Question 1

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 2

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 3

The value of a good

Accepted Answer

A)  depends on many factors, including who uses it and under what circumstances. 
B)  is determined by the cost of producing it. 
C)  depends on the labor necessary to supply the good. 
D)  can be measured objectively by a survey of manufacturers of the good. 
A)  depends on many factors, including who uses it and under what circumstances. 
B)  is determined by the cost of producing it. 
C)  depends on the labor necessary to supply the good. 
D)  can be measured objectively by a survey of manufacturers of the good.

Question 4

If a decision maker uses marginal analysis, then the relevant costs are the

Accepted Answer

A)  full costs of a particular activity or product. 
B)  fixed costs which do not vary with the extra activity or output. 
C)  profits obtained on the activity or product. 
D)  average costs for a particular activity or product. 
E)  additional costs of a particular activity or product. 
A)  full costs of a particular activity or product. 
B)  fixed costs which do not vary with the extra activity or output. 
C)  profits obtained on the activity or product. 
D)  average costs for a particular activity or product. 
E)  additional costs of a particular activity or product.

Question 5

Criteria for rationing goods and resources must be established because of

Accepted Answer

A)  the law of comparative advantage. 
B)  the use of capitalism as a form of economic organization. 
C)  the inability of politicians to develop efficient forms of economic organization. 
D)  scarcity imposed by nature. 
A)  the law of comparative advantage. 
B)  the use of capitalism as a form of economic organization. 
C)  the inability of politicians to develop efficient forms of economic organization. 
D)  scarcity imposed by nature.

Question 6

The Latin phrase "ceteris paribus" means

Accepted Answer

A)  that one event causes another. 
B)  that one event is associated with, but not caused by, another. 
C)  that other potential causes are assumed to remain constant. 
D)  the way things should be. 
A)  that one event causes another. 
B)  that one event is associated with, but not caused by, another. 
C)  that other potential causes are assumed to remain constant. 
D)  the way things should be.

Question 7

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 8

The fallacy of composition is the incorrect view that

Accepted Answer

A)  decisions are always made at the margin. 
B)  incentives matter only to those who behave selfishly. 
C)  if something is true for an individual, then it must also be true for the group. 
D)  the value of a good can be objectively measured by its cost of production. 
A)  decisions are always made at the margin. 
B)  incentives matter only to those who behave selfishly. 
C)  if something is true for an individual, then it must also be true for the group. 
D)  the value of a good can be objectively measured by its cost of production.

Question 9

Which one of the following statements is correct?

Accepted Answer

A)  Policymakers have good intentions and therefore their proposals will create good outcomes. 
B)  Potential secondary effects do not need to be considered when deciding whether to implement a new government program. 
C)  A good outcome is guaranteed from a government program if it is created with good intentions. 
D)  Government programs can be implemented with good intentions but can lead to undesirable outcomes because of unintended consequences. 
A)  Policymakers have good intentions and therefore their proposals will create good outcomes. 
B)  Potential secondary effects do not need to be considered when deciding whether to implement a new government program. 
C)  A good outcome is guaranteed from a government program if it is created with good intentions. 
D)  Government programs can be implemented with good intentions but can lead to undesirable outcomes because of unintended consequences.

Question 10

"Mediocre economists often consider only the immediate apparent effects of a change, whereas a good economist will also consider effects that may only become observable over time." This statement most clearly emphasizes

Accepted Answer

A)  the fallacy of composition. 
B)  economizing behavior. 
C)  the importance of secondary effects. 
D)  the fact that association is not causation. 
A)  the fallacy of composition. 
B)  economizing behavior. 
C)  the importance of secondary effects. 
D)  the fact that association is not causation.

Question 11

The basic ingredients in any economic decision are

Accepted Answer

A)  scarcity and choice. 
B)  surpluses and shortages. 
C)  market prices and the use of efficient production methods. 
D)  needs and wants. 
A)  scarcity and choice. 
B)  surpluses and shortages. 
C)  market prices and the use of efficient production methods. 
D)  needs and wants.

Question 12

Which one of the following statements is correct?

Accepted Answer

A)  Policymakers have good intentions and therefore their proposals will create good outcomes. 
B)  Potential secondary effects do not need to be considered when deciding whether to implement a new government program. 
C)  A good outcome is guaranteed from a government program if it is created with good intentions. 
D)  Government programs can be implemented with good intentions but can lead to undesirable outcomes because of unintended consequences. 
A)  Policymakers have good intentions and therefore their proposals will create good outcomes. 
B)  Potential secondary effects do not need to be considered when deciding whether to implement a new government program. 
C)  A good outcome is guaranteed from a government program if it is created with good intentions. 
D)  Government programs can be implemented with good intentions but can lead to undesirable outcomes because of unintended consequences.

Question 13

The economic way of thinking stresses that

Accepted Answer

A)  changes in personal costs and benefits generally fail to exert much impact on behavior. 
B)  incentives matter--individuals respond in predictable ways to changes in personal costs and benefits. 
C)  if one individual gains from an economic activity, then someone else must lose and in the same proportion. 
D)  if a good is provided by the government, its production will not consume valuable scarce resources. 
A)  changes in personal costs and benefits generally fail to exert much impact on behavior. 
B)  incentives matter--individuals respond in predictable ways to changes in personal costs and benefits. 
C)  if one individual gains from an economic activity, then someone else must lose and in the same proportion. 
D)  if a good is provided by the government, its production will not consume valuable scarce resources.

