Question 1

Which of the following is a positive economic statement?

Accepted Answer

A) Too much government spending is the biggest problem facing the U.S.economy. 
B) Creating jobs is the most serious problem facing the U.S.economy. 
C) Raising taxes provides additional revenue that should be used to finance health care. 
D) If taxes are over 50 percent of national income,job creation falls. 
A) Too much government spending is the biggest problem facing the U.S.economy. 
B) Creating jobs is the most serious problem facing the U.S.economy. 
C) Raising taxes provides additional revenue that should be used to finance health care. 
D) If taxes are over 50 percent of national income,job creation falls.

Question 2

When price is the rationing criterion,individuals have a strong incentive to

Accepted Answer

A) ignore the wishes of others when making decisions about how to use their resources. 
B) provide services to others in exchange for income. 
C) avoid exchanges because in every exchange there will be one person who gains and another who loses. 
D) substitute promises for the consistent delivery of a quality product. 
A) ignore the wishes of others when making decisions about how to use their resources. 
B) provide services to others in exchange for income. 
C) avoid exchanges because in every exchange there will be one person who gains and another who loses. 
D) substitute promises for the consistent delivery of a quality product.

Question 3

A local restaurant offers an "all you can eat" Sunday brunch for $12.Susan eats four servings but leaves half of a fifth helping uneaten.Why?

Accepted Answer

A) Her marginal value of a serving of brunch has fallen below $12. 
B) Her marginal value of a serving has fallen below $2.40 ($12 divided by 5 servings). 
C) Her marginal value of food has fallen to zero. 
D) The total value she places on brunch today exactly equals $12. 
A) Her marginal value of a serving of brunch has fallen below $12. 
B) Her marginal value of a serving has fallen below $2.40 ($12 divided by 5 servings). 
C) Her marginal value of food has fallen to zero. 
D) The total value she places on brunch today exactly equals $12.

Question 4

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 5

If people willingly give up something (such as money)for a good,then the good is

Accepted Answer

A) not an economic good. 
B) scarce. 
C) available in an unlimited supply. 
D) a luxury good. 
A) not an economic good. 
B) scarce. 
C) available in an unlimited supply. 
D) a luxury good.

Question 6

People make decisions at the margin.Thus,when deciding whether to purchase a second car,they would compare

Accepted Answer

A) the total benefits expected from two cars with the costs of the two cars. 
B) the additional benefits expected from a second car with the total cost of the two cars. 
C) the dollar cost of the two cars with the potential income that the two cars will generate. 
D) the additional benefits of the second car with the additional costs of the second car. 
A) the total benefits expected from two cars with the costs of the two cars. 
B) the additional benefits expected from a second car with the total cost of the two cars. 
C) the dollar cost of the two cars with the potential income that the two cars will generate. 
D) the additional benefits of the second car with the additional costs of the second car.

Question 7

Susan wishes to buy gasoline and have her car washed.She finds that if she buys 9 gallons of gasoline at $1.50 per gallon,the car wash costs $1,but if she buys 10 gallons of gasoline,the car wash is free.For Susan,the marginal cost of the tenth gallon of gasoline is

Accepted Answer

A) zero. 
B) 50 cents. 
C) $1. 
D) $1.50. 
A) zero. 
B) 50 cents. 
C) $1. 
D) $1.50.

Question 8

"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 9

When economists say an individual displays economizing behavior,they simply mean that the individual is

Accepted Answer

A) making a lot of money. 
B) purchasing only those products that are cheap and of low quality. 
C) learning how to run a business more effectively. 
D) making choices to gain the maximum benefit at the least possible cost. 
A) making a lot of money. 
B) purchasing only those products that are cheap and of low quality. 
C) learning how to run a business more effectively. 
D) making choices to gain the maximum benefit at the least possible cost.

Question 10

Which of the following is a normative statement?

Accepted Answer

A) A decrease in price leads to an increase in quantity consumed. 
B) Incomes grow more rapidly in high-tax states than low-tax states. 
C) People would be better off if government expenditures were higher. 
D) People will buy less butter at $1.50 per pound than they will at $1 per pound. 
A) A decrease in price leads to an increase in quantity consumed. 
B) Incomes grow more rapidly in high-tax states than low-tax states. 
C) People would be better off if government expenditures were higher. 
D) People will buy less butter at $1.50 per pound than they will at $1 per pound.

Question 11

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 12

Economic choice and competitive behavior are the result of

Accepted Answer

A) scarcity. 
B) poverty. 
C) public ownership of resources. 
D) private ownership of resources. 
A) scarcity. 
B) poverty. 
C) public ownership of resources. 
D) private ownership of resources.

Question 13

According to Adam Smith,individual self-interest

Accepted Answer

A) is a powerful force for economic progress when it is directed by competitive markets. 
B) is a powerful force for economic progress when individuals are wisely directed by a strong central government. 
C) is a major factor in retarding the economic progress of humankind. 
D) could be either a positive or negative force for economic progress,depending on the moral influences of political leaders. 
A) is a powerful force for economic progress when it is directed by competitive markets. 
B) is a powerful force for economic progress when individuals are wisely directed by a strong central government. 
C) is a major factor in retarding the economic progress of humankind. 
D) could be either a positive or negative force for economic progress,depending on the moral influences of political leaders.

