Question 1

Economics is primarily the study of

Accepted Answer

A) how individuals make choices because of scarcity. 
B) how to succeed in business. 
C) how to make money in the stock market. 
D) how the values and preferences of people are formed. 
A) how individuals make choices because of scarcity. 
B) how to succeed in business. 
C) how to make money in the stock market. 
D) how the values and preferences of people are formed.

Question 2

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 3

Economic choice and competitive behavior are the result of

Accepted Answer

A) basic human greed. 
B) poverty. 
C) private ownership of resources. 
D) scarcity. 
A) basic human greed. 
B) poverty. 
C) private ownership of resources. 
D) scarcity.

Question 4

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 5

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 6

Economic analysis is based on the premise that

Accepted Answer

A) people act only out of selfish motives. 
B) people are always fully informed when making choices. 
C) changes in the personal benefits or costs of an action influence behavior in a predictable way. 
D) most human behavior is unpredictable. 
A) people act only out of selfish motives. 
B) people are always fully informed when making choices. 
C) changes in the personal benefits or costs of an action influence behavior in a predictable way. 
D) most human behavior is unpredictable.

Question 7

Competitive behavior

Accepted Answer

A) occurs as a reaction to scarcity. 
B) occurs only in a market system. 
C) occurs only when the government allocates goods and services. 
D) always generates waste. 
A) occurs as a reaction to scarcity. 
B) occurs only in a market system. 
C) occurs only when the government allocates goods and services. 
D) always generates waste.

Question 8

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 9

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 10

Positive economics differs from normative economics in that

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, and normative statements are not. 
C) positive economic statements tell us what we should be doing, and normative economics tells us what we should have done. 
D) positive economic statements focus on the application of the theory, and normative economic statements are theoretical. 
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, and normative statements are not. 
C) positive economic statements tell us what we should be doing, and normative economics tells us what we should have done. 
D) positive economic statements focus on the application of the theory, and normative economic statements are theoretical.

Question 11

Which of the following best describes the difference between an objective concept and a subjective concept?

Accepted Answer

A) A subjective concept is a fact based on observation that is not subject to personal opinion, while an objective concept is based on personal preferences and value judgments. 
B) An objective concept is a fact based on observation that is not subject to personal opinion, while a subjective concept is based on personal preferences and value judgments. 
C) A subjective concept relates to issues in microeconomics, while an objective concept relates to issues in macroeconomics. 
D) An objective concept can only be illustrated in words, while a subjective concept can usually be illustrated with a graph. 
A) A subjective concept is a fact based on observation that is not subject to personal opinion, while an objective concept is based on personal preferences and value judgments. 
B) An objective concept is a fact based on observation that is not subject to personal opinion, while a subjective concept is based on personal preferences and value judgments. 
C) A subjective concept relates to issues in microeconomics, while an objective concept relates to issues in macroeconomics. 
D) An objective concept can only be illustrated in words, while a subjective concept can usually be illustrated with a graph.

Question 12

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 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

Which of the following is often referred to as the basic postulate of economics?

Accepted Answer

A) Individuals act only out of selfish motives. 
B) Incentives matter--individuals respond in predictable ways to changes in personal costs and benefits. 
C) The accuracy of the assumptions is the best test of an economic theory. 
D) The value of a good is objective; it is equal to the cost of producing the good. 
A) Individuals act only out of selfish motives. 
B) Incentives matter--individuals respond in predictable ways to changes in personal costs and benefits. 
C) The accuracy of the assumptions is the best test of an economic theory. 
D) The value of a good is objective; it is equal to the cost of producing the good.

Question 15

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 16

A restaurant offers an "all you can eat" lunch buffet for $12. Jim has eaten three servings and is trying to decide whether or not to go back for a fourth. The economic way of thinking suggests that Jim should go back for the fourth serving if and only if

Accepted Answer

A) his marginal benefit of the additional serving is greater than zero. 
B) his marginal benefit of the additional serving is at least $3. 
C) his marginal benefit of the additional serving is $12 or more. 
D) his total value from the meal exceeds $12. 
A) his marginal benefit of the additional serving is greater than zero. 
B) his marginal benefit of the additional serving is at least $3. 
C) his marginal benefit of the additional serving is $12 or more. 
D) his total value from the meal exceeds $12.

Question 17

The difference between a positive economic statement and a normative statement is that

Accepted Answer

A) a positive statement must be true; a normative statement is often not true 
B) a normative statement must be true; a positive statement is often not true 
C) a positive statement can be proved; a normative statement cannot 
D) a normative statement can be proved; a positive statement cannot 
E) a positive economic statement is a moral judgment; a normative economic statement is not a moral judgment 
A) a positive statement must be true; a normative statement is often not true 
B) a normative statement must be true; a positive statement is often not true 
C) a positive statement can be proved; a normative statement cannot 
D) a normative statement can be proved; a positive statement cannot 
E) a positive economic statement is a moral judgment; a normative economic statement is not a moral judgment

Question 18

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 19

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 20

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.

Exam 1: The Economic Approach

Economics is primarily the study of

Rational choice requires that opportunity cost be

Economic choice and competitive behavior are the result of

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

Which of the following is a positive economic statement?

Economic analysis is based on the premise that

Competitive behavior

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

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

Positive economics differs from normative economics in that

Which of the following best describes the difference between an objective concept and a subjective concept?

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

The economic way of thinking stresses that

Which of the following is often referred to as the basic postulate of economics?

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

A restaurant offers an "all you can eat" lunch buffet for $12. Jim has eaten three servings and is trying to decide whether or not to go back for a fourth. The economic way of thinking suggests that Jim should go back for the fourth serving if and only if

The difference between a positive economic statement and a normative statement is that

What is the best test of an economic theory?

When economists say goods are scarce, they mean

When economists say a good is scarce, they mean

A: Some Tools of the Economist

B: Some Tools of the Economist

A: Supply, Demand, and the Market Process

B: Supply, Demand, and the Market Process

A: Supply and Demand: Applications and Extensions

B: Supply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Consumer Choice and Elasticity

A: Costs and the Supply of Goods

B: Costs and the Supply of Goods

A: Price Takers and the Competitive Process

B: Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

A: Price-Searcher Markets With High Entry Barriers

B: Price-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

Appendix: Government Spending and Taxation

Appendix: the Economics of Social Security

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

Appendix: Great Debates in Economics: Keynes Versus Hayek

Appendix: the Crisis of 2008: Causes and Lessons for the Future

Appendix: Lessons From the Great Depression

Appendix: the Economics of Healthcare

Appendix:education: Problems and Performance

Appendix: Earnings Differences Between Men and Women

Appendix: the Question of Resource Exhaustion

Appendix: Do Labor Unions Increase the Wages of Workers

Appendix: Difficult Environmental Cases and the Role of Government

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