Question 1

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. B

Question 2

Which of the following statements is correct?

Accepted Answer

A) If the buyer of a good gains,the seller must lose an equal amount. 
B) The value of goods is objective;it is equal to the cost of supplying the good. 
C) Opportunity costs will always be incurred when scarce resources are used to produce a good. 
D) Changes in incentives generally have no effect on human behavior. 
A) If the buyer of a good gains,the seller must lose an equal amount. 
B) The value of goods is objective;it is equal to the cost of supplying the good. 
C) Opportunity costs will always be incurred when scarce resources are used to produce a good. 
D) Changes in incentives generally have no effect on human behavior. C

Question 3

The three major categories of resources are

Accepted Answer

A) human resources,physical resources,and natural resources. 
B) scarce resources,capital resources,and abundant resources. 
C) financial resources,global resources,and local resources. 
D) common resources,private resources,and capital resources. 
A) human resources,physical resources,and natural resources. 
B) scarce resources,capital resources,and abundant resources. 
C) financial resources,global resources,and local resources. 
D) common resources,private resources,and capital resources. A

Question 4

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 5

Homeowners can deduct interest payments on their mortgages from their federal income tax.If this deduction were removed,how would the housing market be affected?

Accepted Answer

The deductibility of these interest paym

Question 6

Rational choice requires that opportunity cost be

Accepted Answer

A) ignored in making a decision. 
B) considered for individual choices,but not for societal choices. 
C) computed,but not actually used in making a decision. 
D) considered as part of making a decision. 
E) used as the sole decision criterion. 
A) ignored in making a decision. 
B) considered for individual choices,but not for societal choices. 
C) computed,but not actually used in making a decision. 
D) considered as part of making a decision. 
E) used as the sole decision criterion.

Question 7

In economics,the benefit (or satisfaction)that an individual gets from an activity is called

Accepted Answer

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

Question 8

The economic way of thinking is

Accepted Answer

A) a set of historical generalizations that indicates what goods should be produced. 
B) a body of statistical data that indicates how an economy should be organized. 
C) a set of basic concepts that helps one understand human choices. 
D) a set of complex,highly abstract theories that provides persons skilled in statistics with the information necessary to tell others what choices they should make. 
A) a set of historical generalizations that indicates what goods should be produced. 
B) a body of statistical data that indicates how an economy should be organized. 
C) a set of basic concepts that helps one understand human choices. 
D) a set of complex,highly abstract theories that provides persons skilled in statistics with the information necessary to tell others what choices they should make.

Question 9

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 10

Which of the following is true?

Accepted Answer

A) Positive economics deals with how people react to changes in benefits,and normative economics deals with how people react to changes in costs. 
B) Positive economic statements are testable,but normative statements are not. 
C) Positive economic statements involve value judgments while normative economics focuses on whether a policy will achieve its intended objectives. 
D) Positive economic statements focus on policy issues while normative economics focuses on economic theory. 
A) Positive economics deals with how people react to changes in benefits,and normative economics deals with how people react to changes in costs. 
B) Positive economic statements are testable,but normative statements are not. 
C) Positive economic statements involve value judgments while normative economics focuses on whether a policy will achieve its intended objectives. 
D) Positive economic statements focus on policy issues while normative economics focuses on economic theory.

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

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

Capital is a term economists use to refer to

Accepted Answer

A) man-made resources used to produce other goods and services. 
B) resources that are available in nature such as mineral deposits. 
C) money that is used to consume goods and services,to distinguish it from money that is saved. 
D) the value of the best alternative to an action. 
A) man-made resources used to produce other goods and services. 
B) resources that are available in nature such as mineral deposits. 
C) money that is used to consume goods and services,to distinguish it from money that is saved. 
D) the value of the best alternative to an action.

Question 14

Criteria for rationing goods and resources must be established because of

Accepted Answer

A) scarcity. 
B) the use of capitalism as the method of economic organization. 
C) the inability of politicians to develop efficient forms of economic organization. 
D) shortages resulting from government inefficiency. 
A) scarcity. 
B) the use of capitalism as the method of economic organization. 
C) the inability of politicians to develop efficient forms of economic organization. 
D) shortages resulting from government inefficiency.

