The United States has chosen greater eff

Question 17

A large factory pours its toxic wastewater into a nearby river, and as a result, the residents of a downstream community experience high rates of illness and birth defects. The economic problem illustrated by this example is

Accepted Answer

A)  marginal thinking. 
B)  comparative advantage. 
C)  repealing the laws of supply and demand. 
D)  externalities. 
E)  productivity growth. 
A)  marginal thinking. 
B)  comparative advantage. 
C)  repealing the laws of supply and demand. 
D)  externalities. 
E)  productivity growth.

Question 18

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

Accepted Answer

Economists might disagree beca

Question 19

Which of the following is one source of disagreement between economists?

Accepted Answer

A)  Some facts about the economy are unknown. 
B)  Economists differ in their political persuasions. 
C)  Economic theory may not always give an unambiguous answer to a question. 
D)  Solving one problem may make another problem worse. 
E)  All of these responses are correct. 
A)  Some facts about the economy are unknown. 
B)  Economists differ in their political persuasions. 
C)  Economic theory may not always give an unambiguous answer to a question. 
D)  Solving one problem may make another problem worse. 
E)  All of these responses are correct.

Question 20

Two variables that systematically change together are correlated.

Accepted Answer

A) True 
 B)False

Exam 1: What Is Economics

You have just bought a used car and drive away satisfied that you've made a good deal on the purchase. What would an economist say about your "gain" on the deal?

The lower left-hand corner of a graph where the two axes meet is called the graph's origin.

What are the tools available to governments to mitigate cycles of boom and bust? Why do these tools fail?

As a student, one of the costs of sleeping in rather than going to class is likely to be a lower grade in the class.

Greater economic efficiency often leads to greater economic inequality.

Economists use models in order to

Carefully define the following terms, and explain their importance in economics. a. Opportunity cost b. Abstraction c. Theory d. Model e. Marginal analysis

There is no trade-off between efficiency and equality.

Economists are often required to make unrealistic assumptions concerning the problems they are investigating.

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

The beginning point of a graph (the 0,0 point) is known as

"The hotter it gets, the more water people drink." This statement implies that the relationship between temperature and water consumption must have a

Using economic theory to analyze policy issues

Inaccurate prediction generally invalidates the use of theory in economics.

A recent article about the US economy asked, "What is the price of low inflation?" In this context, the price is likely to be measured by

How does the United States differ from the European Union in how it balances the competing claims of equality and efficiency?

A large factory pours its toxic wastewater into a nearby river, and as a result, the residents of a downstream community experience high rates of illness and birth defects. The economic problem illustrated by this example is

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

Which of the following is one source of disagreement between economists?

Two variables that systematically change together are correlated.

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

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 Us Economy

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