Question 1

Which of the following is a positive economic statement?

Accepted Answer

A)  Too much government spending is the biggest problem facing the U.S. economy. 
B)  Creating jobs is the most serious problem facing the U.S. economy. 
C)  Raising taxes provides additional revenue that should be used to finance health care. 
D)  If taxes are over 50 percent of national income, job creation falls. 
A)  Too much government spending is the biggest problem facing the U.S. economy. 
B)  Creating jobs is the most serious problem facing the U.S. economy. 
C)  Raising taxes provides additional revenue that should be used to finance health care. 
D)  If taxes are over 50 percent of national income, job creation falls.

Question 2

The fact that some people love tomatoes while others dislike them illustrates that

Accepted Answer

A)  the value of a good is subjective. 
B)  the value created by a good does not depend on who consumes it. 
C)  the value of a tomato cannot be determined by the person consuming it. 
D)  tomatoes have a value that is determined by their cost of production rather than by the value to the consumer of the tomatoes. 
A)  the value of a good is subjective. 
B)  the value created by a good does not depend on who consumes it. 
C)  the value of a tomato cannot be determined by the person consuming it. 
D)  tomatoes have a value that is determined by their cost of production rather than by the value to the consumer of the tomatoes.

Question 3

The unintended consequences of an economic change that are not immediately identifiable but are felt only with time are known in economics as

Accepted Answer

A)  opportunity costs. 
B)  marginal effects. 
C)  secondary effects. 
D)  scarcity constraints. 
A)  opportunity costs. 
B)  marginal effects. 
C)  secondary effects. 
D)  scarcity constraints.

Question 4

Which of the following is true?

Accepted Answer

A)  Human choice is generally not influenced by changes in incentives. 
B)  What is true for the individual must be true for the group as a whole. 
C)  Using scarce resources to meet one need reduces our ability to meet needs in other areas. 
D)  The economic way of thinking stresses that good intentions usually lead to sound economic policy. 
A)  Human choice is generally not influenced by changes in incentives. 
B)  What is true for the individual must be true for the group as a whole. 
C)  Using scarce resources to meet one need reduces our ability to meet needs in other areas. 
D)  The economic way of thinking stresses that good intentions usually lead to sound economic policy.

Question 5

A radio station gives "free money" to those listeners whose names are drawn and announced over the airwaves from postcards the listeners sent into the radio station. Is the money really free for the listener?

Accepted Answer

While most students can identify the mon

Question 6

Ex-London School of Economics student Mick Jagger sang, "You can't always get what you want, but if you try sometime, you just might find you can get what you need." Another statement of the basic economic principle expressed in this lyric is that

Accepted Answer

A)  rational decisions are not always possible. 
B)  you can allocate your resources to what gives you the highest value. 
C)  you can create the supply to meet your own demand. 
D)  you can maximize social welfare by making optimal decisions. 
A)  rational decisions are not always possible. 
B)  you can allocate your resources to what gives you the highest value. 
C)  you can create the supply to meet your own demand. 
D)  you can maximize social welfare by making optimal decisions.

Question 7

Susan wishes to buy gasoline and have her car washed. She finds that if she buys 9 gallons of gasoline at $1.50 per gallon, the car wash costs $1, but if she buys 10 gallons of gasoline, the car wash is free. For Susan, the marginal cost of the tenth gallon of gasoline is

Accepted Answer

A)  zero. 
B)  50 cents. 
C)  $1. 
D)  $1.50. 
A)  zero. 
B)  50 cents. 
C)  $1. 
D)  $1.50.

Question 8

The fallacy of composition is the fallacious view that

Accepted Answer

A)  economic activity will benefit everyone. 
B)  what is true for the individual will also be true for the group. 
C)  it is possible for the whole to be greater than the sum of the individual parts. 
D)  association does not necessarily indicate causation. 
A)  economic activity will benefit everyone. 
B)  what is true for the individual will also be true for the group. 
C)  it is possible for the whole to be greater than the sum of the individual parts. 
D)  association does not necessarily indicate causation.

Question 9

Economic analysis assumes that

Accepted Answer

A)  people act only out of selfish motives. 
B)  people are motivated by a variety of forces; however, changes in personal benefits and costs affect behavior only when individuals are motivated by selfishness. 
C)  people are basically unselfish, and their actions are, therefore, difficult to predict. 
D)  changes in the personal benefits and costs associated with an activity will exert a predictable influence on the behavior of both those who are selfish and those who are unselfish. 
A)  people act only out of selfish motives. 
B)  people are motivated by a variety of forces; however, changes in personal benefits and costs affect behavior only when individuals are motivated by selfishness. 
C)  people are basically unselfish, and their actions are, therefore, difficult to predict. 
D)  changes in the personal benefits and costs associated with an activity will exert a predictable influence on the behavior of both those who are selfish and those who are unselfish.

