Question 1

Externalities are created when parties not involved in an economic transaction are affected by it.

Accepted Answer

A) True 
 B)False

Question 2

A model that is an oversimplification for one purpose will likely be an oversimplification for other purposes as well.

Accepted Answer

A) True 
 B)False

Question 3

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 4

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 5

Carefully distinguish between an economic theory and economic model.

Accepted Answer

An economic theory is a deliberate simpl

Question 6

Slope is measured as rise/run.

Accepted Answer

A) True 
 B)False

Question 7

Consider the following information regarding a person's decision to go to college: college tuition is $20,000 per year, room and board is $10,000 per year, and books and materials are $2,000 per year. Suppose that instead of going to college this person could have earned $18,000 working in a store. An economist would calculate the cost of going to college as

Accepted Answer

A)  $20,000. 
B)  $30,000. 
C)  $32,000. 
D)  $50,000. 
E)  $18,000. 
A)  $20,000. 
B)  $30,000. 
C)  $32,000. 
D)  $50,000. 
E)  $18,000.

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

Explain why an airline may decide to sell an air ticket to a stand-by passenger at less than the full fare if there are empty seats on the airplane?

Accepted Answer

The decision depends on the marginal, or

Question 10

The principle of comparative advantage explains how

Accepted Answer

A)  one nation can take advantage of another one through international trade. 
B)  two nations may engage in mutually beneficial trade, even though one of them is more productive than the other. 
C)  one individual can take advantage of another through international trade. 
D)  some people are good at producing everything, while others have no comparative advantages. 
E)  some nations end up with large trade surpluses. 
A)  one nation can take advantage of another one through international trade. 
B)  two nations may engage in mutually beneficial trade, even though one of them is more productive than the other. 
C)  one individual can take advantage of another through international trade. 
D)  some people are good at producing everything, while others have no comparative advantages. 
E)  some nations end up with large trade surpluses.

Question 11

If a government enacts a price floor on agricultural products to protect wheat farmers, the result is likely going to be

Accepted Answer

A)  an increase in price with a surplus of wheat. 
B)  an increase in price with a shortage of wheat. 
C)  a decrease in price with a surplus of wheat. 
D)  a decrease in price with a shortage of wheat. 
A)  an increase in price with a surplus of wheat. 
B)  an increase in price with a shortage of wheat. 
C)  a decrease in price with a surplus of wheat. 
D)  a decrease in price with a shortage of wheat.

Question 12

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 13

Suppose that interdiction efforts have stemmed the flow of illegal drugs into the United States. If there is no change in demand, this leads to higher prices for these substances. The result is an increase in crime as users attempt to maintain their now more expensive habits. Economists would call this effect

Accepted Answer

A)  the illusion of rationality. 
B)  an externality. 
C)  the cost disease of personal services. 
D)  inflation. 
E)  unemployment. 
A)  the illusion of rationality. 
B)  an externality. 
C)  the cost disease of personal services. 
D)  inflation. 
E)  unemployment.

Question 14

Policy-oriented economists seek to develop theories to

Accepted Answer

A)  explain how things work, so policies can be formulated. 
B)  describe what happened in a particular time period in history. 
C)  describe current economic events. 
D)  find correlations between events. 
E)  change people's values and ethics. 
A)  explain how things work, so policies can be formulated. 
B)  describe what happened in a particular time period in history. 
C)  describe current economic events. 
D)  find correlations between events. 
E)  change people's values and ethics.

Question 15

Some college students think that because a college degree greatly increases their earning potential there is no opportunity cost of attending college. How would an economist look at the matter?

Accepted Answer

A)  There is no opportunity cost, assuming that future earnings actually increase as expected. 
B)  The opportunity cost is much less than it would appear, assuming that earnings increase. 
C)  Opportunity cost is a meaningless concept in this situation. 
D)  The college students are completely correct in all respects. 
E)  There is still an opportunity cost, even if it is justified by higher future earnings. 
A)  There is no opportunity cost, assuming that future earnings actually increase as expected. 
B)  The opportunity cost is much less than it would appear, assuming that earnings increase. 
C)  Opportunity cost is a meaningless concept in this situation. 
D)  The college students are completely correct in all respects. 
E)  There is still an opportunity cost, even if it is justified by higher future earnings.

Question 16

Harry Truman is credited with the statement, "Give me a one-armed economist," because economists are likely to say, "On the one hand, . . . on the other hand." Why do economists "waffle" more than physicists or chemists?

Accepted Answer

Economists describe human behavior, whic

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

Figure 1-2
 
Identify the slope of the two curves A and B in Figure 1-2.

Accepted Answer

A)  A-zero, B-one. 
B)  A-one, B-zero. 
C)  A-one, B-different at different points. 
D)  A-different at different points, B-zero. 
A)  A-zero, B-one. 
B)  A-one, B-zero. 
C)  A-one, B-different at different points. 
D)  A-different at different points, B-zero.

Question 19

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 20

A contour map illustrates a cause-and-effect relationship among three variables.

Accepted Answer

A) True 
 B)False

Externalities are created when parties not involved in an economic transaction are affected by it.

A model that is an oversimplification for one purpose will likely be an oversimplification for other purposes as well.

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

The opportunity cost to you of an action is

Carefully distinguish between an economic theory and economic model.

Slope is measured as rise/run.

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

Explain why an airline may decide to sell an air ticket to a stand-by passenger at less than the full fare if there are empty seats on the airplane?

The principle of comparative advantage explains how

If a government enacts a price floor on agricultural products to protect wheat farmers, the result is likely going to be

Which of the following statements is true?

Policy-oriented economists seek to develop theories to

Some college students think that because a college degree greatly increases their earning potential there is no opportunity cost of attending college. How would an economist look at the matter?

Harry Truman is credited with the statement, "Give me a one-armed economist," because economists are likely to say, "On the one hand, . . . on the other hand." Why do economists "waffle" more than physicists or chemists?

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

Figure 1-2 Identify the slope of the two curves A and B in Figure 1-2.

Which of the following statements is NOT true?

A contour map illustrates a cause-and-effect relationship among three variables.

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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Exam 1: What Is Economics

Externalities are created when parties not involved in an economic transaction are affected by it.

A model that is an oversimplification for one purpose will likely be an oversimplification for other purposes as well.

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

The opportunity cost to you of an action is

Carefully distinguish between an economic theory and economic model.

Slope is measured as rise/run.

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

Explain why an airline may decide to sell an air ticket to a stand-by passenger at less than the full fare if there are empty seats on the airplane?

The principle of comparative advantage explains how

If a government enacts a price floor on agricultural products to protect wheat farmers, the result is likely going to be

Which of the following statements is true?

Policy-oriented economists seek to develop theories to

Some college students think that because a college degree greatly increases their earning potential there is no opportunity cost of attending college. How would an economist look at the matter?

Harry Truman is credited with the statement, "Give me a one-armed economist," because economists are likely to say, "On the one hand, . . . on the other hand." Why do economists "waffle" more than physicists or chemists?

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

Figure 1-2 Identify the slope of the two curves A and B in Figure 1-2.

Which of the following statements is NOT true?

A contour map illustrates a cause-and-effect relationship among three variables.

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

Filters