Exam 1: The Nature of Economics

Suppose a survey is taken concerning car safety. According to the survey, people strongly desire safer cars and indicate they are willing to pay substantially more for safer cars. Using this information, one auto firm adds numerous safety features to its car, raising the price by several thousand dollars. Sales drop sharply, and the firm loses profits. What went wrong?

Which of the following is a normative economic statement?

Economic theory predicts that people make choices in a manner that

What is the type of mechanism that answers the basic economic questions through a decentralized decision making process?

Economics is the study of how people make

In economic analysis, people's resources are

Which of the following is an example of a positive statement?

According to proponents of behavioral economics, because every possible choice cannot be considered, an individual will tend to fall back on methods of making decisions that are simpler than trying to sort through every single possibility, known as

Economics is a study of

The primary purpose of economics is to understand how people make

"Rational, self-interested people would never end up worse off by any decision they make. Obviously, people often make mistakes or have regrets. Therefore, people do not act rationally or out of self-interest." Do you agree with these statements? Why or why not?

Which of the following is NOT studied in microeconomics?

Which of the following statements is TRUE regarding the textbook used in this course?

The basic economic problem is a situation of

Normative economic statements

Which of the following statements is a normative as opposed to a positive economic statement?

The slope of a straight line

A mixed economic system is best described as an economy with a mix of

Which of the following is a behavioral implication of bounded rationality?

Economics may be referred to as a(n)________ science, meaning that data is looked at to see whether assertions are correct.