Question 10

Just before class, Jim tells Stuart, "Stuart, you shouldn't skip class today because you have paid tuition to enroll in the class." Stuart ignores Jim's advice, and instead makes the decision of whether to attend based on what he feels he'd be missing that day in class relative to his value of the extra time he could have to finish the video game he is playing. To an economist, Stuart is

Accepted Answer

A)  using marginal decision making. 
B)  ignoring the total value of attending class. 
C)  ignoring the concept of opportunity cost. 
D)  committing the fallacy of composition. 
A)  using marginal decision making. 
B)  ignoring the total value of attending class. 
C)  ignoring the concept of opportunity cost. 
D)  committing the fallacy of composition.

Question 11

Which one of the following statements is most clearly inconsistent with the economic way of thinking?

Accepted Answer

A)  "If you give a person a fish, you feed him for a day; if you teach him to fish, you feed him for life." 
B)  "If the government provides a good free to citizens, then the opportunity cost of the good is zero." 
C)  "If you derive the same satisfaction from a hamburger as a chicken sandwich, it makes sense to have the cheaper alternative for lunch." 
D)  "When it is cheaper to have someone else mow your lawn than to mow it yourself, hiring someone to do the job is consistent with economizing behavior." 
A)  "If you give a person a fish, you feed him for a day; if you teach him to fish, you feed him for life." 
B)  "If the government provides a good free to citizens, then the opportunity cost of the good is zero." 
C)  "If you derive the same satisfaction from a hamburger as a chicken sandwich, it makes sense to have the cheaper alternative for lunch." 
D)  "When it is cheaper to have someone else mow your lawn than to mow it yourself, hiring someone to do the job is consistent with economizing behavior."

Question 12

Which of the following is an example of a normative economic statement?

Accepted Answer

A)  The inflation rate in the United States decreased from 4 percent last year to 3 percent this year as a result of lower energy prices. 
B)  The economy grew at an annual rate of 5 percent during the first quarter of this year. 
C)  If two automobile companies merge, it is likely that the price of automobiles will rise. 
D)  An increase in international trade benefits some workers but hurts others. 
E)  The minimum wage should be increased so that low income workers can afford to keep up with the cost of living. 
A)  The inflation rate in the United States decreased from 4 percent last year to 3 percent this year as a result of lower energy prices. 
B)  The economy grew at an annual rate of 5 percent during the first quarter of this year. 
C)  If two automobile companies merge, it is likely that the price of automobiles will rise. 
D)  An increase in international trade benefits some workers but hurts others. 
E)  The minimum wage should be increased so that low income workers can afford to keep up with the cost of living.

Question 13

Which one of the following is a positive economic statement?

Accepted Answer

A)  An increase in the minimum wage will reduce employment. 
B)  The minimum wage should be increased. 
C)  Social justice will be served by increasing the minimum wage. 
D)  Thoughtful people oppose an increase in the minimum wage. 
A)  An increase in the minimum wage will reduce employment. 
B)  The minimum wage should be increased. 
C)  Social justice will be served by increasing the minimum wage. 
D)  Thoughtful people oppose an increase in the minimum wage.

Question 14

Which of the following is most clearly consistent with the basic postulate of economics regarding the reaction of people to a change in incentives.

Accepted Answer

A)  Farmers produce fewer bushels of wheat in response to an increase in the price of wheat. 
B)  People will buy more milk at a price of $2 per gallon than at $1 per gallon. 
C)  People will buy less gas if the price of gas increases by $.20 per gallon. 
D)  People will consume more beef if the price increases from $1 to $2 per pound. 
A)  Farmers produce fewer bushels of wheat in response to an increase in the price of wheat. 
B)  People will buy more milk at a price of $2 per gallon than at $1 per gallon. 
C)  People will buy less gas if the price of gas increases by $.20 per gallon. 
D)  People will consume more beef if the price increases from $1 to $2 per pound.

Question 15

Which of the following is part of the economic way of thinking?

Accepted Answer

A)  Opportunity costs will always be incurred when scarce resources are used to produce a good. 
B)  When the cost of an option increases, individuals will be less likely to choose it. 
C)  In addition to their immediate direct effects, economic actions often generate secondary effects that are observable only after the passage of time. 
D)  All of the above are part of the economic way of thinking. 
A)  Opportunity costs will always be incurred when scarce resources are used to produce a good. 
B)  When the cost of an option increases, individuals will be less likely to choose it. 
C)  In addition to their immediate direct effects, economic actions often generate secondary effects that are observable only after the passage of time. 
D)  All of the above are part of the economic way of thinking.

Question 16

If Susan bought nine gallons of gasoline at $1.50 per gallon, the car wash cost $1, but if she bought 10 gallons of gasoline, the car wash was free. Given that Susan is going to get the car wash, the marginal cost of the tenth gallon of gasoline is

Accepted Answer

A)  zero. 
B)  $.50. 
C)  $1.00. 
D)  $1.50. 
A)  zero. 
B)  $.50. 
C)  $1.00. 
D)  $1.50.

