Question 1

Consider the statement, "The number of beers consumed the night before a test affects the grade." In this statement

Accepted Answer

A)  beer is the dependent variable and test grade is the independent variable. 
B)  beer is the independent variable and test grade is the dependent variable. 
C)  both beer and grade are dependent variables. 
D)  both beer and grade are independent variables. 
A)  beer is the dependent variable and test grade is the independent variable. 
B)  beer is the independent variable and test grade is the dependent variable. 
C)  both beer and grade are dependent variables. 
D)  both beer and grade are independent variables.

Question 2

Why is economics called an empirical science?

Accepted Answer

A)  because economics has been used to both create and destroy empires 
B)  because economics uses impressions to evaluate the usefulness of its models 
C)  because economics relies on real-world data to determine the usefulness of a model 
D)  because economics utilizes intuition rather than data to evaluate a model's worth 
A)  because economics has been used to both create and destroy empires 
B)  because economics uses impressions to evaluate the usefulness of its models 
C)  because economics relies on real-world data to determine the usefulness of a model 
D)  because economics utilizes intuition rather than data to evaluate a model's worth

Question 3

Positive analysis can be described as

Accepted Answer

A)  the study of whether people respond to positive incentives. 
B)  the study of whether people respond to negative incentives. 
C)  a value-free approach to inquiry. 
D)  a study that is not tested empirically. 
A)  the study of whether people respond to positive incentives. 
B)  the study of whether people respond to negative incentives. 
C)  a value-free approach to inquiry. 
D)  a study that is not tested empirically.

Question 4

A relationship between two variables in which one variable increases at the same time that the other increases is called

Accepted Answer

A)  nonlinear. 
B)  constant. 
C)  inverse. 
D)  direct. 
A)  nonlinear. 
B)  constant. 
C)  inverse. 
D)  direct.

Question 5

Ceteris paribus means

Accepted Answer

A)  other variables are held constant. 
B)  almost certainly. 
C)  only if everything works just right. 
D)  perhaps. 
A)  other variables are held constant. 
B)  almost certainly. 
C)  only if everything works just right. 
D)  perhaps.

Question 6

Economists assume that people are motivated by

Accepted Answer

A)  benevolence. 
B)  altruism. 
C)  greed. 
D)  rational self-interest. 
A)  benevolence. 
B)  altruism. 
C)  greed. 
D)  rational self-interest.

Question 7

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

Accepted Answer

A)  rules of thumb. 
B)  rational options. 
C)  irrational choices. 
D)  normative decisions. 
A)  rules of thumb. 
B)  rational options. 
C)  irrational choices. 
D)  normative decisions.

Question 8

Explain what economists mean when they apply the rationality assumption.

Accepted Answer

The rationality assumption means that pe

Question 9

One problem with constructing a perfectly complete realistic economic model is that

Accepted Answer

A)  it would be too simplistic to have any value. 
B)  it would be far too complicated to analyze. 
C)  politicians see little value in such a model. 
D)  None of the above is true. 
A)  it would be too simplistic to have any value. 
B)  it would be far too complicated to analyze. 
C)  politicians see little value in such a model. 
D)  None of the above is true.

Question 10

Which of the following is NOT a focus of the study of economics?

Accepted Answer

A)  how individual preferences are formed 
B)  unemployment 
C)  inflation 
D)  prices in particular markets 
A)  how individual preferences are formed 
B)  unemployment 
C)  inflation 
D)  prices in particular markets

Question 11

The difference between positive statements and normative statements is that

Accepted Answer

A)  a positive statement involves a value judgment and a normative statement is a statement of fact. 
B)  a positive statement is a statement of fact and a normative statement involves value judgments. 
C)  value judgments are made in normative statements but assumed in positive statements. 
D)  normative statements are provable while positive statements are not. 
A)  a positive statement involves a value judgment and a normative statement is a statement of fact. 
B)  a positive statement is a statement of fact and a normative statement involves value judgments. 
C)  value judgments are made in normative statements but assumed in positive statements. 
D)  normative statements are provable while positive statements are not.

Question 12

When people donate money to a charity, they behave

Accepted Answer

A)  rationally if the act gives them satisfaction. 
B)  irrationally because the act does not benefit anyone. 
C)  in an unpredictable manner because the act involves no incentive. 
D)  in a way that only makes themselves worse off. 
A)  rationally if the act gives them satisfaction. 
B)  irrationally because the act does not benefit anyone. 
C)  in an unpredictable manner because the act involves no incentive. 
D)  in a way that only makes themselves worse off.

