Question 1

In economics,the term "scarcity" refers to the fact that

Accepted Answer

A) everything really worthwhile costs money. 
B) even in wealthy countries like the United States,some people are poor. 
C) no society can produce enough to satisfy fully the desires of people for goods and services. 
D) sometimes shortages of a good arise when its price is set below the market equilibrium. 
A) everything really worthwhile costs money. 
B) even in wealthy countries like the United States,some people are poor. 
C) no society can produce enough to satisfy fully the desires of people for goods and services. 
D) sometimes shortages of a good arise when its price is set below the market equilibrium.

Question 2

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 3

Which of the following is a positive economic statement?

Accepted Answer

A) Reducing unemployment should be the highest priority of the federal government. 
B) An increase in unemployment benefits will increase the unemployment rate. 
C) Corporations should be prohibited from laying off workers during a recession. 
D) Congress should increase unemployment benefits during a recession. 
A) Reducing unemployment should be the highest priority of the federal government. 
B) An increase in unemployment benefits will increase the unemployment rate. 
C) Corporations should be prohibited from laying off workers during a recession. 
D) Congress should increase unemployment benefits during a recession.

Question 4

What is the best test of an economic theory?

Accepted Answer

A) its eloquence 
B) the plausibility of its assumptions 
C) its ability to predict real-world events,patterns,and changes 
D) whether it produces implications that are favored by the researcher 
A) its eloquence 
B) the plausibility of its assumptions 
C) its ability to predict real-world events,patterns,and changes 
D) whether it produces implications that are favored by the researcher

Question 5

Your friend notices that U.S.auto production and U.S.population growth have moved together over several decades.He reasons that one way to slow population growth is for the government to order the auto makers to cut back on production.You gently point out to him that he

Accepted Answer

A) is correct only when the economy is in a recession 
B) has mistakenly inferred causation from observed correlation 
C) has ignored secondary effects 
D) has committed the fallacy of composition 
E) is correct only when the United States enjoys economic growth 
A) is correct only when the economy is in a recession 
B) has mistakenly inferred causation from observed correlation 
C) has ignored secondary effects 
D) has committed the fallacy of composition 
E) is correct only when the United States enjoys economic growth

Question 6

"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.

Question 7

Every economy must ration goods in some way because of

Accepted Answer

A) overpopulation. 
B) poorly-performing markets. 
C) the income gap between rich and poor. 
D) scarcity. 
A) overpopulation. 
B) poorly-performing markets. 
C) the income gap between rich and poor. 
D) scarcity.

Question 8

Which of the following is a positive economic statement?

Accepted Answer

A) Raising the federal minimum wage to $6.50 per hour will cause the rate of unemployment to increase. 
B) The United States spends too much on welfare. 
C) Philosophy is not as interesting as economics. 
D) Cold weather is much more enjoyable than warm weather. 
A) Raising the federal minimum wage to $6.50 per hour will cause the rate of unemployment to increase. 
B) The United States spends too much on welfare. 
C) Philosophy is not as interesting as economics. 
D) Cold weather is much more enjoyable than warm weather.

Question 9

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 10

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 11

When economists use the term ceteris paribus,they indicate

Accepted Answer

A) the causal relationship between two economic variables cannot be determined. 
B) the analysis is true for the individual but not for the economy as a whole. 
C) all other factors are assumed to be constant. 
D) their conclusions are based on normative economics rather than positive economic analysis. 
A) the causal relationship between two economic variables cannot be determined. 
B) the analysis is true for the individual but not for the economy as a whole. 
C) all other factors are assumed to be constant. 
D) their conclusions are based on normative economics rather than positive economic analysis.

Question 12

When deciding whether to buy a second car,the economic way of thinking indicates that the purchaser should compare

Accepted Answer

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

Question 13

Which of the following is the best definition of economics?

Accepted Answer

A) An investigation of the quantities and prices of the various goods produced by the nations of the world. 
B) A study of why inflation and unemployment periodically plague the U.S.economy. 
C) An analysis of how individuals and societies deal with the problem of scarcity. 
D) An examination of the role that money plays in the economy. 
E) A study of how goods and services are distributed throughout the world. 
A) An investigation of the quantities and prices of the various goods produced by the nations of the world. 
B) A study of why inflation and unemployment periodically plague the U.S.economy. 
C) An analysis of how individuals and societies deal with the problem of scarcity. 
D) An examination of the role that money plays in the economy. 
E) A study of how goods and services are distributed throughout the world.