Question 17

Because information is costly to acquire,

Accepted Answer

A)  people will rationally choose not to become fully informed when making decisions. 
B)  people will generally choose to become as fully informed as possible when making decisions. 
C)  people will generally choose to acquire no information that would be relevant to their decisions. 
D)  none of the above are true. 
A)  people will rationally choose not to become fully informed when making decisions. 
B)  people will generally choose to become as fully informed as possible when making decisions. 
C)  people will generally choose to acquire no information that would be relevant to their decisions. 
D)  none of the above are true.

Question 18

In economics, secondary effects refer to the

Accepted Answer

A)  best alternative that must be forgone as the result of a choice. 
B)  unintended consequences of a change that are not immediately identifiable but are felt only with time. 
C)  immediate and visible intended consequences of a change. 
D)  impact of the scarcity of resources on the scarcity of the goods that are produced with those resources. 
A)  best alternative that must be forgone as the result of a choice. 
B)  unintended consequences of a change that are not immediately identifiable but are felt only with time. 
C)  immediate and visible intended consequences of a change. 
D)  impact of the scarcity of resources on the scarcity of the goods that are produced with those resources.

Question 19

Homeowners can deduct interest payments on their mortgages from their federal income tax. If this deduction were removed, how would the housing market be affected?

Accepted Answer

The deductibility of these interest paym

Question 20

Which of the following groups would most likely benefit from a law that is extremely tough on those who drink and drive?

Accepted Answer

A)  truck drivers 
B)  taxi drivers 
C)  bartenders 
D)  doctors and nurses 
A)  truck drivers 
B)  taxi drivers 
C)  bartenders 
D)  doctors and nurses

Which of the following is a positive economic statement?

The fact that some people love tomatoes while others dislike them illustrates that

The unintended consequences of an economic change that are not immediately identifiable but are felt only with time are known in economics as

Which of the following is true?

A radio station gives "free money" to those listeners whose names are drawn and announced over the airwaves from postcards the listeners sent into the radio station. Is the money really free for the listener?

Ex-London School of Economics student Mick Jagger sang, "You can't always get what you want, but if you try sometime, you just might find you can get what you need." Another statement of the basic economic principle expressed in this lyric is that

Susan wishes to buy gasoline and have her car washed. She finds that if she buys 9 gallons of gasoline at $1.50 per gallon, the car wash costs $1, but if she buys 10 gallons of gasoline, the car wash is free. For Susan, the marginal cost of the tenth gallon of gasoline is

The fallacy of composition is the fallacious view that

Economic analysis assumes that

Which one of the following statements is most clearly inconsistent with the economic way of thinking?

Which of the following is an example of a normative economic statement?

Which one of the following is a positive economic statement?

Which of the following is most clearly consistent with the basic postulate of economics regarding the reaction of people to a change in incentives.

Which of the following is part of the economic way of thinking?

If Susan bought nine gallons of gasoline at $1.50 per gallon, the car wash cost $1, but if she bought 10 gallons of gasoline, the car wash was free. Given that Susan is going to get the car wash, the marginal cost of the tenth gallon of gasoline is

Because information is costly to acquire,

In economics, secondary effects refer to the

Homeowners can deduct interest payments on their mortgages from their federal income tax. If this deduction were removed, how would the housing market be affected?

Which of the following groups would most likely benefit from a law that is extremely tough on those who drink and drive?

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

Which of the following is a positive economic statement?

The fact that some people love tomatoes while others dislike them illustrates that

The unintended consequences of an economic change that are not immediately identifiable but are felt only with time are known in economics as

Which of the following is true?

A radio station gives "free money" to those listeners whose names are drawn and announced over the airwaves from postcards the listeners sent into the radio station. Is the money really free for the listener?

Ex-London School of Economics student Mick Jagger sang, "You can't always get what you want, but if you try sometime, you just might find you can get what you need." Another statement of the basic economic principle expressed in this lyric is that

Susan wishes to buy gasoline and have her car washed. She finds that if she buys 9 gallons of gasoline at $1.50 per gallon, the car wash costs $1, but if she buys 10 gallons of gasoline, the car wash is free. For Susan, the marginal cost of the tenth gallon of gasoline is

The fallacy of composition is the fallacious view that

Economic analysis assumes that

Which one of the following statements is most clearly inconsistent with the economic way of thinking?

Which of the following is an example of a normative economic statement?

Which one of the following is a positive economic statement?

Which of the following is most clearly consistent with the basic postulate of economics regarding the reaction of people to a change in incentives.

Which of the following is part of the economic way of thinking?

If Susan bought nine gallons of gasoline at $1.50 per gallon, the car wash cost $1, but if she bought 10 gallons of gasoline, the car wash was free. Given that Susan is going to get the car wash, the marginal cost of the tenth gallon of gasoline is

Because information is costly to acquire,

In economics, secondary effects refer to the

Homeowners can deduct interest payments on their mortgages from their federal income tax. If this deduction were removed, how would the housing market be affected?

Which of the following groups would most likely benefit from a law that is extremely tough on those who drink and drive?

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