Question 1

To say that "there is a scarcity of gold" means that:

Accepted Answer

A) gold prices will plummet. 
B) there is not enough gold to satisfy people's demand. 
C) there are a very few substitutes for gold. 
D) gold is relatively less expensive than other metals. 
E) the demand for gold is changing. 
A) gold prices will plummet. 
B) there is not enough gold to satisfy people's demand. 
C) there are a very few substitutes for gold. 
D) gold is relatively less expensive than other metals. 
E) the demand for gold is changing.

Question 2

Which of the following is a normative statement?

Accepted Answer

A) Higher prices for cigarettes discourage people from buying cigarettes. 
B) The Federal Reserve should lower interest rates to help boost residential construction. 
C) High demand for cars drove up fuel prices. 
D) Government expenditure on public health and sanitation declined over the years. 
E) The U.S.experienced a high rate of unemployment in 2009. 
A) Higher prices for cigarettes discourage people from buying cigarettes. 
B) The Federal Reserve should lower interest rates to help boost residential construction. 
C) High demand for cars drove up fuel prices. 
D) Government expenditure on public health and sanitation declined over the years. 
E) The U.S.experienced a high rate of unemployment in 2009.

Question 3

Both microeconomic and macroeconomic theories:

Accepted Answer

A) clearly state the public policies that should be undertaken to avoid or solve a particular problem under consideration. 
B) deal with the aggregate. 
C) deal with what ought to be as opposed to what is. 
D) are forms of positive economics. 
E) deal with individual entities in an economy. 
A) clearly state the public policies that should be undertaken to avoid or solve a particular problem under consideration. 
B) deal with the aggregate. 
C) deal with what ought to be as opposed to what is. 
D) are forms of positive economics. 
E) deal with individual entities in an economy.

Question 4

According to the American Shareholders Association,a majority of Americans prefer to invest in education rather than stock markets,because of the volatility in the rate of return from the latter.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following statements is in the realm of positive economics?

Accepted Answer

A) The president should propose a tax cut because taxes are too high. 
B) Studies show that if taxes are cut,unemployment falls. 
C) The budget deficit is too high and should be lowered. 
D) Studies show that a national debt of over a trillion dollars is bad for the country and should not be allowed to occur. 
E) The share of defense spending in the budget ought to be changed. 
A) The president should propose a tax cut because taxes are too high. 
B) Studies show that if taxes are cut,unemployment falls. 
C) The budget deficit is too high and should be lowered. 
D) Studies show that a national debt of over a trillion dollars is bad for the country and should not be allowed to occur. 
E) The share of defense spending in the budget ought to be changed.

Question 6

The common logical mistake of interpreting association as causation:

Accepted Answer

A) never occurs in the real world. 
B) is another term for the fallacy of composition. 
C) occurs when unrelated or coincidental events that occur at about the same time are said to have a cause-and-effect relationship. 
D) is the error of attributing what applies in the case of one to the case of many. 
E) occurs when one variable is closely associated with another variable. 
A) never occurs in the real world. 
B) is another term for the fallacy of composition. 
C) occurs when unrelated or coincidental events that occur at about the same time are said to have a cause-and-effect relationship. 
D) is the error of attributing what applies in the case of one to the case of many. 
E) occurs when one variable is closely associated with another variable.

Question 7

Which of the following resources will not be considered as land?

Accepted Answer

A) Minerals 
B) Timber 
C) Water 
D) Fertile soil 
E) Processed cotton fibre 
A) Minerals 
B) Timber 
C) Water 
D) Fertile soil 
E) Processed cotton fibre

Question 8

A haircut at an upscale beauty salon would be regarded as a good in economics.

Accepted Answer

A) True 
 B)False

Question 9

The term rational self-interest,as viewed by economists,means:

Accepted Answer

A) consumers would never pay more for a good simply because it carried a certain designer label. 
B) only economists are capable of making choices according to rational self-interest. 
C) people never act until they have perfect information in order to guarantee that they act in their own self-interest. 
D) consumers always seek the least expensive option when making a purchase,regardless of individual preferences. 
E) people will make the choices that,given the information available,will give them the greatest amount of satisfaction. 
A) consumers would never pay more for a good simply because it carried a certain designer label. 
B) only economists are capable of making choices according to rational self-interest. 
C) people never act until they have perfect information in order to guarantee that they act in their own self-interest. 
D) consumers always seek the least expensive option when making a purchase,regardless of individual preferences. 
E) people will make the choices that,given the information available,will give them the greatest amount of satisfaction.

Question 10

Because economics recognizes that any action has costs,it is often counterintuitive in its ability to point out the unintended consequences of public choices.

Accepted Answer

A) True 
 B)False

Question 11

Approximately how many American adults hold a college degree?

Accepted Answer

A) 70 percent 
B) 10 percent 
C) 30 percent 
D) 45 percent 
E) 50 percent 
A) 70 percent 
B) 10 percent 
C) 30 percent 
D) 45 percent 
E) 50 percent

Question 12

Tim has noticed that every time women's hemlines rise,stock market prices rise.He is therefore poised to invest in stocks the next time the local fashion editor predicts that shorter skirts will be in for the next season.Tim's error is called:

Accepted Answer

A) ceteris paribus. 
B) the fallacy of composition. 
C) the interpretation of association as causation. 
D) the scientific method. 
E) selfish behavior. 
A) ceteris paribus. 
B) the fallacy of composition. 
C) the interpretation of association as causation. 
D) the scientific method. 
E) selfish behavior.

