Question 1

Modern economics as a field of study is usually thought to have begun with

Accepted Answer

A)  Adam Smith and the writing of The Wealth of Nations. 
B)  David Ricardo and the writing of The Principles of Political Economy and Taxation. 
C)  Aristotle and the writing of Politics and Ethics. 
D)  Moses and the Ten Commandments. 
A)  Adam Smith and the writing of The Wealth of Nations. 
B)  David Ricardo and the writing of The Principles of Political Economy and Taxation. 
C)  Aristotle and the writing of Politics and Ethics. 
D)  Moses and the Ten Commandments.

Question 2

When economists say a good is scarce, they mean

Accepted Answer

A)  there are only a limited number of consumers who would be interested in purchasing the good. 
B)  the human desire for the good exceeds the amount freely available from nature. 
C)  most people in poorer countries do not have enough of the good. 
D)  the production of the good has no opportunity cost for society. 
A)  there are only a limited number of consumers who would be interested in purchasing the good. 
B)  the human desire for the good exceeds the amount freely available from nature. 
C)  most people in poorer countries do not have enough of the good. 
D)  the production of the good has no opportunity cost for society.

Question 3

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

Accepted Answer

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

Question 4

Someone notices that sunspot activity is high just prior to recessions and concludes that sunspots cause recessions. This person has

Accepted Answer

A)  confused association and causation. 
B)  misunderstood the ceteris paribus assumption. 
C)  used normative economics to answer a positive question. 
D)  built an untestable model. 
A)  confused association and causation. 
B)  misunderstood the ceteris paribus assumption. 
C)  used normative economics to answer a positive question. 
D)  built an untestable model.

Question 5

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 6

When economists say goods are scarce, they mean

Accepted Answer

A)  consumers are too poor to afford the goods and services available. 
B)  consumers are unwilling to buy goods unless they have very low prices. 
C)  goods are generally freely available from nature in most countries. 
D)  the desire for goods and services exceeds our ability to produce them with the limited resources available. 
A)  consumers are too poor to afford the goods and services available. 
B)  consumers are unwilling to buy goods unless they have very low prices. 
C)  goods are generally freely available from nature in most countries. 
D)  the desire for goods and services exceeds our ability to produce them with the limited resources available.

Question 7

Santiago wants to buy some milk and a box of cereal. If he buys 2 quarts of milk at $1 per quart, the box of cereal costs 75 cents. If he buys 3 quarts of milk at $1 per quart, the box of cereal is free. For Santiago, the marginal cost of the third quart of milk is

Accepted Answer

A)  zero. 
B)  25 cents. 
C)  75 cents. 
D)  $1. 
A)  zero. 
B)  25 cents. 
C)  75 cents. 
D)  $1.

Question 8

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

Question 9

Positive economics

Accepted Answer

A)  postulates relationships among economic variables that are potentially refutable by real-world events. 
B)  is strictly quantitative and is, therefore, of little value to policy makers. 
C)  will usually indicate which economic policy is best. 
D)  is the same as normative economics. 
A)  postulates relationships among economic variables that are potentially refutable by real-world events. 
B)  is strictly quantitative and is, therefore, of little value to policy makers. 
C)  will usually indicate which economic policy is best. 
D)  is the same as normative economics.

Question 10

A popular video program, used to teach primary school children about economics, defines scarcity as "when you don't have enough of something." Evaluate this definition based on your understanding of the scarcity concept.

Accepted Answer

This definition is a bit simplistic for

Question 11

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 12

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 13

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 14

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 15

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 16

To say that people make marginal decisions means that

Accepted Answer

A)  they usually wait until the last minute before making a decision to buy 
B)  they weigh the additional costs and additional benefits of various activities before they make a decision 
C)  most people just barely get by on the incomes they earn and live from day to day on the very edge of subsistence 
D)  they consider the total cost and benefit of various activities before they make a purchase 
A)  they usually wait until the last minute before making a decision to buy 
B)  they weigh the additional costs and additional benefits of various activities before they make a decision 
C)  most people just barely get by on the incomes they earn and live from day to day on the very edge of subsistence 
D)  they consider the total cost and benefit of various activities before they make a purchase

Question 17

"After every fall election, the weather starts to turn cold, therefore elections cause cold weather." This statement

Accepted Answer

A)  confuses positive and normative analysis. 
B)  commits the fallacy of composition. 
C)  fails to recognize that association is not causation. 
D)  confuses macroeconomics with microeconomics. 
A)  confuses positive and normative analysis. 
B)  commits the fallacy of composition. 
C)  fails to recognize that association is not causation. 
D)  confuses macroeconomics with microeconomics.