Question 15

Doris,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." To an economist,Doris is

Accepted Answer

A) making an irrational choice. 
B) making a rational choice. 
C) not fully considering the personal costs and benefits of her decision. 
D) not responding to the incentives she faces. 
A) making an irrational choice. 
B) making a rational choice. 
C) not fully considering the personal costs and benefits of her decision. 
D) not responding to the incentives she faces.

Question 16

"The money and resources currently being devoted to the War on Terrorism reduces the quantity of other goods that we are able to supply." This statement most clearly illustrates which of the following?

Accepted Answer

A) the fallacy of composition. 
B) the idea that association is not causation. 
C) the concept of opportunity cost. 
D) the difference between positive and normative economics. 
A) the fallacy of composition. 
B) the idea that association is not causation. 
C) the concept of opportunity cost. 
D) the difference between positive and normative economics.

Question 17

Which of the following is a guidepost to economic thinking?

Accepted Answer

A) The value of a good can be objectively measured. 
B) Individuals should never make a decision without having complete information. 
C) Incentives matter. 
D) Goods are scarce for the poor but not for the rich. 
A) The value of a good can be objectively measured. 
B) Individuals should never make a decision without having complete information. 
C) Incentives matter. 
D) Goods are scarce for the poor but not for the rich.

Question 18

If a college enforces a new policy where anyone caught cheating is immediately expelled,the basic postulate of economics suggests that

Accepted Answer

A) cheating will be completely eliminated. 
B) fewer students will attempt to cheat. 
C) the amount of cheating will be unaffected. 
D) any of the above is possible because student behavior is unpredictable. 
A) cheating will be completely eliminated. 
B) fewer students will attempt to cheat. 
C) the amount of cheating will be unaffected. 
D) any of the above is possible because student behavior is unpredictable.

Question 19

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 20

Economists use the term ceteris paribus to indicate that

Accepted Answer

A) supply and demand are in balance. 
B) other things are assumed to be constant. 
C) the analysis is true for the individual but not for the economy as a whole. 
D) their conclusions are based on normative economics rather than positive economic analysis. 
A) supply and demand are in balance. 
B) other things are assumed to be constant. 
C) the analysis is true for the individual but not for the economy as a whole. 
D) their conclusions are based on normative economics rather than positive economic analysis.

Exam 1: The Economic Approach

When economists say a good is scarce,they mean

Which of the following statements is correct?

The three major categories of resources are

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

Homeowners can deduct interest payments on their mortgages from their federal income tax.If this deduction were removed,how would the housing market be affected?

Rational choice requires that opportunity cost be

In economics,the benefit (or satisfaction)that an individual gets from an activity is called

The economic way of thinking is

The Latin phrase "ceteris paribus" means

Which of the following is true?

The fallacy of composition is the incorrect view that

Capital is a term economists use to refer to

Criteria for rationing goods and resources must be established because of

Doris,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." To an economist,Doris is

"The money and resources currently being devoted to the War on Terrorism reduces the quantity of other goods that we are able to supply." This statement most clearly illustrates which of the following?

Which of the following is a guidepost to economic thinking?

If a college enforces a new policy where anyone caught cheating is immediately expelled,the basic postulate of economics suggests that

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

Economists use the term ceteris paribus to indicate that

Asome Tools of the Economist

Asupply,demand,and the Market Process

Asupply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Ataking the Nations Economic Pulse

Economic Fluctuations, unemployment, and Inflation

Aan Introduction to Basic Macroeconomic Markets

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

Fiscal Policy: the Keynesian View and Historical Perspective

Fiscal Policy, incentives, and Secondary Effects

Amoney 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

Consumer Choice and Elasticity

Acosts and the Supply of Goods

Aprice Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Aprice-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

Government Spending and Taxation

The Economics of Social Security

The Stock Market: Its Function, Performance, and Potential As an Investment Opportunity

Great Debates in Economics: Keynes Versus Hayek

The Crisis of 2008: Causes and Lessons for the Future

Lessons From the Great Depression

Lessons From Japan and Canada

The Federal Budget and the National Debt

The Economics of Healthcare

Education: Problems and Performance

Earnings Differences Between Men and Women

Do Labor Unions Increase the Wages of Workers

The Question of Resource Exhaustion

Difficult Environmental Cases and the Role of Government

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