Question 1

Market-based policies are effective methods that the government can use to address externality problems.

Accepted Answer

A) True 
 B)False

Question 2

If movement along a graph causes the value on the vertical axis to rise by 5 units and the value on the horizontal axis to fall by 10 units, the slope of the function is

Accepted Answer

A) 5 
B) −.5. 
C) −2. 
D) −72. 
A) 5 
B) −.5. 
C) −2. 
D) −72.

Question 3

In scientific language, a theory is an untested assertion of alleged fact.

Accepted Answer

A) True 
 B)False

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

Figure 1-1
 
The slope of the line in Figure 1-1 is

Accepted Answer

A) 0.5. 
B) 2.0. 
C) −0.5. 
D) −2.0. 
A) 0.5. 
B) 2.0. 
C) −0.5. 
D) −2.0.

Question 6

The United States produces both automobiles and computers more efficiently than Mexico. Nevertheless, it is possible that both nations would benefit from trade in these items. The reason for this is

Accepted Answer

A) the law of comparative advantage. 
B) the inflation-unemployment trade-off. 
C) externalities. 
D) the cost disease of personal services. 
E) attempts to repeal the law of supply and demand. 
A) the law of comparative advantage. 
B) the inflation-unemployment trade-off. 
C) externalities. 
D) the cost disease of personal services. 
E) attempts to repeal the law of supply and demand.

Question 7

In economics, abstraction from reality is necessary because of the complexity of the real world.

Accepted Answer

A) True 
 B)False

Question 8

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 9

Arguably, the most important factor affecting economic well-being is

Accepted Answer

A) the inflation rate. 
B) the unemployment rate. 
C) the growth of budget deficits. 
D) the growth in productivity. 
E) the growth of monopoly power by firms. 
A) the inflation rate. 
B) the unemployment rate. 
C) the growth of budget deficits. 
D) the growth in productivity. 
E) the growth of monopoly power by firms.

Question 10

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 11

The statement "saccharine causes cancer" is not a theory; it is a hypothesis.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) may not be able to use the same models. 
B) always make the same value judgments. 
C) are unable to assemble all of the necessary facts about the economy. 
D) All of these responses are correct. 
A) may not be able to use the same models. 
B) always make the same value judgments. 
C) are unable to assemble all of the necessary facts about the economy. 
D) All of these responses are correct.

Question 13

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 14

A government has the ability to use fiscal and monetary policy to mitigate the effects of economic fluctuations.

Accepted Answer

A) True 
 B)False

Question 15

To an economist, the cost of a college education

Accepted Answer

A) includes the income that the student could have earned during the time spent in college. 
B) can be measured solely by the dollar cost of tuition, books, and other fees. 
C) includes only the cost of schooling, not the cost of housing and food. 
D) excludes financial aid in computation of the cost of schooling. 
E) All of these responses are correct. 
A) includes the income that the student could have earned during the time spent in college. 
B) can be measured solely by the dollar cost of tuition, books, and other fees. 
C) includes only the cost of schooling, not the cost of housing and food. 
D) excludes financial aid in computation of the cost of schooling. 
E) All of these responses are correct.

Question 16

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 17

In 1971, a bank worker could process 265 checks in 1 hour. Currently, computers with built-in reader-sorter processing capacity have pushed that number above 100,000 checks per hour. Economists describe this type of activity as

Accepted Answer

A) the exploitation of labor. 
B) an increase in labor productivity. 
C) the displacement of labor. 
D) the effects of comparative advantage. 
E) the mutual gains received through voluntary trade. 
A) the exploitation of labor. 
B) an increase in labor productivity. 
C) the displacement of labor. 
D) the effects of comparative advantage. 
E) the mutual gains received through voluntary trade.

Question 18

Is it possible to express an economic model in words without diagrams?

Accepted Answer

A) No, models can only be stated in diagrams. 
B) No, the very definition of model requires mathematical form. 
C) Yes, some of the simplest models are verbal statements. 
D) Yes, although the best models always use diagrams. 
E) Uncertain, economic theory has not answered this question yet. 
A) No, models can only be stated in diagrams. 
B) No, the very definition of model requires mathematical form. 
C) Yes, some of the simplest models are verbal statements. 
D) Yes, although the best models always use diagrams. 
E) Uncertain, economic theory has not answered this question yet.

Question 19

Models are used to describe cause-and-effect relationships.

Accepted Answer

A) True 
 B)False

Question 20

Individuals will have different value judgments about the appropriate rate of unemployment and the appropriate rate of inflation.

Accepted Answer

A) True 
 B)False

Exam 1: What Is Economics

Market-based policies are effective methods that the government can use to address externality problems.

If movement along a graph causes the value on the vertical axis to rise by 5 units and the value on the horizontal axis to fall by 10 units, the slope of the function is

In scientific language, a theory is an untested assertion of alleged fact.

The opportunity cost to you of an action is

Figure 1-1 The slope of the line in Figure 1-1 is

The United States produces both automobiles and computers more efficiently than Mexico. Nevertheless, it is possible that both nations would benefit from trade in these items. The reason for this is

In economics, abstraction from reality is necessary because of the complexity of the real world.

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

Arguably, the most important factor affecting economic well-being is

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

The statement "saccharine causes cancer" is not a theory; it is a hypothesis.

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

Tools used by economists include

A government has the ability to use fiscal and monetary policy to mitigate the effects of economic fluctuations.

To an economist, the cost of a college education

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

In 1971, a bank worker could process 265 checks in 1 hour. Currently, computers with built-in reader-sorter processing capacity have pushed that number above 100,000 checks per hour. Economists describe this type of activity as

Is it possible to express an economic model in words without diagrams?

Models are used to describe cause-and-effect relationships.

Individuals will have different value judgments about the appropriate rate of unemployment and the appropriate rate of inflation.

The Economy: 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

Externalities, Externaliteis, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

International Trade and Comparative Advantage

Contemporary Issues in the Us Economy

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