Question 18

While waiting in line to buy two tacos at 75 cents each, and a medium drink for 80 cents, Emma notices that the restaurant has a value meal containing three tacos and a medium drink all for $2.50. For Emma, the marginal cost of purchasing the third taco would be

Accepted Answer

A)  zero. 
B)  20 cents. 
C)  75 cents. 
D)  80 cents. 
A)  zero. 
B)  20 cents. 
C)  75 cents. 
D)  80 cents.

Question 19

Which of the following was a key belief of Adam Smith?

Accepted Answer

A)  he felt that human goodness would provide adequate goods and services to everyone. 
B)  he stressed that limited exchange and command economies would prevent the exploitation of the poor. 
C)  he believed that individuals pursuing their own interests would direct economic activity in the most advantageous way. 
D)  he lectured about the importance of gold and silver in providing a stable monetary system. 
A)  he felt that human goodness would provide adequate goods and services to everyone. 
B)  he stressed that limited exchange and command economies would prevent the exploitation of the poor. 
C)  he believed that individuals pursuing their own interests would direct economic activity in the most advantageous way. 
D)  he lectured about the importance of gold and silver in providing a stable monetary system.

Question 20

"After every fall election, the weather starts to turn cold, therefore elections cause cold weather." This statement

Accepted Answer

A)  confuses positive and normative analysis. 
B)  commits the fallacy of composition. 
C)  fails to recognize that association is not causation. 
D)  confuses macroeconomics with microeconomics. 
A)  confuses positive and normative analysis. 
B)  commits the fallacy of composition. 
C)  fails to recognize that association is not causation. 
D)  confuses macroeconomics with microeconomics.

Modern economics as a field of study is usually thought to have begun with

When economists say a good is scarce, they mean

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

Someone notices that sunspot activity is high just prior to recessions and concludes that sunspots cause recessions. This person has

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

When economists say goods are scarce, they mean

Santiago wants to buy some milk and a box of cereal. If he buys 2 quarts of milk at $1 per quart, the box of cereal costs 75 cents. If he buys 3 quarts of milk at $1 per quart, the box of cereal is free. For Santiago, the marginal cost of the third quart of milk is

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

Positive economics

A popular video program, used to teach primary school children about economics, defines scarcity as "when you don't have enough of something." Evaluate this definition based on your understanding of the scarcity concept.

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

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?

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

To say that people make marginal decisions means that

"After every fall election, the weather starts to turn cold, therefore elections cause cold weather." This statement

While waiting in line to buy two tacos at 75 cents each, and a medium drink for 80 cents, Emma notices that the restaurant has a value meal containing three tacos and a medium drink all for $2.50. For Emma, the marginal cost of purchasing the third taco would be

Which of the following was a key belief of Adam Smith?

"After every fall election, the weather starts to turn cold, therefore elections cause cold weather." This 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

Modern economics as a field of study is usually thought to have begun with

When economists say a good is scarce, they mean

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

Someone notices that sunspot activity is high just prior to recessions and concludes that sunspots cause recessions. This person has

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

When economists say goods are scarce, they mean

Santiago wants to buy some milk and a box of cereal. If he buys 2 quarts of milk at $1 per quart, the box of cereal costs 75 cents. If he buys 3 quarts of milk at $1 per quart, the box of cereal is free. For Santiago, the marginal cost of the third quart of milk is

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

Positive economics

A popular video program, used to teach primary school children about economics, defines scarcity as "when you don't have enough of something." Evaluate this definition based on your understanding of the scarcity concept.

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

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?

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

To say that people make marginal decisions means that

"After every fall election, the weather starts to turn cold, therefore elections cause cold weather." This statement

While waiting in line to buy two tacos at 75 cents each, and a medium drink for 80 cents, Emma notices that the restaurant has a value meal containing three tacos and a medium drink all for $2.50. For Emma, the marginal cost of purchasing the third taco would be

Which of the following was a key belief of Adam Smith?

"After every fall election, the weather starts to turn cold, therefore elections cause cold weather." This 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