Question 1

The highest valued alternative that must be given up in order to choose an action is called its

Accepted Answer

A)  opportunity cost. 
B)  utility. 
C)  scarcity. 
D)  ceteris paribus. 
A)  opportunity cost. 
B)  utility. 
C)  scarcity. 
D)  ceteris paribus.

Question 2

The basic difference between macroeconomics and microeconomics is that

Accepted Answer

A)  macroeconomics is concerned with the forest (aggregate markets), while microeconomics is concerned with the individual trees (subcomponents). 
B)  macroeconomics is concerned with policy decisions, while microeconomics applies only to theory. 
C)  microeconomics is concerned with the forest (aggregate markets), while macroeconomics is concerned with the trees (subcomponents). 
D)  opportunity cost is applicable to macroeconomics, and the fallacy of composition relates to microeconomics. 
A)  macroeconomics is concerned with the forest (aggregate markets), while microeconomics is concerned with the individual trees (subcomponents). 
B)  macroeconomics is concerned with policy decisions, while microeconomics applies only to theory. 
C)  microeconomics is concerned with the forest (aggregate markets), while macroeconomics is concerned with the trees (subcomponents). 
D)  opportunity cost is applicable to macroeconomics, and the fallacy of composition relates to microeconomics.

Question 3

"The standard of living is too low for many individuals in the United States. The government should implement policies designed to achieve a more equal distribution of income." The preceding statements are

Accepted Answer

A)  positive economic statements based on cause and effect. 
B)  normative economic statements based on value judgments. 
C)  based on the fallacy of composition argument. 
D)  an empirically validated economic principle. 
A)  positive economic statements based on cause and effect. 
B)  normative economic statements based on value judgments. 
C)  based on the fallacy of composition argument. 
D)  an empirically validated economic principle.

Question 4

Which of the following is a positive economic statement?

Accepted Answer

A)  The federal minimum wage should be raised to $6.50 per hour. 
B)  The United States spends too much on national defense. 
C)  Higher rates of investment lead to higher rates of economic growth. 
D)  Economics is more interesting to study than history. 
A)  The federal minimum wage should be raised to $6.50 per hour. 
B)  The United States spends too much on national defense. 
C)  Higher rates of investment lead to higher rates of economic growth. 
D)  Economics is more interesting to study than history.

Question 5

Economists are generally opposed to tariffs or other restrictions on imported goods because of the negative secondary effects they create that more than offset the benefits to employment in the domestic industry. Which of the following could be considered a secondary effect of these trade restrictions?

Accepted Answer

A)  The price to consumers of the good in question will be higher as a result of the restriction, meaning consumers will be worse off. 
B)  As consumers must spend more money to purchase the good, there will be employment losses in other domestic industries as consumers cut back on their spending on other things. 
C)  Because there is a link between a country's imports and its exports, less imports from other countries will result in lower domestic employment in export industries. 
D)  All of the above. 
A)  The price to consumers of the good in question will be higher as a result of the restriction, meaning consumers will be worse off. 
B)  As consumers must spend more money to purchase the good, there will be employment losses in other domestic industries as consumers cut back on their spending on other things. 
C)  Because there is a link between a country's imports and its exports, less imports from other countries will result in lower domestic employment in export industries. 
D)  All of the above.

Question 6

Who is more likely to drive carelessly, Sue in her 1980 Ford with bad brakes or Sally, who has a 2005 BMW with all the most recent safety options?

Accepted Answer

On the surface, we might conclude that S

Question 7

If the government provides free schooling for all students, an economist would say education is

Accepted Answer

A)  a free good, having no cost. 
B)  scarce even though its cost is paid by taxpayers rather than by students. 
C)  an example of a good that is no longer scarce. 
D)  all of the above. 
A)  a free good, having no cost. 
B)  scarce even though its cost is paid by taxpayers rather than by students. 
C)  an example of a good that is no longer scarce. 
D)  all of the above.

Question 8

Which of the following is a normative statement?

Accepted Answer

A)  A decrease in price leads to an increase in quantity consumed. 
B)  Incomes grow more rapidly in high-tax states than low-tax states. 
C)  People would be better off if government expenditures were higher. 
D)  People will buy less butter at $1.50 per pound than they will at $1 per pound. 
A)  A decrease in price leads to an increase in quantity consumed. 
B)  Incomes grow more rapidly in high-tax states than low-tax states. 
C)  People would be better off if government expenditures were higher. 
D)  People will buy less butter at $1.50 per pound than they will at $1 per pound.

Question 9

Every economy must ration goods in some way because of

Accepted Answer

A)  overpopulation. 
B)  poorly-performing markets. 
C)  the income gap between rich and poor. 
D)  scarcity. 
A)  overpopulation. 
B)  poorly-performing markets. 
C)  the income gap between rich and poor. 
D)  scarcity.

