Question 1

Which one of the following is a positive economic statement?

Accepted Answer

A) An increase in the minimum wage will reduce employment. 
B) The minimum wage should be increased. 
C) Social justice will be served by increasing the minimum wage. 
D) Thoughtful people oppose an increase in the minimum wage. 
A) An increase in the minimum wage will reduce employment. 
B) The minimum wage should be increased. 
C) Social justice will be served by increasing the minimum wage. 
D) Thoughtful people oppose an increase in the minimum wage.

Question 2

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 3

"There is no such thing as a free lunch." This statement best reflects the fact that

Accepted Answer

A) consumers are unwilling to pay for a good unless it provides them with value. 
B) an opportunity cost is always present when scarce resources are used to produce a good. 
C) it generally requires enormous effort to search out the best place to eat lunch. 
D) the value of a good to consumers will decrease as they have more of it. 
A) consumers are unwilling to pay for a good unless it provides them with value. 
B) an opportunity cost is always present when scarce resources are used to produce a good. 
C) it generally requires enormous effort to search out the best place to eat lunch. 
D) the value of a good to consumers will decrease as they have more of it.

Question 4

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 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

A tradeoff exists between a clean environment and a higher level of income in that

Accepted Answer

A) studies show that individuals with higher levels of income actually pollute less than low-income individuals. 
B) efforts to reduce pollution typically are not completely successful. 
C) laws that reduce pollution raise costs of production and reduce incomes. 
D) by employing individuals to clean up pollution, employment and income both rise. 
A) studies show that individuals with higher levels of income actually pollute less than low-income individuals. 
B) efforts to reduce pollution typically are not completely successful. 
C) laws that reduce pollution raise costs of production and reduce incomes. 
D) by employing individuals to clean up pollution, employment and income both rise.

Question 7

Senator DuMonde favors a government program that he believes will help save endangered species. Economic analysis indicates that

Accepted Answer

A) because Senator DuMonde has good intentions, his new program will have the desired results. 
B) Senator DuMonde's new program could have unintended consequences that might result in an outcome different from what was intended. 
C) regardless of any secondary effects, costs should not be considered when designing environmental legislation. 
D) because Senator DuMonde's proposal is a government program, it will not have an opportunity cost. 
A) because Senator DuMonde has good intentions, his new program will have the desired results. 
B) Senator DuMonde's new program could have unintended consequences that might result in an outcome different from what was intended. 
C) regardless of any secondary effects, costs should not be considered when designing environmental legislation. 
D) because Senator DuMonde's proposal is a government program, it will not have an opportunity cost.

Question 8

Which of the following is part of the economic way of thinking?

Accepted Answer

A) Opportunity costs will always be incurred when scarce resources are used to produce a good. 
B) When the cost of an option increases, individuals will be less likely to choose it. 
C) In addition to their immediate direct effects, economic actions often generate secondary effects that are observable only after the passage of time. 
D) All of the above are part of the economic way of thinking. 
A) Opportunity costs will always be incurred when scarce resources are used to produce a good. 
B) When the cost of an option increases, individuals will be less likely to choose it. 
C) In addition to their immediate direct effects, economic actions often generate secondary effects that are observable only after the passage of time. 
D) All of the above are part of the economic way of thinking.

Question 9

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

Accepted Answer

A) making a lot of money. 
B) buying only those products that are cheap and of low quality. 
C) learning how to run a business more effectively. 
D) seeking the lowest cost method to accomplish her objectives. 
A) making a lot of money. 
B) buying only those products that are cheap and of low quality. 
C) learning how to run a business more effectively. 
D) seeking the lowest cost method to accomplish her objectives.

Question 10

Which of the following is a positive economic statement?

Accepted Answer

A) reducing unemployment should be the highest priority of the federal government. 
B) a reduction in the payroll tax will reduce the unemployment rate. 
C) corporations should be prohibited from laying off workers during a recession. 
D) the current unemployment rate is too high. 
A) reducing unemployment should be the highest priority of the federal government. 
B) a reduction in the payroll tax will reduce the unemployment rate. 
C) corporations should be prohibited from laying off workers during a recession. 
D) the current unemployment rate is too high.

Question 11

Which of the following is not consistent with the basic postulate of economics that incentives matter?

Accepted Answer

A) Farmers produce fewer bushels of wheat in response to an increase in the price of wheat. 
B) A politician votes against a proposal because most of his constituents oppose it. 
C) People drive less because of higher gas prices. 
D) People buy more milk in response to a reduction in the price of milk. 
A) Farmers produce fewer bushels of wheat in response to an increase in the price of wheat. 
B) A politician votes against a proposal because most of his constituents oppose it. 
C) People drive less because of higher gas prices. 
D) People buy more milk in response to a reduction in the price of milk.

