Question 1

When economists use the term ceteris paribus, they indicate

Accepted Answer

A)  the causal relationship between two economic variables cannot be determined. 
B)  the analysis is true for the individual but not for the economy as a whole. 
C)  all other factors are assumed to be constant. 
D)  their conclusions are based on normative economics rather than positive economic analysis. 
A)  the causal relationship between two economic variables cannot be determined. 
B)  the analysis is true for the individual but not for the economy as a whole. 
C)  all other factors are assumed to be constant. 
D)  their conclusions are based on normative economics rather than positive economic analysis.

Question 2

Which of the following is consistent with the implications of the economic guidepost that information is costly to acquire?

Accepted Answer

A)  Most people do not know the names of their legislators in the U.S. Congress, but those same individuals are likely to know the names of all the cast members on a popular TV show. 
B)  In considering purchases, people are more likely to purchase a consumer ratings magazine that reviews new automobiles before buying a car, but are unlikely to purchase a consumer ratings magazine that reviews pens and pencils before buying a pen or pencil. 
C)  When shopping for something like a new calculator, people will generally not spend the time to do price comparisons at all of the stores in town that sell calculators. 
D)  All of the above are consistent with the economic way of thinking. 
A)  Most people do not know the names of their legislators in the U.S. Congress, but those same individuals are likely to know the names of all the cast members on a popular TV show. 
B)  In considering purchases, people are more likely to purchase a consumer ratings magazine that reviews new automobiles before buying a car, but are unlikely to purchase a consumer ratings magazine that reviews pens and pencils before buying a pen or pencil. 
C)  When shopping for something like a new calculator, people will generally not spend the time to do price comparisons at all of the stores in town that sell calculators. 
D)  All of the above are consistent with the economic way of thinking.

Question 3

Which of the following is not consistent with the basic postulate of economics that incentives matter?

Accepted Answer

A)  Farmers produce fewer bushels of wheat in response to an increase in the price of wheat. 
B)  A politician votes against a proposal because most of his constituents oppose it. 
C)  People drive less because of higher gas prices. 
D)  People buy more milk in response to a reduction in the price of milk. 
A)  Farmers produce fewer bushels of wheat in response to an increase in the price of wheat. 
B)  A politician votes against a proposal because most of his constituents oppose it. 
C)  People drive less because of higher gas prices. 
D)  People buy more milk in response to a reduction in the price of milk.

Question 4

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

Accepted Answer

A)  opportunity costs. 
B)  utility curves. 
C)  secondary effects. 
D)  comparative advantages. 
A)  opportunity costs. 
B)  utility curves. 
C)  secondary effects. 
D)  comparative advantages.

Question 5

Harold, a delivery man, washes and irons his own shirts. Sarah, his boss, sends her clothes to a laundry. Which is the most plausible economic explanation for this difference?

Accepted Answer

A)  Harold must enjoy ironing more than Sarah does. 
B)  Harold must be better at ironing than Sarah is. 
C)  The opportunity cost of ironing is greater for Harold. 
D)  Sarah has a higher opportunity cost of laundering her clothes than Harold does. 
A)  Harold must enjoy ironing more than Sarah does. 
B)  Harold must be better at ironing than Sarah is. 
C)  The opportunity cost of ironing is greater for Harold. 
D)  Sarah has a higher opportunity cost of laundering her clothes than Harold does.

Question 6

People are more likely to purchase a consumer ratings magazine that reviews new automobiles before buying a new car than they are to purchase a consumer ratings magazine that reviews pens and pencils before buying a new pen or pencil. Which of the following best explains this behavior?

Accepted Answer

A)  Because the consumer ratings magazine must have a higher price for the issue reviewing pens and pencils. 
B)  Because the value of the information, in terms of avoiding a mistake on the purchase, is much higher for an automobile than for a pen or pencil, it is more worthwhile to gather this information. 
C)  Because people generally do not know which products are reviewed by these consumer magazines. 
D)  None of the above explain this behavior. 
A)  Because the consumer ratings magazine must have a higher price for the issue reviewing pens and pencils. 
B)  Because the value of the information, in terms of avoiding a mistake on the purchase, is much higher for an automobile than for a pen or pencil, it is more worthwhile to gather this information. 
C)  Because people generally do not know which products are reviewed by these consumer magazines. 
D)  None of the above explain this behavior.

Question 7

In economics, the term marginal refers to

Accepted Answer

A)  the change or difference between two alternatives. 
B)  man-made resources as opposed to natural resources. 
C)  the satisfaction a consumer receives from a good. 
D)  holding everything else constant in the analysis. 
A)  the change or difference between two alternatives. 
B)  man-made resources as opposed to natural resources. 
C)  the satisfaction a consumer receives from a good. 
D)  holding everything else constant in the analysis.

Question 8

The most fundamental concept in economics is that

Accepted Answer

A)  changes in incentives influence behavior in a predictable way--people will be less likely to choose an option as it becomes more expensive. 
B)  changes in incentives generally do not influence human behavior. 
C)  goods that are provided by government are free for society. 
D)  individuals generally do not consider other alternatives when making a choice. 
A)  changes in incentives influence behavior in a predictable way--people will be less likely to choose an option as it becomes more expensive. 
B)  changes in incentives generally do not influence human behavior. 
C)  goods that are provided by government are free for society. 
D)  individuals generally do not consider other alternatives when making a choice.