Question 10

Which of the following is a positive economic statement?

Accepted Answer

A)  Reducing unemployment should be the highest priority of the federal government. 
B)  An increase in unemployment benefits will increase the unemployment rate. 
C)  Corporations should be prohibited from laying off workers during a recession. 
D)  Congress should increase unemployment benefits during a recession. 
A)  Reducing unemployment should be the highest priority of the federal government. 
B)  An increase in unemployment benefits will increase the unemployment rate. 
C)  Corporations should be prohibited from laying off workers during a recession. 
D)  Congress should increase unemployment benefits during a recession.

Question 11

According to Adam Smith, individual self-interest

Accepted Answer

A)  is a powerful force for economic progress when it is directed by competitive markets. 
B)  is a powerful force for economic progress when individuals are wisely directed by a strong central government. 
C)  is a major factor in retarding the economic progress of humankind. 
D)  could be either a positive or negative force for economic progress, depending on the moral influences of political leaders. 
A)  is a powerful force for economic progress when it is directed by competitive markets. 
B)  is a powerful force for economic progress when individuals are wisely directed by a strong central government. 
C)  is a major factor in retarding the economic progress of humankind. 
D)  could be either a positive or negative force for economic progress, depending on the moral influences of political leaders.

Question 12

Why would a radio station give money to listeners? Does this violate the economic way of thinking?

Accepted Answer

Radio stations do surveys to see what ty

Question 13

Which of the following is the best definition of economics?

Accepted Answer

A)  An investigation of the quantities and prices of the various goods produced by the nations of the world. 
B)  A study of why inflation and unemployment periodically plague the U.S. economy. 
C)  An analysis of how individuals and societies deal with the problem of scarcity. 
D)  An examination of the role that money plays in the economy. 
E)  A study of how goods and services are distributed throughout the world. 
A)  An investigation of the quantities and prices of the various goods produced by the nations of the world. 
B)  A study of why inflation and unemployment periodically plague the U.S. economy. 
C)  An analysis of how individuals and societies deal with the problem of scarcity. 
D)  An examination of the role that money plays in the economy. 
E)  A study of how goods and services are distributed throughout the world.

Question 14

"As soon as I announced my 'get tough on crime' policy, criminals got scared and the crime rate went down." Suppose that the lower crime rate was actually caused by freezing cold temperatures in January--it was just too cold for anybody to be out robbing other people. Which fundamental economic mistake did the politician make?

Accepted Answer

A)  believing that what's good for one person is good for the whole group (the fallacy of composition) 
B)  failing to take into account the benefits of crime (the payoff fallacy) 
C)  believing that association is the same as causation 
D)  failing to understand the theory of comparative advantage 
A)  believing that what's good for one person is good for the whole group (the fallacy of composition) 
B)  failing to take into account the benefits of crime (the payoff fallacy) 
C)  believing that association is the same as causation 
D)  failing to understand the theory of comparative advantage

Question 15

When deciding whether to buy a second car, the economic way of thinking indicates that the purchaser should compare

Accepted Answer

A)  the benefits expected from two cars with the cost of both. 
B)  the additional benefits expected from a second car with the cost of the two cars. 
C)  the dollar cost of the two cars with the potential income that the cars will generate. 
D)  the additional benefits of the second car with the additional cost of the second car. 
A)  the benefits expected from two cars with the cost of both. 
B)  the additional benefits expected from a second car with the cost of the two cars. 
C)  the dollar cost of the two cars with the potential income that the cars will generate. 
D)  the additional benefits of the second car with the additional cost of the second car.

Question 16

If a decision maker uses marginal analysis, then the relevant costs are the

Accepted Answer

A)  full costs of a particular activity or product. 
B)  fixed costs which do not vary with the extra activity or output. 
C)  profits obtained on the activity or product. 
D)  average costs for a particular activity or product. 
E)  additional costs of a particular activity or product. 
A)  full costs of a particular activity or product. 
B)  fixed costs which do not vary with the extra activity or output. 
C)  profits obtained on the activity or product. 
D)  average costs for a particular activity or product. 
E)  additional costs of a particular activity or product.

Question 17

When an individual weighs her options and makes a choice that maximizes her benefit at the minimum cost, economists refer to this as a process of

Accepted Answer

A)  rational decision making. 
B)  objective decision making because the value of goods is determined objectively. 
C)  marginal management analysis. 
D)  random decision making. 
A)  rational decision making. 
B)  objective decision making because the value of goods is determined objectively. 
C)  marginal management analysis. 
D)  random decision making.

