Question 1

Economic models are NOT used to

Accepted Answer

A)  explain economic phenomena. 
B)  predict economic phenomena. 
C)  understand economic phenomena. 
D)  describe all economic phenomena in minute detail. 
A)  explain economic phenomena. 
B)  predict economic phenomena. 
C)  understand economic phenomena. 
D)  describe all economic phenomena in minute detail.

Question 2

Which of the following is an example of an application of the ceteris paribus assumption?

Accepted Answer

A)  An analysis of how price changes affect how much of a good people will purchase when all other factors are held constant 
B)  An analysis of how people purchase more goods when prices decline and income increases 
C)  After reading an article on the dangers of high-fat diets, an individual buys less red meat when prices increase 
D)  An analysis of how worker productivity increases when a firm invests in new machines and training programs 
A)  An analysis of how price changes affect how much of a good people will purchase when all other factors are held constant 
B)  An analysis of how people purchase more goods when prices decline and income increases 
C)  After reading an article on the dangers of high-fat diets, an individual buys less red meat when prices increase 
D)  An analysis of how worker productivity increases when a firm invests in new machines and training programs

Question 3

Assumptions are necessary to

Accepted Answer

A)  make economics a social science. 
B)  define a set of circumstances where a model is most likely to apply. 
C)  define the relationship between wants and resources under all circumstances. 
D)  define the specific cause and effect relationship that is being explained by social sciences. 
A)  make economics a social science. 
B)  define a set of circumstances where a model is most likely to apply. 
C)  define the relationship between wants and resources under all circumstances. 
D)  define the specific cause and effect relationship that is being explained by social sciences.

Question 4

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

Accepted Answer

A)  The unemployment rate last month was 5.4 percent. 
B)  The unemployment rate last month was too high. 
C)  Because of the high unemployment rate last month the government should increase government spending. 
D)  The unemployment rate should be measured differently because it doesn't include students who can't find jobs. 
A)  The unemployment rate last month was 5.4 percent. 
B)  The unemployment rate last month was too high. 
C)  Because of the high unemployment rate last month the government should increase government spending. 
D)  The unemployment rate should be measured differently because it doesn't include students who can't find jobs.

Question 5

The slope of a nonlinear curve

Accepted Answer

A)  is constant. 
B)  is always negative. 
C)  changes along the various points of the curve. 
D)  is always equal to 1. 
A)  is constant. 
B)  is always negative. 
C)  changes along the various points of the curve. 
D)  is always equal to 1.

Question 6

Economics is a social science that involves the study of how individuals

Accepted Answer

A)  develop their tastes and preferences. 
B)  maximize their wealth. 
C)  define happiness. 
D)  choose among alternatives to satisfy their unlimited wants. 
A)  develop their tastes and preferences. 
B)  maximize their wealth. 
C)  define happiness. 
D)  choose among alternatives to satisfy their unlimited wants.

Question 7

Which of the following best describes how economists test the empirical predictions of economic models?

Accepted Answer

A)  Economists survey individuals to learn about how people think through decisions about how much to purchase or to produce. 
B)  Economists collect and analyze real-world observations of people's actions to discern if those actions accord with theories' predictions. 
C)  Based on theories about thought processes, economists seek to determine which thought processes predominate in determining how a person decides what actions to take. 
D)  Recognizing that people always do what they say they will do, economists rely exclusively on information gleaned from polls and surveys conducted by poll takers and market researchers. 
A)  Economists survey individuals to learn about how people think through decisions about how much to purchase or to produce. 
B)  Economists collect and analyze real-world observations of people's actions to discern if those actions accord with theories' predictions. 
C)  Based on theories about thought processes, economists seek to determine which thought processes predominate in determining how a person decides what actions to take. 
D)  Recognizing that people always do what they say they will do, economists rely exclusively on information gleaned from polls and surveys conducted by poll takers and market researchers.

Question 8

Macroeconomics is concerned with

Accepted Answer

A)  individual business firms. 
B)  specific industries. 
C)  individual consumers. 
D)  a nation's entire economy. 
A)  individual business firms. 
B)  specific industries. 
C)  individual consumers. 
D)  a nation's entire economy.

Question 9

Which of the following would likely be studied in a macroeconomics course?

Accepted Answer

A)  the unemployment rate 
B)  total output for an economy 
C)  the inflation rate 
D)  all of the above 
A)  the unemployment rate 
B)  total output for an economy 
C)  the inflation rate 
D)  all of the above

Question 10

If the government offers to reduce your property taxes by 10 percent if you install solar heating for your home, this would be an example of

Accepted Answer

A)  police power. 
B)  incentives. 
C)  disincentives. 
D)  ceteris paribus. 
A)  police power. 
B)  incentives. 
C)  disincentives. 
D)  ceteris paribus.

Question 11

Which is NOT true about the use of economic models?