Question 9

If you win the lottery this would be great for you, but if everyone simultaneously won the lottery this wouldn't be nearly as good, why?

Accepted Answer

A)  association is not causation 
B)  it is a violation of ceteris paribus 
C)  the fallacy of composition 
D)  what appear to be positive outcomes in society are actually normative. 
A)  association is not causation 
B)  it is a violation of ceteris paribus 
C)  the fallacy of composition 
D)  what appear to be positive outcomes in society are actually normative.

Question 10

The statement, "John buys more of good X as his income increases, ceteris paribus," means

Accepted Answer

A)  John's income is being held constant. 
B)  John's purchases of good X are being held constant. 
C)  John's income and purchases of this good are being held constant. 
D)  John's income is the only influence that is being allowed to change. 
E)  the price of this good is being allowed to change. 
A)  John's income is being held constant. 
B)  John's purchases of good X are being held constant. 
C)  John's income and purchases of this good are being held constant. 
D)  John's income is the only influence that is being allowed to change. 
E)  the price of this good is being allowed to change.

Question 11

The fallacy of composition is the incorrect view that

Accepted Answer

A)  everything else is always held constant when a change occurs. 
B)  a small change in an economic variable will have unrecognizable but significant consequences on the economy. 
C)  when two events are associated, the one observed first must have caused the second. 
D)  if something is true for an individual, then it must also be true for the group. 
A)  everything else is always held constant when a change occurs. 
B)  a small change in an economic variable will have unrecognizable but significant consequences on the economy. 
C)  when two events are associated, the one observed first must have caused the second. 
D)  if something is true for an individual, then it must also be true for the group.

Question 12

Economic choice and competitive behavior are the result of

Accepted Answer

A)  basic human greed. 
B)  poverty. 
C)  private ownership of resources. 
D)  scarcity. 
A)  basic human greed. 
B)  poverty. 
C)  private ownership of resources. 
D)  scarcity.

Question 13

When Mother Theresa won the Nobel Peace Prize, the monetary award was well in excess of $100,000. Did she accept the money? If so, what did she do with it?

Accepted Answer

Mother Theresa used the money to help th

Question 14

Which one of the following states a central element of the economic way of thinking?

Accepted Answer

A)  Scarce goods are priceless. 
B)  Incentives matter--human choice is influenced in predictable ways by changes in personal costs and benefits. 
C)  The realism of the assumptions is the best test of an economic theory. 
D)  When deciding how to allocate time, the concept of opportunity cost is meaningless. 
A)  Scarce goods are priceless. 
B)  Incentives matter--human choice is influenced in predictable ways by changes in personal costs and benefits. 
C)  The realism of the assumptions is the best test of an economic theory. 
D)  When deciding how to allocate time, the concept of opportunity cost is meaningless.

Question 15

Which of the following best describes the difference between an objective concept and a subjective concept?

Accepted Answer

A)  A subjective concept is a fact based on observation that is not subject to personal opinion, while an objective concept is based on personal preferences and value judgments. 
B)  An objective concept is a fact based on observation that is not subject to personal opinion, while a subjective concept is based on personal preferences and value judgments. 
C)  A subjective concept relates to issues in microeconomics, while an objective concept relates to issues in macroeconomics. 
D)  An objective concept can only be illustrated in words, while a subjective concept can usually be illustrated with a graph. 
A)  A subjective concept is a fact based on observation that is not subject to personal opinion, while an objective concept is based on personal preferences and value judgments. 
B)  An objective concept is a fact based on observation that is not subject to personal opinion, while a subjective concept is based on personal preferences and value judgments. 
C)  A subjective concept relates to issues in microeconomics, while an objective concept relates to issues in macroeconomics. 
D)  An objective concept can only be illustrated in words, while a subjective concept can usually be illustrated with a graph.

Question 16

Standby passengers on airlines who pay low rates for seats benefit from the low price. How are the airlines affected?

Accepted Answer

A)  They lose, because the standby passengers do not cover the full cost of the seats. 
B)  They gain, because the additional revenue covers the "fixed costs" of the flight. 
C)  They lose, because the gain of the passengers must necessarily come at the expense of the airline. 
D)  They benefit as long as the additional revenue from the passengers exceeds the marginal cost. 
A)  They lose, because the standby passengers do not cover the full cost of the seats. 
B)  They gain, because the additional revenue covers the "fixed costs" of the flight. 
C)  They lose, because the gain of the passengers must necessarily come at the expense of the airline. 
D)  They benefit as long as the additional revenue from the passengers exceeds the marginal cost.