Question 12

Which of the following is a normative economic statement?

Accepted Answer

A) If we doubled the size of welfare payments, we would reduce the number of homeless persons. 
B) Companies should be concerned with more than just their profits. 
C) An increase in spending on airport security will reduce the number of hijackings. 
D) If social security were to be privatized, workers would earn a higher rate of return on their retirement contributions. 
A) If we doubled the size of welfare payments, we would reduce the number of homeless persons. 
B) Companies should be concerned with more than just their profits. 
C) An increase in spending on airport security will reduce the number of hijackings. 
D) If social security were to be privatized, workers would earn a higher rate of return on their retirement contributions.

Question 13

A radio station gives "free money" to those listeners whose names are drawn and announced over the airwaves from postcards the listeners sent into the radio station. Is the money really free for the listener?

Accepted Answer

While most students can identify the mon

Question 14

To say that people make marginal decisions means that

Accepted Answer

A) they usually wait until the last minute before making a decision to buy 
B) they weigh the additional costs and additional benefits of various activities before they make a decision 
C) most people just barely get by on the incomes they earn and live from day to day on the very edge of subsistence 
D) they consider the total cost and benefit of various activities before they make a purchase 
A) they usually wait until the last minute before making a decision to buy 
B) they weigh the additional costs and additional benefits of various activities before they make a decision 
C) most people just barely get by on the incomes they earn and live from day to day on the very edge of subsistence 
D) they consider the total cost and benefit of various activities before they make a purchase

Question 15

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 16

For the typical student, taking an introductory course in economics should

Accepted Answer

A) turn the student into an economist. 
B) teach the student solutions to most social problems. 
C) teach the student how to answer complex social questions. 
D) help the student learn to rationally analyze social problems. 
E) All of the above are correct. 
A) turn the student into an economist. 
B) teach the student solutions to most social problems. 
C) teach the student how to answer complex social questions. 
D) help the student learn to rationally analyze social problems. 
E) All of the above are correct.

Question 17

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 18

All but one of the following are elements of the economic way of thinking. Which one is not part of the economic way of thinking?

Accepted Answer

A) Incentives matter. 
B) The value of goods can be determined objectively. 
C) Economic thinking is marginal thinking. 
D) Information is scarce. 
A) Incentives matter. 
B) The value of goods can be determined objectively. 
C) Economic thinking is marginal thinking. 
D) Information is scarce.

Question 19

If the government provides free schooling for all students, an economist would say education is

Accepted Answer

A) a free good, having no cost. 
B) scarce even though its cost is paid by taxpayers rather than by students. 
C) an example of a good that is no longer scarce. 
D) all of the above. 
A) a free good, having no cost. 
B) scarce even though its cost is paid by taxpayers rather than by students. 
C) an example of a good that is no longer scarce. 
D) all of the above.

Question 20

To abstract from reality in an economic model means that

Accepted Answer

A) we include only a few of the essential aspects of reality. 
B) the economic study surveys only a very limited period of time. 
C) we include only those elements which support our hypothesis. 
D) the model includes every aspect of the real world. 
E) the model examines the actions of the consumers in the absence of producers and the government. 
A) we include only a few of the essential aspects of reality. 
B) the economic study surveys only a very limited period of time. 
C) we include only those elements which support our hypothesis. 
D) the model includes every aspect of the real world. 
E) the model examines the actions of the consumers in the absence of producers and the government.

Exam 1: The Economic Approach

Which one of the following is a positive economic statement?

Which of the following is a normative statement?

"There is no such thing as a free lunch." This statement best reflects the fact that

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

Criteria for rationing goods and resources must be established because of

A tradeoff exists between a clean environment and a higher level of income in that

Senator DuMonde favors a government program that he believes will help save endangered species. Economic analysis indicates that

Which of the following is part of the economic way of thinking?

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

Which of the following is a positive economic statement?

Which of the following is not consistent with the basic postulate of economics that incentives matter?

Which of the following is a normative economic statement?

A radio station gives "free money" to those listeners whose names are drawn and announced over the airwaves from postcards the listeners sent into the radio station. Is the money really free for the listener?

To say that people make marginal decisions means that

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

For the typical student, taking an introductory course in economics should

The economic way of thinking is

All but one of the following are elements of the economic way of thinking. Which one is not part of the economic way of thinking?

If the government provides free schooling for all students, an economist would say education is

To abstract from reality in an economic model means that

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

Filters