Question 14

The term ceteris paribus means that

Accepted Answer

A) everything is changing. 
B) all variables except those specified are constant. 
C) no one knows which variables will change and which will remain constant. 
D) the basic postulate of economics does not apply for the case being considered. 
A) everything is changing. 
B) all variables except those specified are constant. 
C) no one knows which variables will change and which will remain constant. 
D) the basic postulate of economics does not apply for the case being considered.

Question 15

Which of the following most clearly distinguishes between positive and normative economics?

Accepted Answer

A) Positive economics is the study of what ought to be;normative economics is concerned with the facts. 
B) Positive economics is the study of the facts;normative economics is concerned with what ought to be. 
C) Positive economics is the study of supply and demand in narrowly defined markets such as the market for shoes;normative economics focuses on highly aggregated markets such as the market for all consumer products. 
D) Positive economics is the study of goods that are scarce;normative economics is concerned with goods that are not scarce. 
A) Positive economics is the study of what ought to be;normative economics is concerned with the facts. 
B) Positive economics is the study of the facts;normative economics is concerned with what ought to be. 
C) Positive economics is the study of supply and demand in narrowly defined markets such as the market for shoes;normative economics focuses on highly aggregated markets such as the market for all consumer products. 
D) Positive economics is the study of goods that are scarce;normative economics is concerned with goods that are not scarce.

Question 16

The opportunity cost of an action is

Accepted Answer

A) the monetary payment the action required. 
B) the total time spent by all parties in carrying out the action. 
C) the value of the best opportunity that must be sacrificed in order to take the action. 
D) the cost of all alternative actions that could have been taken,added together. 
A) the monetary payment the action required. 
B) the total time spent by all parties in carrying out the action. 
C) the value of the best opportunity that must be sacrificed in order to take the action. 
D) the cost of all alternative actions that could have been taken,added together.

Question 17

The basic postulate of economics indicates that changes in incentives influence

Accepted Answer

A) the actions of producers but not consumers. 
B) the actions of consumers but not producers. 
C) the choices of individuals only when they buy and sell goods in the marketplace. 
D) the choices of individuals with regard to a wide range of activities,including those generally perceived as social or political. 
A) the actions of producers but not consumers. 
B) the actions of consumers but not producers. 
C) the choices of individuals only when they buy and sell goods in the marketplace. 
D) the choices of individuals with regard to a wide range of activities,including those generally perceived as social or political.

Question 18

The basic difference between macroeconomics and microeconomics is that

Accepted Answer

A) macroeconomics looks at how people make choices,and microeconomics looks at why they make those choices. 
B) macroeconomics is concerned with economic policy,and microeconomics is concerned with economic theory. 
C) macroeconomics focuses on the aggregate economy,and microeconomics focuses on small components of that economy. 
D) macroeconomics is associated with the fallacy of composition,and microeconomics has little to do with the fallacy of composition. 
A) macroeconomics looks at how people make choices,and microeconomics looks at why they make those choices. 
B) macroeconomics is concerned with economic policy,and microeconomics is concerned with economic theory. 
C) macroeconomics focuses on the aggregate economy,and microeconomics focuses on small components of that economy. 
D) macroeconomics is associated with the fallacy of composition,and microeconomics has little to do with the fallacy of composition.

Question 19

When economists say an individual has made a rational choice,they mean the individual has

Accepted Answer

A) made the choice by weighing their own subjective costs and benefits. 
B) made a "good" decision,one that reasonable outside observers would have also made. 
C) neglected to consider the unintended consequences arising from their decision. 
D) ignored their own personal interests and made the choice that is best for society. 
A) made the choice by weighing their own subjective costs and benefits. 
B) made a "good" decision,one that reasonable outside observers would have also made. 
C) neglected to consider the unintended consequences arising from their decision. 
D) ignored their own personal interests and made the choice that is best for society.

Question 20

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.

Exam 1: The Economic Approach

Which of the following is a positive economic statement?

When price is the rationing criterion,individuals have a strong incentive to

A local restaurant offers an "all you can eat" Sunday brunch for $12.Susan eats four servings but leaves half of a fifth helping uneaten.Why?

Standby passengers on airlines who pay low rates for seats benefit from the low price.How are the airlines affected?

If people willingly give up something (such as money)for a good,then the good is

People make decisions at the margin.Thus,when deciding whether to purchase a second car,they would compare

Susan wishes to buy gasoline and have her car washed.She finds that if she buys 9 gallons of gasoline at $1.50 per gallon,the car wash costs $1,but if she buys 10 gallons of gasoline,the car wash is free.For Susan,the marginal cost of the tenth gallon of gasoline is

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

When economists say an individual displays economizing behavior,they simply mean that the individual is

Which of the following is a normative statement?

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

Economic choice and competitive behavior are the result of

According to Adam Smith,individual self-interest

The term ceteris paribus means that

Which of the following most clearly distinguishes between positive and normative economics?

The opportunity cost of an action is

The basic postulate of economics indicates that changes in incentives influence

The basic difference between macroeconomics and microeconomics is that

When economists say an individual has made a rational choice,they mean the individual has

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

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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