Question 1

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 2

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 3

What is the best test of an economic theory?

Accepted Answer

A)  The accuracy of the assumptions behind the theory. 
B)  The ability of the theory to predict real-world events. 
C)  The implications of the theory for current public policy. 
D)  How much mathematical detail is behind the theory. 
A)  The accuracy of the assumptions behind the theory. 
B)  The ability of the theory to predict real-world events. 
C)  The implications of the theory for current public policy. 
D)  How much mathematical detail is behind the theory.

Question 4

Which of the following is a positive economic statement?

Accepted Answer

A)  Government control of rent is a fair way to help poor people afford housing. 
B)  Government control of rent keeps landlords from charging too much rent. 
C)  Government control of rent decreases the number of new apartments constructed. 
D)  Government control of rent is an injustice. 
A)  Government control of rent is a fair way to help poor people afford housing. 
B)  Government control of rent keeps landlords from charging too much rent. 
C)  Government control of rent decreases the number of new apartments constructed. 
D)  Government control of rent is an injustice.

Question 5

While waiting in line to buy one cheeseburger for $1.50 and a medium drink for $1.00, Sally notices that she could get a value meal that contains both the cheeseburger and medium drink and also a medium order of fries for $2.75. She thinks to herself, "Is it worth the extra 25 cents to get the medium fries?" To an economist, Sally's decision is an example of

Accepted Answer

A)  marginal decision making. 
B)  basing decisions on total, rather than marginal, value. 
C)  an unintended consequence. 
D)  the fallacy of composition. 
A)  marginal decision making. 
B)  basing decisions on total, rather than marginal, value. 
C)  an unintended consequence. 
D)  the fallacy of composition.

Question 6

Which one of the following statements most accurately indicates the basic motivation for behavior?

Accepted Answer

A)  Individuals are motivated primarily by selfish desires; thus, personal costs and benefits influence their actions. 
B)  Individuals are motivated primarily by humanitarian concerns; therefore, personal costs and benefits exert little influence on most of their actions. 
C)  Individuals are motivated by a variety of forces; however, changes in personal benefits and costs influence the choices of both selfish and humanitarian individuals. 
D)  Individuals are motivated by a variety of forces; however, changes in personal benefits and costs affect behavior only when individuals are motivated by selfishness. 
A)  Individuals are motivated primarily by selfish desires; thus, personal costs and benefits influence their actions. 
B)  Individuals are motivated primarily by humanitarian concerns; therefore, personal costs and benefits exert little influence on most of their actions. 
C)  Individuals are motivated by a variety of forces; however, changes in personal benefits and costs influence the choices of both selfish and humanitarian individuals. 
D)  Individuals are motivated by a variety of forces; however, changes in personal benefits and costs affect behavior only when individuals are motivated by selfishness.

Question 7

Some individuals or families can become completely saturated with a service such as television. This suggests that

Accepted Answer

A)  wants are limited 
B)  desires for a single commodity can be satisfied but then the focus will switch to other goods and services 
C)  a highly productive economy may someday be able to satisfy all human desires 
D)  resources are not truly fixed in supply as we generally assume 
E)  scarcity does not exist 
A)  wants are limited 
B)  desires for a single commodity can be satisfied but then the focus will switch to other goods and services 
C)  a highly productive economy may someday be able to satisfy all human desires 
D)  resources are not truly fixed in supply as we generally assume 
E)  scarcity does not exist

Question 8

A rational decision maker takes an action if and only if

Accepted Answer

A)  the marginal benefit of the action exceeds the marginal cost of the action. 
B)  the marginal cost of the action exceeds the marginal benefit of the action. 
C)  the marginal cost of the action is zero. 
D)  the opportunity cost of the action is zero. 
A)  the marginal benefit of the action exceeds the marginal cost of the action. 
B)  the marginal cost of the action exceeds the marginal benefit of the action. 
C)  the marginal cost of the action is zero. 
D)  the opportunity cost of the action is zero.

Question 9

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 10

Evaluate this statement: "People engaged in economizing behavior will always buy the lowest priced item they can find."

Accepted Answer

As long as price is the only factor, we

Question 11

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 12

If people are self-interested, why does anyone give money to public radio?

Accepted Answer

Since people can listen to public radio

Question 13

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 14

Economics is primarily the study of

Accepted Answer

A)  how to make money in the stock market. 
B)  how to find lower cost methods of production. 
C)  the choices we must make among alternatives because of scarcity. 
D)  the proper form of industrial structure for the United States. 
A)  how to make money in the stock market. 
B)  how to find lower cost methods of production. 
C)  the choices we must make among alternatives because of scarcity. 
D)  the proper form of industrial structure for the United States.

