Question 1

The perpetual state of insufficiency of resources to satisfy people's unlimited wants is:

Accepted Answer

A)  apparent only in poor countries. 
B)  completely unrealistic. 
C)  present in modern economies, but not in the past. 
D)  the definition of scarcity. 
A)  apparent only in poor countries. 
B)  completely unrealistic. 
C)  present in modern economies, but not in the past. 
D)  the definition of scarcity.

Question 2

Which of the following is a statement of positive economics?

Accepted Answer

A)  I hope unemployment comes down soon. 
B)  President X's way of dealing with unemployment is better than President Y's. 
C)  I think everyone should sacrifice to reduce the deficit. 
D)  If taxes are reduced, unemployment will drop. 
A)  I hope unemployment comes down soon. 
B)  President X's way of dealing with unemployment is better than President Y's. 
C)  I think everyone should sacrifice to reduce the deficit. 
D)  If taxes are reduced, unemployment will drop.

Question 3

What type of economic analysis is limited to testable, verifiable statements?

Accepted Answer

A)  Macroeconomics. 
B)  Entrepreneurial economics. 
C)  Positive economics. 
D)  Normative economics. 
A)  Macroeconomics. 
B)  Entrepreneurial economics. 
C)  Positive economics. 
D)  Normative economics.

Question 4

An economic model is useful only if it:

Accepted Answer

A)  contains no positive statements. 
B)  captures all the complexities of reality. 
C)  yields accurate predictions. 
D)  has both macro- and microeconomic applications. 
A)  contains no positive statements. 
B)  captures all the complexities of reality. 
C)  yields accurate predictions. 
D)  has both macro- and microeconomic applications.

Question 5

Which of the following is not a resource?

Accepted Answer

A)  Land. 
B)  Labor. 
C)  Money. 
D)  Capital. 
A)  Land. 
B)  Labor. 
C)  Money. 
D)  Capital.

Question 6

Select the normative statement that completes the following sentence: If the minimum wage is raised:

Accepted Answer

A)  cost per unit of output will rise. 
B)  workers will gain their rightful share of total income. 
C)  the rate of inflation will increase. 
D)  profits will fall. 
A)  cost per unit of output will rise. 
B)  workers will gain their rightful share of total income. 
C)  the rate of inflation will increase. 
D)  profits will fall.

Question 7

Exhibit 1A-3  Straight line   In Exhibit 1A-3, the slope of straight line AB is:

Accepted Answer

A)  positive. 
B)  zero. 
C)  negative. 
D)  variable. 
A)  positive. 
B)  zero. 
C)  negative. 
D)  variable.

Question 8

An entrepreneur is:

Accepted Answer

A)  an employee in a factory. 
B)  the manager of a factory. 
C)  the person who conceives and starts a business. 
D)  the person who contracts to work for a specific price. 
E)  the person who does not assume any risk in business. 
A)  an employee in a factory. 
B)  the manager of a factory. 
C)  the person who conceives and starts a business. 
D)  the person who contracts to work for a specific price. 
E)  the person who does not assume any risk in business.

Question 9

The term Ceteris paribus means that:

Accepted Answer

A)  the model includes all important variables occurring in the real world. 
B)  all factors which influence the event are changing at the same time. 
C)  one influence is changing and everything else is being held constant. 
D)  the consumer is king. 
A)  the model includes all important variables occurring in the real world. 
B)  all factors which influence the event are changing at the same time. 
C)  one influence is changing and everything else is being held constant. 
D)  the consumer is king.

Question 10

Scarcity:

Accepted Answer

A)  exists because resources are unlimited while human wants are limited. 
B)  means we are unable to have as much as we would like to have. 
C)  will likely be eliminated as technology continues to expand. 
D)  is not an issue addressed in economics. 
A)  exists because resources are unlimited while human wants are limited. 
B)  means we are unable to have as much as we would like to have. 
C)  will likely be eliminated as technology continues to expand. 
D)  is not an issue addressed in economics.

Question 11

Exhibit 1A-7  Straight line relationship   Which of the following would cause a shift in the relationship shown in Exhibit 1A-7?

Accepted Answer

A)  A rise in people's annual income. 
B)  A rise in people's expenditure on air travel. 
C)  A rise in the price of air travel. 
D)  All of the above would shift the line in the graph. 
A)  A rise in people's annual income. 
B)  A rise in people's expenditure on air travel. 
C)  A rise in the price of air travel. 
D)  All of the above would shift the line in the graph.

Question 12

"An increase in the federal minimum wage causes an increase in unemployment among teenagers" is a:

Accepted Answer

A)  statement of positive economics. 
B)  statement of normative economics. 
C)  testable value judgment. 
D)  fallacy of composition. 
A)  statement of positive economics. 
B)  statement of normative economics. 
C)  testable value judgment. 
D)  fallacy of composition.