Question 18

If a college enforces a new policy where anyone caught cheating is immediately expelled, the basic postulate of economics suggests that

Accepted Answer

A)  cheating will be completely eliminated. 
B)  fewer students will attempt to cheat. 
C)  the amount of cheating will be unaffected. 
D)  any of the above is possible because student behavior is unpredictable. 
A)  cheating will be completely eliminated. 
B)  fewer students will attempt to cheat. 
C)  the amount of cheating will be unaffected. 
D)  any of the above is possible because student behavior is unpredictable.

Question 19

Which of the following most clearly distinguishes between positive and normative economics?

Accepted Answer

A)  Positive economics is the study of what ought to be; normative economics is concerned with the facts. 
B)  Positive economics is the study of the facts; normative economics is concerned with what ought to be. 
C)  Positive economics is the study of supply and demand in narrowly defined markets such as the market for shoes; normative economics focuses on highly aggregated markets such as the market for all consumer products. 
D)  Positive economics is the study of goods that are scarce; normative economics is concerned with goods that are not scarce. 
A)  Positive economics is the study of what ought to be; normative economics is concerned with the facts. 
B)  Positive economics is the study of the facts; normative economics is concerned with what ought to be. 
C)  Positive economics is the study of supply and demand in narrowly defined markets such as the market for shoes; normative economics focuses on highly aggregated markets such as the market for all consumer products. 
D)  Positive economics is the study of goods that are scarce; normative economics is concerned with goods that are not scarce.

Question 20

Ralph wants to buy some milk and a box of cereal. If Ralph buys 4 gallons of milk at $3.00 per gallon, the box of cereal costs $2.00. If he buys 5 gallons of milk, the box of cereal is free. For Ralph, the marginal cost of buying a fifth gallon of milk is:

Accepted Answer

A)  zero. 
B)  $1.00. 
C)  $2.00. 
D)  $3.00. 
A)  zero. 
B)  $1.00. 
C)  $2.00. 
D)  $3.00.

The highest valued alternative that must be given up in order to choose an action is called its

The basic difference between macroeconomics and microeconomics is that

"The standard of living is too low for many individuals in the United States. The government should implement policies designed to achieve a more equal distribution of income." The preceding statements are

Which of the following is a positive economic statement?

Who is more likely to drive carelessly, Sue in her 1980 Ford with bad brakes or Sally, who has a 2005 BMW with all the most recent safety options?

If the government provides free schooling for all students, an economist would say education is

Which of the following is a normative statement?

Every economy must ration goods in some way because of

Which of the following is a positive economic statement?

According to Adam Smith, individual self-interest

Why would a radio station give money to listeners? Does this violate the economic way of thinking?

Which of the following is the best definition of economics?

When deciding whether to buy a second car, the economic way of thinking indicates that the purchaser should compare

If a decision maker uses marginal analysis, then the relevant costs are the

When an individual weighs her options and makes a choice that maximizes her benefit at the minimum cost, economists refer to this as a process of

If a college enforces a new policy where anyone caught cheating is immediately expelled, the basic postulate of economics suggests that

Which of the following most clearly distinguishes between positive and normative economics?

Ralph wants to buy some milk and a box of cereal. If Ralph buys 4 gallons of milk at $3.00 per gallon, the box of cereal costs $2.00. If he buys 5 gallons of milk, the box of cereal is free. For Ralph, the marginal cost of buying a fifth gallon of milk is:

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Applying the Basics: Special Topics in Economics

Filters

Exam 1: The Economic Approach

The highest valued alternative that must be given up in order to choose an action is called its

The basic difference between macroeconomics and microeconomics is that

"The standard of living is too low for many individuals in the United States. The government should implement policies designed to achieve a more equal distribution of income." The preceding statements are

Which of the following is a positive economic statement?

Who is more likely to drive carelessly, Sue in her 1980 Ford with bad brakes or Sally, who has a 2005 BMW with all the most recent safety options?

If the government provides free schooling for all students, an economist would say education is

Which of the following is a normative statement?

Every economy must ration goods in some way because of

Which of the following is a positive economic statement?

According to Adam Smith, individual self-interest

Why would a radio station give money to listeners? Does this violate the economic way of thinking?

Which of the following is the best definition of economics?

When deciding whether to buy a second car, the economic way of thinking indicates that the purchaser should compare

If a decision maker uses marginal analysis, then the relevant costs are the

When an individual weighs her options and makes a choice that maximizes her benefit at the minimum cost, economists refer to this as a process of

If a college enforces a new policy where anyone caught cheating is immediately expelled, the basic postulate of economics suggests that

Which of the following most clearly distinguishes between positive and normative economics?

Ralph wants to buy some milk and a box of cereal. If Ralph buys 4 gallons of milk at $3.00 per gallon, the box of cereal costs $2.00. If he buys 5 gallons of milk, the box of cereal is free. For Ralph, the marginal cost of buying a fifth gallon of milk is:

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Applying the Basics: Special Topics in Economics

Filters