Accepted Answer

A)  Economic models are simplified representations of the real world. 
B)  Economists sometimes use laboratory experiments to test their theories. 
C)  Economists use what has already happened in the real world to test their theories. 
D)  Economists are employed to explain economic phenomena but are never used to predict what might happen next. 
A)  Economic models are simplified representations of the real world. 
B)  Economists sometimes use laboratory experiments to test their theories. 
C)  Economists use what has already happened in the real world to test their theories. 
D)  Economists are employed to explain economic phenomena but are never used to predict what might happen next.

Question 12

Aggregate measures are

Accepted Answer

A)  anything to do with economics. 
B)  a total measure of a variable across the economy. 
C)  used only in microeconomics. 
D)  determined by the Bureau of Labor Statistics. 
A)  anything to do with economics. 
B)  a total measure of a variable across the economy. 
C)  used only in microeconomics. 
D)  determined by the Bureau of Labor Statistics.

Question 13

Microeconomics is the study of

Accepted Answer

A)  the behavior of the economy as a whole. 
B)  how rising prices affect the level of employment in the economy. 
C)  how individuals and firms make decisions. 
D)  the effect that money has in the economic system. 
A)  the behavior of the economy as a whole. 
B)  how rising prices affect the level of employment in the economy. 
C)  how individuals and firms make decisions. 
D)  the effect that money has in the economic system.

Question 14

The "paired observation" of (-14, -6) means

Accepted Answer

A)  x = -14, y = -6 
B)  x = -6, y = -14 
C)  that the distance between the two points will be 8. 
D)  the origin is at -14 and -6. 
A)  x = -14, y = -6 
B)  x = -6, y = -14 
C)  that the distance between the two points will be 8. 
D)  the origin is at -14 and -6.

Question 15

Normative economics

Accepted Answer

A)  is never studied at the undergraduate level. 
B)  involves value judgments. 
C)  is always objective. 
D)  cannot be applied to all economic problems. 
A)  is never studied at the undergraduate level. 
B)  involves value judgments. 
C)  is always objective. 
D)  cannot be applied to all economic problems.

Question 16

All of the following are positive statements EXCEPT

Accepted Answer

A)  the President of the United States in 2008 was George W. Bush. 
B)  California is in the United States. 
C)  migratory birds fly south for the winter. 
D)  a dog is man's best friend. 
A)  the President of the United States in 2008 was George W. Bush. 
B)  California is in the United States. 
C)  migratory birds fly south for the winter. 
D)  a dog is man's best friend.

Question 17

Economics is the study of

Accepted Answer

A)  nonhuman phenomena. 
B)  the determinants of preferences. 
C)  scarce resources and unlimited wants. 
D)  the physical sciences. 
A)  nonhuman phenomena. 
B)  the determinants of preferences. 
C)  scarce resources and unlimited wants. 
D)  the physical sciences.

Question 18

"Ceteris paribus" assumption means

Accepted Answer

A)  the role of rational self-interest in the economy. 
B)  that nothing else changes except the variables under consideration. 
C)  relying on real-world data in evaluating the usefulness of a model. 
D)  analysis that is strictly limited to making either purely descriptive statements or scientific predictions. 
A)  the role of rational self-interest in the economy. 
B)  that nothing else changes except the variables under consideration. 
C)  relying on real-world data in evaluating the usefulness of a model. 
D)  analysis that is strictly limited to making either purely descriptive statements or scientific predictions.

Question 19

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

Accepted Answer

A)  In order to reduce the budget deficit, tax rates should be increased. 
B)  In order to increase employment, the minimum wage should be decreased. 
C)  If payroll taxes are raised, then the Social Security crisis will be resolved. 
D)  If gas prices fall, consumers should purchase more gas. 
A)  In order to reduce the budget deficit, tax rates should be increased. 
B)  In order to increase employment, the minimum wage should be decreased. 
C)  If payroll taxes are raised, then the Social Security crisis will be resolved. 
D)  If gas prices fall, consumers should purchase more gas.

Question 20

The basic economic problem is a situation of

Accepted Answer

A)  limited resources and unlimited wants. 
B)  both limited resources and limited wants. 
C)  limited incomes and unlimited choices. 
D)  unlimited incomes and limited choices. 
A)  limited resources and unlimited wants. 
B)  both limited resources and limited wants. 
C)  limited incomes and unlimited choices. 
D)  unlimited incomes and limited choices.

Exam 1: The Nature of Economics

Economic models are NOT used to

Which of the following is an example of an application of the ceteris paribus assumption?

Assumptions are necessary to

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

The slope of a nonlinear curve

Economics is a social science that involves the study of how individuals

Which of the following best describes how economists test the empirical predictions of economic models?

Macroeconomics is concerned with

Which of the following would likely be studied in a macroeconomics course?

If the government offers to reduce your property taxes by 10 percent if you install solar heating for your home, this would be an example of

Which is NOT true about the use of economic models?

Aggregate measures are

Microeconomics is the study of

The "paired observation" of (-14, -6) means

Normative economics

All of the following are positive statements EXCEPT

Economics is the study of

"Ceteris paribus" assumption means

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

The basic economic problem is a situation of

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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