Question 1

An economic system is

Accepted Answer

A)  the universe of all resources. 
B)  a way to create new resources. 
C)  a mechanism to allocate scarce resources. 
D)  an organization that generates profits. 
A)  the universe of all resources. 
B)  a way to create new resources. 
C)  a mechanism to allocate scarce resources. 
D)  an organization that generates profits.

Question 2

Macroeconomics might study which of the following?

Accepted Answer

A)  the causes of domestic unemployment 
B)  decision making undertaken by firms 
C)  decision making undertaken by households 
D)  determinants of the prices of rare goods (e.g., diamonds) 
A)  the causes of domestic unemployment 
B)  decision making undertaken by firms 
C)  decision making undertaken by households 
D)  determinants of the prices of rare goods (e.g., diamonds)

Question 3

"Ceteris paribus" means

Accepted Answer

A)  "invisible hand." 
B)  "other things constant." 
C)  "making all the necessary changes." 
D)  "individual." 
A)  "invisible hand." 
B)  "other things constant." 
C)  "making all the necessary changes." 
D)  "individual."

Question 4

Positive economic analysis is said to be

Accepted Answer

A)  true. 
B)  right. 
C)  value-laden. 
D)  objective. 
A)  true. 
B)  right. 
C)  value-laden. 
D)  objective.

Question 5

Both the social sciences and the natural sciences employ ________ to help them understand the world around them.

Accepted Answer

A)  models 
B)  designs 
C)  traditional thinking 
D)  implications 
A)  models 
B)  designs 
C)  traditional thinking 
D)  implications

Question 6

Another term for "economic models" is

Accepted Answer

A)  economic designs. 
B)  economic theories. 
C)  economic science. 
D)  economic maps. 
A)  economic designs. 
B)  economic theories. 
C)  economic science. 
D)  economic maps.

Question 7

A characteristic of a good model is that

Accepted Answer

A)  its predictions can be tested using real-world data. 
B)  it is useful for making irrefutable predictions. 
C)  it applies to all situations. 
D)  it predicts perfectly. 
A)  its predictions can be tested using real-world data. 
B)  it is useful for making irrefutable predictions. 
C)  it applies to all situations. 
D)  it predicts perfectly.

Question 8

It has been noted that when the price of a good increases, people purchase less of the good. This is an example of

Accepted Answer

A)  macroeconomic analysis. 
B)  irrational behavior. 
C)  normative economic analysis. 
D)  positive economic analysis. 
A)  macroeconomic analysis. 
B)  irrational behavior. 
C)  normative economic analysis. 
D)  positive economic analysis.

Question 9

Sara looks into her closet and discovers a pair of like-new shoes she no longer wears because they give her blisters. From the economist's perspective, was Sara behaving rationally when she bought those shoes?

Accepted Answer

A)  No. If any of a person's decisions have poor results, that person is irrational. 
B)  Yes, as long as Sara didn't intentionally purchase blister-causing shoes. 
C)  No. The rationality assumption states that rational people never make mistakes. 
D)  It's not clear because psychology, not economics, deals with the rationality assumption. 
A)  No. If any of a person's decisions have poor results, that person is irrational. 
B)  Yes, as long as Sara didn't intentionally purchase blister-causing shoes. 
C)  No. The rationality assumption states that rational people never make mistakes. 
D)  It's not clear because psychology, not economics, deals with the rationality assumption.

Question 10

A map is an example of a model because a map

Accepted Answer

A)  realistically describes an area. 
B)  is always as complex as space will permit. 
C)  is two-dimensional. 
D)  is a simplified representation of reality. 
A)  realistically describes an area. 
B)  is always as complex as space will permit. 
C)  is two-dimensional. 
D)  is a simplified representation of reality.

Question 11

Which of the following would NOT provide an incentive to reduce the amount of beef consumed?

Accepted Answer

A)  An increase in the price of beef 
B)  A subsidy to buyers of beef 
C)  A decrease in the price of chicken 
D)  A ban on beef sales by the Food and Drug Administration 
A)  An increase in the price of beef 
B)  A subsidy to buyers of beef 
C)  A decrease in the price of chicken 
D)  A ban on beef sales by the Food and Drug Administration

Question 12

What is the type of economic system that relies on one central authority to make economic decisions?