Question 13

Mary says she plans to return to college next semester assuming her car keeps running, tuition fees don't go up, and her daycare provider continues to be dependable. An economist would say that Mary plans to return to college next semester, ________.

Accepted Answer

A)  caveat emptor 
B)  ceteris paribus 
C)  laissez faire 
D)  ipso facto 
A)  caveat emptor 
B)  ceteris paribus 
C)  laissez faire 
D)  ipso facto

Question 14

All of the following are aspects of macroeconomics EXCEPT

Accepted Answer

A)  the U.S. unemployment rate. 
B)  the production decisions of a pharmaceutical firm. 
C)  the budget deficit of the United States. 
D)  foreign trade. 
A)  the U.S. unemployment rate. 
B)  the production decisions of a pharmaceutical firm. 
C)  the budget deficit of the United States. 
D)  foreign trade.

Question 15

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

Accepted Answer

A)  It is too hot to go jogging. 
B)  Ceteris paribus, a teacher should award a higher grade if you study more hours for an economics test. 
C)  When the price of an item increases, people respond by reducing their consumption of the item. 
D)  The government should balance the budget. 
A)  It is too hot to go jogging. 
B)  Ceteris paribus, a teacher should award a higher grade if you study more hours for an economics test. 
C)  When the price of an item increases, people respond by reducing their consumption of the item. 
D)  The government should balance the budget.

Question 16

Why do economists test their hypotheses?

Accepted Answer

A)  to see whether people are motivated by self-interest 
B)  to see whether their models predict the choices people will make 
C)  to determine whether government policies have effectively achieved their goals 
D)  to learn what people are thinking when they make the choices they do 
A)  to see whether people are motivated by self-interest 
B)  to see whether their models predict the choices people will make 
C)  to determine whether government policies have effectively achieved their goals 
D)  to learn what people are thinking when they make the choices they do

Question 17

When studying individuals' economic behavior, economists assume that

Accepted Answer

A)  individuals understand the rationale for all their actions. 
B)  individuals act as if they were rational. 
C)  only educated people act as if they were rational. 
D)  self-interest is of limited relevance in predicting an individual's actions. 
A)  individuals understand the rationale for all their actions. 
B)  individuals act as if they were rational. 
C)  only educated people act as if they were rational. 
D)  self-interest is of limited relevance in predicting an individual's actions.

Question 18

"To be useful, a model must be completely realistic." Evaluate.

Accepted Answer

This statement is incorrect. To be usefu

Question 19

In an economic model, assumptions

Accepted Answer

A)  must be applicable to all real-world situations. 
B)  must be eliminated before being used to make sure the model is realistic. 
C)  are not important in determining the usefulness of the model. 
D)  define the set of circumstances in which the model is most likely to be applicable in the real world. 
A)  must be applicable to all real-world situations. 
B)  must be eliminated before being used to make sure the model is realistic. 
C)  are not important in determining the usefulness of the model. 
D)  define the set of circumstances in which the model is most likely to be applicable in the real world.

Question 20

Rational behavior for an economist means that individuals

Accepted Answer

A)  are motivated by self-interest. 
B)  never change their minds. 
C)  always make positive choices. 
D)  are self-sacrificing. 
A)  are motivated by self-interest. 
B)  never change their minds. 
C)  always make positive choices. 
D)  are self-sacrificing.

Exam 1: The Nature of Economics

Consider the statement, "The number of beers consumed the night before a test affects the grade." In this statement

Why is economics called an empirical science?

Positive analysis can be described as

A relationship between two variables in which one variable increases at the same time that the other increases is called

Ceteris paribus means

Economists assume that people are motivated by

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

Explain what economists mean when they apply the rationality assumption.

One problem with constructing a perfectly complete realistic economic model is that

Which of the following is NOT a focus of the study of economics?

The difference between positive statements and normative statements is that

When people donate money to a charity, they behave

Mary says she plans to return to college next semester assuming her car keeps running, tuition fees don't go up, and her daycare provider continues to be dependable. An economist would say that Mary plans to return to college next semester, ________.

All of the following are aspects of macroeconomics EXCEPT

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

Why do economists test their hypotheses?

When studying individuals' economic behavior, economists assume that

"To be useful, a model must be completely realistic." Evaluate.

In an economic model, assumptions

Rational behavior for an economist means that individuals

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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