Question 13

Which of the following would eliminate scarcity as an economic problem?

Accepted Answer

A)  Moderation of people's competitive instincts. 
B)  Discovery of sufficiently large new energy reserves. 
C)  Resumption of steady productivity growth. 
D)  None of the above. 
A)  Moderation of people's competitive instincts. 
B)  Discovery of sufficiently large new energy reserves. 
C)  Resumption of steady productivity growth. 
D)  None of the above.

Question 14

The subject of economics is primarily the study of:

Accepted Answer

A)  the government decision-making process. 
B)  how to operate a business successfully. 
C)  decision-making because of the problem of scarcity. 
D)  how to make money in the stock market. 
A)  the government decision-making process. 
B)  how to operate a business successfully. 
C)  decision-making because of the problem of scarcity. 
D)  how to make money in the stock market.

Question 15

Which of the following is the best example of a nonrenewable resource?

Accepted Answer

A)  Forests. 
B)  Oil. 
C)  Clean air. 
D)  Fish in the ocean. 
A)  Forests. 
B)  Oil. 
C)  Clean air. 
D)  Fish in the ocean.

Question 16

Economists use models to:

Accepted Answer

A)  abstract from the complexities of the world. 
B)  understand economic behavior. 
C)  explain and help predict human behavior. 
D)  do all of the above. 
A)  abstract from the complexities of the world. 
B)  understand economic behavior. 
C)  explain and help predict human behavior. 
D)  do all of the above.

Question 17

If the price of a textbook rises and then students purchase fewer textbooks, an economic model can show a cause-and-effect relationship only if which of the following conditions holds:

Accepted Answer

A)  students' incomes fall. 
B)  tuition decreases. 
C)  the number of students increases. 
D)  everything else is constant. 
E)  the bookstore no longer accepts used book trade-ins. 
A)  students' incomes fall. 
B)  tuition decreases. 
C)  the number of students increases. 
D)  everything else is constant. 
E)  the bookstore no longer accepts used book trade-ins.

Question 18

Exhibit 1A-1  Straight line   In Exhibit 1A-1, the slope of straight line AB is:

Accepted Answer

A)  positive. 
B)  zero. 
C)  negative. 
D)  variable. 
A)  positive. 
B)  zero. 
C)  negative. 
D)  variable.

Question 19

Exhibit 1A-2  Straight line   In Exhibit 1A-2, the slope of straight line CD is:

Accepted Answer

A)  positive. 
B)  zero. 
C)  negative. 
D)  variable. 
A)  positive. 
B)  zero. 
C)  negative. 
D)  variable.

Question 20

Which of the following is a positive statement?

Accepted Answer

A)  I think we should pass a constitutional amendment to reduce the deficit. 
B)  President Clinton's way of dealing with the economy is better than President Bush's. 
C)  I hope interest rates come down soon. 
D)  If taxes are raised, unemployment will drop. 
A)  I think we should pass a constitutional amendment to reduce the deficit. 
B)  President Clinton's way of dealing with the economy is better than President Bush's. 
C)  I hope interest rates come down soon. 
D)  If taxes are raised, unemployment will drop.

Exam 1: Introducing the Economic Way of Thinking

The perpetual state of insufficiency of resources to satisfy people's unlimited wants is:

Which of the following is a statement of positive economics?

What type of economic analysis is limited to testable, verifiable statements?

An economic model is useful only if it:

Which of the following is not a resource?

Select the normative statement that completes the following sentence: If the minimum wage is raised:

Exhibit 1A-3 Straight line In Exhibit 1A-3, the slope of straight line AB is:

An entrepreneur is:

The term Ceteris paribus means that:

Scarcity:

Exhibit 1A-7 Straight line relationship Which of the following would cause a shift in the relationship shown in Exhibit 1A-7?

"An increase in the federal minimum wage causes an increase in unemployment among teenagers" is a:

Which of the following would eliminate scarcity as an economic problem?

The subject of economics is primarily the study of:

Which of the following is the best example of a nonrenewable resource?

Economists use models to:

If the price of a textbook rises and then students purchase fewer textbooks, an economic model can show a cause-and-effect relationship only if which of the following conditions holds:

Exhibit 1A-1 Straight line In Exhibit 1A-1, the slope of straight line AB is:

Exhibit 1A-2 Straight line In Exhibit 1A-2, the slope of straight line CD is:

Which of the following is a positive statement?

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets and Income Distribution

Gross Domestic Product

Business Cycles and Unemployment

Inflation

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits, Surpluses, and the National Debt

Money and the Federal Reserve System

Money Creation

Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

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