Accepted Answer

A)  Free market 
B)  Price system 
C)  Command and control 
D)  Mixed economic system 
A)  Free market 
B)  Price system 
C)  Command and control 
D)  Mixed economic system

Question 13

The rationality assumption states that

Accepted Answer

A)  all actions taken by consumers are based on what is good for society. 
B)  people make decisions regardless of how the outcome will affect them. 
C)  people make decisions to buy only those goods that they need rather than goods that they want. 
D)  people do not intentionally make decisions that would leave them worse off. 
A)  all actions taken by consumers are based on what is good for society. 
B)  people make decisions regardless of how the outcome will affect them. 
C)  people make decisions to buy only those goods that they need rather than goods that they want. 
D)  people do not intentionally make decisions that would leave them worse off.

Question 14

What is meant by saying that economics is an empirical science?

Accepted Answer

A)  Economic theories will be tested by seeing how well they correspond to people's declared preferences. 
B)  Economic theories cannot be tested because there is no means of measuring economic variables with adequate precision. 
C)  Economic theories cannot be tested because economic variables change too quickly. 
D)  Economic theories will be tested by seeing how well they correspond to real-world phenomena. 
A)  Economic theories will be tested by seeing how well they correspond to people's declared preferences. 
B)  Economic theories cannot be tested because there is no means of measuring economic variables with adequate precision. 
C)  Economic theories cannot be tested because economic variables change too quickly. 
D)  Economic theories will be tested by seeing how well they correspond to real-world phenomena.

Question 15

The assumption that "other things are constant" is also known as the

Accepted Answer

A)  ceteris paribus assumption. 
B)  rational self-interest assumption. 
C)  distinguishing characteristic of economics as a science. 
D)  relationships assumption. 
A)  ceteris paribus assumption. 
B)  rational self-interest assumption. 
C)  distinguishing characteristic of economics as a science. 
D)  relationships assumption.

Question 16

Which of the following is a positive economic statement?

Accepted Answer

A)  No individual should live in poverty. 
B)  The rate of unemployment of young African-Americans exceeds that of white Americans. 
C)  Unemployment is a more serious problem than inflation. 
D)  Economic considerations are less relevant than ethical issues in deciding national policy. 
A)  No individual should live in poverty. 
B)  The rate of unemployment of young African-Americans exceeds that of white Americans. 
C)  Unemployment is a more serious problem than inflation. 
D)  Economic considerations are less relevant than ethical issues in deciding national policy.

Question 17

Jane is currently developing a model to explain the national unemployment rate. This is an example of

Accepted Answer

A)  a microeconomic topic. 
B)  normative analysis. 
C)  positive analysis. 
D)  how people act in an irrational manner. 
A)  a microeconomic topic. 
B)  normative analysis. 
C)  positive analysis. 
D)  how people act in an irrational manner.

Question 18

Economic models

Accepted Answer

A)  are used to explain how people think. 
B)  are used to explain how people behave. 
C)  are essential representations of the real world. 
D)  are never used for making economic projections or predictions. 
A)  are used to explain how people think. 
B)  are used to explain how people behave. 
C)  are essential representations of the real world. 
D)  are never used for making economic projections or predictions.

Question 19

Analysis that is limited to making either purely descriptive statements or scientific predictions is

Accepted Answer

A)  positive economics. 
B)  normative economics. 
C)  microeconomics. 
D)  macroeconomics. 
A)  positive economics. 
B)  normative economics. 
C)  microeconomics. 
D)  macroeconomics.

Question 20

Which of the following ways to recruit soldiers utilizes incentives?

Accepted Answer

A)  a draft 
B)  universal service 
C)  higher salaries 
D)  longer lengths of service 
A)  a draft 
B)  universal service 
C)  higher salaries 
D)  longer lengths of service

Exam 1: The Nature of Economics

An economic system is

Macroeconomics might study which of the following?

"Ceteris paribus" means

Positive economic analysis is said to be

Both the social sciences and the natural sciences employ ________ to help them understand the world around them.

Another term for "economic models" is

A characteristic of a good model is that

It has been noted that when the price of a good increases, people purchase less of the good. This is an example of

Sara looks into her closet and discovers a pair of like-new shoes she no longer wears because they give her blisters. From the economist's perspective, was Sara behaving rationally when she bought those shoes?

A map is an example of a model because a map

Which of the following would NOT provide an incentive to reduce the amount of beef consumed?

What is the type of economic system that relies on one central authority to make economic decisions?

The rationality assumption states that

What is meant by saying that economics is an empirical science?

The assumption that "other things are constant" is also known as the

Which of the following is a positive economic statement?

Jane is currently developing a model to explain the national unemployment rate. This is an example of

Economic models

Analysis that is limited to making either purely descriptive statements or scientific predictions is

Which of the following ways to recruit soldiers utilizes incentives?

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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