Question 1

Economists and others use economic theory

Accepted Answer

A) only to analyze situations in which money changes hands. 
B) as a partial basis for public policy recommendations. 
C) to confuse their enemies. 
D) to replace value judgments about important policy issues. 
A) only to analyze situations in which money changes hands. 
B) as a partial basis for public policy recommendations. 
C) to confuse their enemies. 
D) to replace value judgments about important policy issues. B

Question 2

Consider the following information regarding a person's decision to go to college: college tuition is $20,000 per year, room and board is $10,000 per year, and books and materials are $2,000 per year.Suppose that instead of going to college this person could have earned $18,000 working in a store.An economist would calculate the cost of going to college as

Accepted Answer

A) $20,000. 
B) $30,000. 
C) $32,000. 
D) $50,000. 
E) $18,000. 
A) $20,000. 
B) $30,000. 
C) $32,000. 
D) $50,000. 
E) $18,000. D

Question 3

Because there is a trade-off between total output and equality of income distribution,

Accepted Answer

A) greater equality of distribution will generally result in higher levels of output. 
B) greater output is generally associated with more equal distribution. 
C) policies designed to increase output will only succeed if distribution is more equal. 
D) policies intended to expand output must necessarily fail. 
E) policies designed to equalize distribution may adversely affect the size of output. 
A) greater equality of distribution will generally result in higher levels of output. 
B) greater output is generally associated with more equal distribution. 
C) policies designed to increase output will only succeed if distribution is more equal. 
D) policies intended to expand output must necessarily fail. 
E) policies designed to equalize distribution may adversely affect the size of output. E

Question 4

A large airline calculates that the additional cost of a having a passenger on a flight to the Bahamas as the cost of a bag of peanuts and a soft drink, which totals $1.50, but the airline's price is $600 for potential customers who want to buy vacant seats on the day of the flight.Which economic principle is this airline failing to utilize?

Accepted Answer

The airline is failing to think at the m

Question 5

The beginning point of a graph (the 0,0 point) is known as

Accepted Answer

A) ground zero. 
B) mother lode. 
C) the origin. 
D) square one. 
E) the beginning. 
A) ground zero. 
B) mother lode. 
C) the origin. 
D) square one. 
E) the beginning.

Question 6

Opportunity cost is the

Accepted Answer

A) cost incurred when one fails to take advantage of an opportunity. 
B) cost incurred in order to increase the availability of attractive opportunities. 
C) cost of the best option forgone as a result of choosing an alternative. 
D) drudgery of the undesirable aspects of an option. 
A) cost incurred when one fails to take advantage of an opportunity. 
B) cost incurred in order to increase the availability of attractive opportunities. 
C) cost of the best option forgone as a result of choosing an alternative. 
D) drudgery of the undesirable aspects of an option.

Question 7

A small increase in productivity growth can have a huge impact on a country's standard of living.

Accepted Answer

A) True 
 B)False

Question 8

Probably the most important factor affecting material well-being is

Accepted Answer

A) inflation rates. 
B) unemployment rates. 
C) budget deficits. 
D) growth in productivity. 
E) monopoly power. 
A) inflation rates. 
B) unemployment rates. 
C) budget deficits. 
D) growth in productivity. 
E) monopoly power.

Question 9

In economics the true cost of making a choice is the value of what must be given up.

Accepted Answer

A) True 
 B)False

Question 10

When economists are critical of government regulations that prohibit free individuals from making certain kinds of contracts, for example, to purchase a good or service, they will usually invoke the concept of

Accepted Answer

A) marginal analysis. 
B) mutual gains from voluntary trade. 
C) inflation-unemployment trade-off. 
D) the need for abstraction. 
E) externalities. 
A) marginal analysis. 
B) mutual gains from voluntary trade. 
C) inflation-unemployment trade-off. 
D) the need for abstraction. 
E) externalities.

Question 11

The market mechanism provides a financial incentive for firms to minimize the pollution they create.

Accepted Answer

A) True 
 B)False

Question 12

In scientific language, a theory is an untested assertion of alleged fact.

Accepted Answer

A) True 
 B)False

Question 13

Economic efficiency and income equality are often conflicting goals in an economy.

Accepted Answer

A) True 
 B)False

Question 14

A contour map illustrates which of the following?

Accepted Answer

A) the cause-effect relationship between two variables 
B) the cause-effect relationship between three variables 
C) the way that three variables are correlated 
D) the way that one variable affects another, which in turn affects a third variable 
E) the way that two variables are correlated and in turn cause changes in a third variable 
A) the cause-effect relationship between two variables 
B) the cause-effect relationship between three variables 
C) the way that three variables are correlated 
D) the way that one variable affects another, which in turn affects a third variable 
E) the way that two variables are correlated and in turn cause changes in a third variable

Question 15

A theory is a deliberate simplification or abstraction of factual relationships.

Accepted Answer

A) True 
 B)False

Question 16

A model that is an oversimplification for one purpose will likely be an oversimplification for other purposes as well.

Accepted Answer

A) True 
 B)False

Question 17

Economists often say that trade is a win-win situation.How do you justify this?

Accepted Answer

One of the fundamental ideas of economic

Question 18

Externalities are created when parties not involved in an economic transaction are affected by it.

Accepted Answer

A) True 
 B)False

Question 19

Attempts by the government to reduce the rate of inflation often result in higher unemployment in the short run.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following statements is true?

Accepted Answer

A) Economic theory does not make unrealistic assumptions. 
B) Economists should not ignore details while focusing on complex problems. 
C) Abstraction forms an important part of economic analysis. 
D) The word theory means same for both economists and laymen. 
A) Economic theory does not make unrealistic assumptions. 
B) Economists should not ignore details while focusing on complex problems. 
C) Abstraction forms an important part of economic analysis. 
D) The word theory means same for both economists and laymen.

Exam 1: What Is Economics

Economists and others use economic theory

Because there is a trade-off between total output and equality of income distribution,

The beginning point of a graph (the 0,0 point) is known as

Opportunity cost is the

A small increase in productivity growth can have a huge impact on a country's standard of living.

Probably the most important factor affecting material well-being is

In economics the true cost of making a choice is the value of what must be given up.

When economists are critical of government regulations that prohibit free individuals from making certain kinds of contracts, for example, to purchase a good or service, they will usually invoke the concept of

The market mechanism provides a financial incentive for firms to minimize the pollution they create.

In scientific language, a theory is an untested assertion of alleged fact.

Economic efficiency and income equality are often conflicting goals in an economy.

A contour map illustrates which of the following?

A theory is a deliberate simplification or abstraction of factual relationships.

A model that is an oversimplification for one purpose will likely be an oversimplification for other purposes as well.

Economists often say that trade is a win-win situation.How do you justify this?

Externalities are created when parties not involved in an economic transaction are affected by it.

Attempts by the government to reduce the rate of inflation often result in higher unemployment in the short run.

Which of the following statements is true?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: the Importance of Marginal Analysis

Securities: Business Finance and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets: the Price System

The Shortcomings of Free Markets

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

Is Useconomic Leadership Threatened

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation

Bringing in the Supply Side: Unemployment and Inflation

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

He Financial Crisis and the Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder

Exchange Rates and the Macroeconomy

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