Question 14

"As soon as I announced my 'get tough on crime' policy,criminals got scared and the crime rate went down." Suppose that the lower crime rate was actually caused by freezing cold temperatures in January--it was just too cold for anybody to be out robbing other people.Which fundamental economic mistake did the politician make?

Accepted Answer

A) believing that what's good for one person is good for the whole group (the fallacy of composition) 
B) failing to take into account the benefits of crime (the payoff fallacy) 
C) believing that association is the same as causation 
D) failing to understand the theory of comparative advantage 
A) believing that what's good for one person is good for the whole group (the fallacy of composition) 
B) failing to take into account the benefits of crime (the payoff fallacy) 
C) believing that association is the same as causation 
D) failing to understand the theory of comparative advantage

Question 15

Positive economics

Accepted Answer

A) postulates a relationship that is potentially refutable and then seeks to determine whether the stated relationship is correct. 
B) uses value judgments to determine which policy alternatives should be chosen. 
C) is of no use to policy makers because it reflects the value judgments of the researcher. 
D) is the scientific study of "what ought to be" among economic relationships. 
A) postulates a relationship that is potentially refutable and then seeks to determine whether the stated relationship is correct. 
B) uses value judgments to determine which policy alternatives should be chosen. 
C) is of no use to policy makers because it reflects the value judgments of the researcher. 
D) is the scientific study of "what ought to be" among economic relationships.

Question 16

Ralph wants to buy some milk and a box of cereal.If Ralph 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 Ralph,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 17

The economic way of thinking suggests that if the government imposed a $500 tax on owners of red automobiles,

Accepted Answer

A) fewer red automobiles would be produced and sold. 
B) more red automobiles would be produced and sold. 
C) there would be no change in the number of red automobiles produced and sold. 
D) red automobiles would cease to exist. 
A) fewer red automobiles would be produced and sold. 
B) more red automobiles would be produced and sold. 
C) there would be no change in the number of red automobiles produced and sold. 
D) red automobiles would cease to exist.

Question 18

In economics,the statement,"There is no such thing as a free lunch," refers to which of the following?

Accepted Answer

A) Individuals must always pay personally for the lunch they consume. 
B) Production of a good requires the use of scarce resources regardless of whether it is supplied free to the consumers. 
C) Restaurant owners would never give away free lunches. 
D) All good theories are testable. 
A) Individuals must always pay personally for the lunch they consume. 
B) Production of a good requires the use of scarce resources regardless of whether it is supplied free to the consumers. 
C) Restaurant owners would never give away free lunches. 
D) All good theories are testable.

Question 19

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 20

When Mother Theresa won the Nobel Peace Prize,the monetary award was well in excess of $100,000.Did she accept the money? If so,what did she do with it?

Accepted Answer

Mother Theresa used the money to help th

Exam 1: The Economic Approach

In economics,the term "scarcity" refers to the fact that

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

Which of the following is a positive economic statement?

What is the best test of an economic theory?

Your friend notices that U.S.auto production and U.S.population growth have moved together over several decades.He reasons that one way to slow population growth is for the government to order the auto makers to cut back on production.You gently point out to him that he

"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

Every economy must ration goods in some way because of

Which of the following is a positive economic statement?

The basic ingredients in any economic decision are

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?

When economists use the term ceteris paribus,they indicate

When deciding whether to buy a second car,the economic way of thinking indicates that the purchaser should compare

Which of the following is the best definition of economics?

Positive economics

Ralph wants to buy some milk and a box of cereal.If Ralph 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 Ralph,the marginal cost of the third quart of milk is

The economic way of thinking suggests that if the government imposed a $500 tax on owners of red automobiles,

In economics,the statement,"There is no such thing as a free lunch," refers to which of the following?

Which of the following is a positive economic statement?

When Mother Theresa won the Nobel Peace Prize,the monetary award was well in excess of $100,000.Did she accept the money? If so,what did she do with it?

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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