Question 17

The basic difference between macroeconomics and microeconomics is that

Accepted Answer

A)  microeconomics is concerned with aggregate markets and the entire economy, while macroeconomics is concerned with specific individual markets. 
B)  macroeconomics is concerned with policy decisions, while microeconomics applies only to theory. 
C)  microeconomics is concerned with individual markets and the behavior of people and firms, while macroeconomics is concerned with aggregate markets and the entire economy. 
D)  macroeconomics is concerned with positive economics, while microeconomics is concerned with normative economics. 
A)  microeconomics is concerned with aggregate markets and the entire economy, while macroeconomics is concerned with specific individual markets. 
B)  macroeconomics is concerned with policy decisions, while microeconomics applies only to theory. 
C)  microeconomics is concerned with individual markets and the behavior of people and firms, while macroeconomics is concerned with aggregate markets and the entire economy. 
D)  macroeconomics is concerned with positive economics, while microeconomics is concerned with normative economics.

Question 18

A marginal change usually is a

Accepted Answer

A)  change that involves little, if anything, that is important. 
B)  large, significant adjustment. 
C)  change for the worse, and so it is usually a short-term change. 
D)  small, incremental adjustment. 
A)  change that involves little, if anything, that is important. 
B)  large, significant adjustment. 
C)  change for the worse, and so it is usually a short-term change. 
D)  small, incremental adjustment.

Question 19

What do economists mean when they state that a good is scarce?

Accepted Answer

A)  There is a shortage or insufficient supply of the good at the existing price. 
B)  It is impossible to expand the availability of the good beyond the current amount. 
C)  People will want to buy more of the good regardless of the price of the good. 
D)  The amount of the good that people would like exceeds the supply freely available from nature. 
A)  There is a shortage or insufficient supply of the good at the existing price. 
B)  It is impossible to expand the availability of the good beyond the current amount. 
C)  People will want to buy more of the good regardless of the price of the good. 
D)  The amount of the good that people would like exceeds the supply freely available from nature.

Question 20

When the Hometown football team is winning by a lot of points after halftime, they often play their second and third team players. One of the coaches notices that when the third team plays that Oklahoma wins by a bigger margin than when just the first team plays. He recommends that the third team see more playing time as a result. What is wrong with his way of thinking?

Accepted Answer

A)  association is not causation 
B)  it is a violation of ceteris paribus 
C)  the fallacy of composition 
D)  good intentions do not guarantee desirable outcomes 
A)  association is not causation 
B)  it is a violation of ceteris paribus 
C)  the fallacy of composition 
D)  good intentions do not guarantee desirable outcomes

When economists use the term ceteris paribus, they indicate

Which of the following is consistent with the implications of the economic guidepost that information is costly to acquire?

Which of the following is not consistent with the basic postulate of economics that incentives matter?

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

Harold, a delivery man, washes and irons his own shirts. Sarah, his boss, sends her clothes to a laundry. Which is the most plausible economic explanation for this difference?

People are more likely to purchase a consumer ratings magazine that reviews new automobiles before buying a new car than they are to purchase a consumer ratings magazine that reviews pens and pencils before buying a new pen or pencil. Which of the following best explains this behavior?

In economics, the term marginal refers to

The most fundamental concept in economics is that

If you win the lottery this would be great for you, but if everyone simultaneously won the lottery this wouldn't be nearly as good, why?

The statement, "John buys more of good X as his income increases, ceteris paribus," means

The fallacy of composition is the incorrect view that

Economic choice and competitive behavior are the result of

When Mother Theresa won the Nobel Peace Prize, the monetary award was well in excess of $100,000. Did she accept the money? If so, what did she do with it?

Which one of the following states a central element of the economic way of thinking?

Which of the following best describes the difference between an objective concept and a subjective concept?

Standby passengers on airlines who pay low rates for seats benefit from the low price. How are the airlines affected?

The basic difference between macroeconomics and microeconomics is that

A marginal change usually is a

What do economists mean when they state that a good is scarce?

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

When economists use the term ceteris paribus, they indicate

Which of the following is consistent with the implications of the economic guidepost that information is costly to acquire?

Which of the following is not consistent with the basic postulate of economics that incentives matter?

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

Harold, a delivery man, washes and irons his own shirts. Sarah, his boss, sends her clothes to a laundry. Which is the most plausible economic explanation for this difference?

People are more likely to purchase a consumer ratings magazine that reviews new automobiles before buying a new car than they are to purchase a consumer ratings magazine that reviews pens and pencils before buying a new pen or pencil. Which of the following best explains this behavior?

In economics, the term marginal refers to

The most fundamental concept in economics is that

If you win the lottery this would be great for you, but if everyone simultaneously won the lottery this wouldn't be nearly as good, why?

The statement, "John buys more of good X as his income increases, ceteris paribus," means

The fallacy of composition is the incorrect view that

Economic choice and competitive behavior are the result of

When Mother Theresa won the Nobel Peace Prize, the monetary award was well in excess of $100,000. Did she accept the money? If so, what did she do with it?

Which one of the following states a central element of the economic way of thinking?

Which of the following best describes the difference between an objective concept and a subjective concept?

Standby passengers on airlines who pay low rates for seats benefit from the low price. How are the airlines affected?

The basic difference between macroeconomics and microeconomics is that

A marginal change usually is a

What do economists mean when they state that a good is scarce?

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