Question 13

An economic approach used to search out answers to questions about the real world depends on the principles of:

Accepted Answer

A) scarcity and rational self-interest. 
B) cost and benefit. 
C) public good and private good. 
D) economic good and economic bad. 
E) self-interest and selfishness. 
A) scarcity and rational self-interest. 
B) cost and benefit. 
C) public good and private good. 
D) economic good and economic bad. 
E) self-interest and selfishness.

Question 14

Some economists have noted that throughout recent U.S.history,as the occurrence of sun spots has increased,so has the rate of overall inflation.If any of these economist based this observation on a short-term forecast of inflation,he/she would be:

Accepted Answer

A) confusing the problems of scarcity and abundance. 
B) committing the fallacy of composition. 
C) committing the error of interpreting association as causation. 
D) using normative analysis. 
E) committing the fallacy of double counting. 
A) confusing the problems of scarcity and abundance. 
B) committing the fallacy of composition. 
C) committing the error of interpreting association as causation. 
D) using normative analysis. 
E) committing the fallacy of double counting.

Question 15

"Since a household cannot afford to keep adding indefinitely to its debt,a country cannot afford to do so either." This statement is an example of:

Accepted Answer

A) interpretation of association as causation. 
B) ceteris paribus ("everything else held constant") analysis. 
C) rational behavior. 
D) the fallacy of composition. 
E) marginal analysis. 
A) interpretation of association as causation. 
B) ceteris paribus ("everything else held constant") analysis. 
C) rational behavior. 
D) the fallacy of composition. 
E) marginal analysis.

Question 16

Rational self-interest depends on:

Accepted Answer

A) the level of education attained by individuals. 
B) the general family background. 
C) the social status of an individual. 
D) the amount of information available with an individual. 
E) the financial status of the individual. 
A) the level of education attained by individuals. 
B) the general family background. 
C) the social status of an individual. 
D) the amount of information available with an individual. 
E) the financial status of the individual.

Question 17

Economics is the study of how people use:

Accepted Answer

A) their scarce resources to satisfy their basic wants. 
B) their scarce resources to attempt to satisfy their unlimited wants. 
C) the natural resources to satisfy their basic wants. 
D) the natural resources to attempt to satisfy their unlimited wants. 
E) their resources to influence the tastes and preferences of others. 
A) their scarce resources to satisfy their basic wants. 
B) their scarce resources to attempt to satisfy their unlimited wants. 
C) the natural resources to satisfy their basic wants. 
D) the natural resources to attempt to satisfy their unlimited wants. 
E) their resources to influence the tastes and preferences of others.

Question 18

The fallacy of composition:

Accepted Answer

A) is illustrated by the saying that if one moviegoer runs to an exit during a fire to get out of the building,then all the moviegoers should rush to that exit. 
B) is the error of attributing what applies to many to the case of one. 
C) is the same as interpreting association as causation. 
D) is illustrated by the assertion that the stock market rises when hemlines of current fashions rise. 
E) implies that not all variables are held constant. 
A) is illustrated by the saying that if one moviegoer runs to an exit during a fire to get out of the building,then all the moviegoers should rush to that exit. 
B) is the error of attributing what applies to many to the case of one. 
C) is the same as interpreting association as causation. 
D) is illustrated by the assertion that the stock market rises when hemlines of current fashions rise. 
E) implies that not all variables are held constant.

Question 19

In its most fundamental sense,economics is the study of:

Accepted Answer

A) production and cost. 
B) supply and demand. 
C) scarcity and choice. 
D) specialization and trade. 
E) externality and public goods. 
A) production and cost. 
B) supply and demand. 
C) scarcity and choice. 
D) specialization and trade. 
E) externality and public goods.

Question 20

Individuals acting with rational self-interest:

Accepted Answer

A) always choose the same options as other rational individuals. 
B) never do voluntary work. 
C) always try to attain satisfaction at the expense of others. 
D) choose options that give them the greatest amount of satisfaction. 
E) are selfish. 
A) always choose the same options as other rational individuals. 
B) never do voluntary work. 
C) always try to attain satisfaction at the expense of others. 
D) choose options that give them the greatest amount of satisfaction. 
E) are selfish.

Exam 1: Economics: The World Around You

To say that "there is a scarcity of gold" means that:

Which of the following is a normative statement?

Both microeconomic and macroeconomic theories:

According to the American Shareholders Association,a majority of Americans prefer to invest in education rather than stock markets,because of the volatility in the rate of return from the latter.

Which of the following statements is in the realm of positive economics?

The common logical mistake of interpreting association as causation:

Which of the following resources will not be considered as land?

A haircut at an upscale beauty salon would be regarded as a good in economics.

The term rational self-interest,as viewed by economists,means:

Because economics recognizes that any action has costs,it is often counterintuitive in its ability to point out the unintended consequences of public choices.

Approximately how many American adults hold a college degree?

Tim has noticed that every time women's hemlines rise,stock market prices rise.He is therefore poised to invest in stocks the next time the local fashion editor predicts that shorter skirts will be in for the next season.Tim's error is called:

An economic approach used to search out answers to questions about the real world depends on the principles of:

Some economists have noted that throughout recent U.S.history,as the occurrence of sun spots has increased,so has the rate of overall inflation.If any of these economist based this observation on a short-term forecast of inflation,he/she would be:

"Since a household cannot afford to keep adding indefinitely to its debt,a country cannot afford to do so either." This statement is an example of:

Rational self-interest depends on:

Economics is the study of how people use:

The fallacy of composition:

In its most fundamental sense,economics is the study of:

Individuals acting with rational self-interest:

Choice, opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

Elasticity: Demand and Supply

Consumer Choice

Supply: The Costs of Doing Business

Profit Maximization

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

Resource Markets

The Labor Market

Capital Markets

The Land Market and Natural Resources

Aging, Social Security and Health Care

Income Distribution,Poverty and Government Policy

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

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