Question 14

Andre, a wheat farmer, is deciding whether or not to add fertilizer to his crops. If he adds 1 pound of fertilizer per acre, the value of the resulting crops rises from $80 to $100 per acre. According to marginal analysis, Andre should add fertilizer if it costs less than

Accepted Answer

A)  $12.50 per pound. 
B)  $20 per pound. 
C)  $80 per pound. 
D)  $100 per pound. 
A)  $12.50 per pound. 
B)  $20 per pound. 
C)  $80 per pound. 
D)  $100 per pound.

Question 15

For a college student who wishes to calculate the true costs of going to college, the costs of room and board

Accepted Answer

A)  should be counted in full, regardless of the costs of eating and sleeping elsewhere. 
B)  should be counted only to the extent that they are more expensive at college than elsewhere. 
C)  usually exceed the opportunity cost of going to college. 
D)  plus the cost of tuition, equals the opportunity cost of going to college. 
A)  should be counted in full, regardless of the costs of eating and sleeping elsewhere. 
B)  should be counted only to the extent that they are more expensive at college than elsewhere. 
C)  usually exceed the opportunity cost of going to college. 
D)  plus the cost of tuition, equals the opportunity cost of going to college.

Question 16

If scarcity were eliminated,

Accepted Answer

A)  all goods would be free. 
B)  no one would have to make any choices. 
C)  everyone could have all they want at no cost. 
D)  all of the above are true. 
A)  all goods would be free. 
B)  no one would have to make any choices. 
C)  everyone could have all they want at no cost. 
D)  all of the above are true.

Question 17

Which of the following is an example of a rational decision?

Accepted Answer

A)  DeShawn enjoys the feeling of wind in his hair enough to ride his motorcycle without a helmet, even though he fully realizes the potential for injury it creates by not wearing one in the unlikely event he is in an accident. 
B)  Jayla, a burglar who breaks into houses, decides to break into the house at 265 Elm Street, rather than the house next door because the house next door has a sign in the yard that says "home protected by a security system." 
C)  Nicolas, a drug user, chooses to buy his cocaine from Samuel, because Samuel's cocaine is as good as the cocaine from other dealers, but Samuel has lower prices. 
D)  All of the above are examples of rational choices. 
A)  DeShawn enjoys the feeling of wind in his hair enough to ride his motorcycle without a helmet, even though he fully realizes the potential for injury it creates by not wearing one in the unlikely event he is in an accident. 
B)  Jayla, a burglar who breaks into houses, decides to break into the house at 265 Elm Street, rather than the house next door because the house next door has a sign in the yard that says "home protected by a security system." 
C)  Nicolas, a drug user, chooses to buy his cocaine from Samuel, because Samuel's cocaine is as good as the cocaine from other dealers, but Samuel has lower prices. 
D)  All of the above are examples of rational choices.

Question 18

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 19

Why would a radio station give money to listeners? Does this violate the economic way of thinking?

Accepted Answer

Radio stations do surveys to see what ty

Question 20

"The standard of living is too low for many individuals in the United States. The government should implement policies designed to achieve a more equal distribution of income." The preceding statements are

Accepted Answer

A)  positive economic statements based on cause and effect. 
B)  normative economic statements based on value judgments. 
C)  based on the fallacy of composition argument. 
D)  an empirically validated economic principle. 
A)  positive economic statements based on cause and effect. 
B)  normative economic statements based on value judgments. 
C)  based on the fallacy of composition argument. 
D)  an empirically validated economic principle.

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

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

The value of a good

If a decision maker uses marginal analysis, then the relevant costs are the

Criteria for rationing goods and resources must be established because of

The Latin phrase "ceteris paribus" means

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

The fallacy of composition is the incorrect view that

Which one of the following statements is correct?

"Mediocre economists often consider only the immediate apparent effects of a change, whereas a good economist will also consider effects that may only become observable over time." This statement most clearly emphasizes

The basic ingredients in any economic decision are

Which one of the following statements is correct?

The economic way of thinking stresses that

Andre, a wheat farmer, is deciding whether or not to add fertilizer to his crops. If he adds 1 pound of fertilizer per acre, the value of the resulting crops rises from $80 to $100 per acre. According to marginal analysis, Andre should add fertilizer if it costs less than

For a college student who wishes to calculate the true costs of going to college, the costs of room and board

If scarcity were eliminated,

Which of the following is an example of a rational decision?

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

Why would a radio station give money to listeners? Does this violate the economic way of thinking?

"The standard of living is too low for many individuals in the United States. The government should implement policies designed to achieve a more equal distribution of income." The preceding statements are

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

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

The value of a good

If a decision maker uses marginal analysis, then the relevant costs are the

Criteria for rationing goods and resources must be established because of

The Latin phrase "ceteris paribus" means

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

The fallacy of composition is the incorrect view that

Which one of the following statements is correct?

"Mediocre economists often consider only the immediate apparent effects of a change, whereas a good economist will also consider effects that may only become observable over time." This statement most clearly emphasizes

The basic ingredients in any economic decision are

Which one of the following statements is correct?

The economic way of thinking stresses that

Andre, a wheat farmer, is deciding whether or not to add fertilizer to his crops. If he adds 1 pound of fertilizer per acre, the value of the resulting crops rises from $80 to $100 per acre. According to marginal analysis, Andre should add fertilizer if it costs less than

For a college student who wishes to calculate the true costs of going to college, the costs of room and board

If scarcity were eliminated,

Which of the following is an example of a rational decision?

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

Why would a radio station give money to listeners? Does this violate the economic way of thinking?

"The standard of living is too low for many individuals in the United States. The government should implement policies designed to achieve a more equal distribution of income." The preceding statements are

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