Question 15

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 16

A tradeoff exists between a clean environment and a higher level of income in that

Accepted Answer

A)  studies show that individuals with higher levels of income actually pollute less than low-income individuals. 
B)  efforts to reduce pollution typically are not completely successful. 
C)  laws that reduce pollution raise costs of production and reduce incomes. 
D)  by employing individuals to clean up pollution, employment and income both rise. 
A)  studies show that individuals with higher levels of income actually pollute less than low-income individuals. 
B)  efforts to reduce pollution typically are not completely successful. 
C)  laws that reduce pollution raise costs of production and reduce incomes. 
D)  by employing individuals to clean up pollution, employment and income both rise.

Question 17

Economics is primarily the study of

Accepted Answer

A)  how to make money in the stock market. 
B)  how to operate a business successfully. 
C)  the allocation of scarce resources in an effort to satisfy wants that are virtually unlimited. 
D)  the methods business firms use to reduce their costs of production. 
A)  how to make money in the stock market. 
B)  how to operate a business successfully. 
C)  the allocation of scarce resources in an effort to satisfy wants that are virtually unlimited. 
D)  the methods business firms use to reduce their costs of production.

Question 18

Which of the following best illustrates the fallacy of composition?

Accepted Answer

A)  If Jamal had more money, he could afford to buy more goods. 
B)  If Aisha stood up at a basketball game, she could get a better view of the game; if everyone stood up at a basketball game, everyone could have a better view of the game. 
C)  If the price of bread rose, consumers would buy less; if consumers bought less bread, the price of bread would rise. 
D)  High housing prices cause people to buy less housing, but an increase in income might cause them to buy more housing. 
A)  If Jamal had more money, he could afford to buy more goods. 
B)  If Aisha stood up at a basketball game, she could get a better view of the game; if everyone stood up at a basketball game, everyone could have a better view of the game. 
C)  If the price of bread rose, consumers would buy less; if consumers bought less bread, the price of bread would rise. 
D)  High housing prices cause people to buy less housing, but an increase in income might cause them to buy more housing.

Question 19

Legislation to protect red-cockaded woodpeckers created incentives that resulted in premature harvesting of trees the woodpeckers like to nest in. This is an example of which of the following?

Accepted Answer

A)  Association is not causation. 
B)  the fallacy of composition 
C)  the use of ceteris paribus conditions in economic analysis 
D)  Good intentions do not always lead to desirable outcomes. 
A)  Association is not causation. 
B)  the fallacy of composition 
C)  the use of ceteris paribus conditions in economic analysis 
D)  Good intentions do not always lead to desirable outcomes.

Question 20

The Secretary of Labor states that wage rates in the country have risen by 2 percent this past year. The head of a local labor union states that wage gains should have been higher. The Secretary's statement is a(n) ____ economic statement, and the labor head's statement is a(n) ____ economic statement.

Accepted Answer

A)  normative; normative 
B)  normative; positive 
C)  positive; normative 
D)  positive; positive 
E)  proper; improper 
A)  normative; normative 
B)  normative; positive 
C)  positive; normative 
D)  positive; positive 
E)  proper; improper

The fallacy of composition is the fallacious view that

A marginal change usually is a

What is the best test of an economic theory?

Which of the following is a positive economic statement?

Which one of the following statements most accurately indicates the basic motivation for behavior?

Some individuals or families can become completely saturated with a service such as television. This suggests that

A rational decision maker takes an action if and only if

Which one of the following is a positive economic statement?

Evaluate this statement: "People engaged in economizing behavior will always buy the lowest priced item they can find."

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

If people are self-interested, why does anyone give money to public radio?

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

Economics is primarily the study of

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

A tradeoff exists between a clean environment and a higher level of income in that

Economics is primarily the study of

Which of the following best illustrates the fallacy of composition?

Legislation to protect red-cockaded woodpeckers created incentives that resulted in premature harvesting of trees the woodpeckers like to nest in. This is an example of which of the following?

The Secretary of Labor states that wage rates in the country have risen by 2 percent this past year. The head of a local labor union states that wage gains should have been higher. The Secretary's statement is a(n) economic statement, and the labor head's statement is a(n) economic statement.

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

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad--As Model

Fiscal Policy: The Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy: Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Special Topics

Filters

Exam 1: The Economic Approach

The fallacy of composition is the fallacious view that

A marginal change usually is a

What is the best test of an economic theory?

Which of the following is a positive economic statement?

Which one of the following statements most accurately indicates the basic motivation for behavior?

Some individuals or families can become completely saturated with a service such as television. This suggests that

A rational decision maker takes an action if and only if

Which one of the following is a positive economic statement?

Evaluate this statement: "People engaged in economizing behavior will always buy the lowest priced item they can find."

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

If people are self-interested, why does anyone give money to public radio?

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

Economics is primarily the study of

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

A tradeoff exists between a clean environment and a higher level of income in that

Economics is primarily the study of

Which of the following best illustrates the fallacy of composition?

Legislation to protect red-cockaded woodpeckers created incentives that resulted in premature harvesting of trees the woodpeckers like to nest in. This is an example of which of the following?

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

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad--As Model

Fiscal Policy: The Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy: Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Special Topics

Filters