Question 1

It is assumed in economics that people make decisions based upon

Accepted Answer

A)  altruism. 
B)  rational self-interest. 
C)  tradition. 
D)  governmental persuasion. 
A)  altruism. 
B)  rational self-interest. 
C)  tradition. 
D)  governmental persuasion.

Question 2

A model is used to explain economic behavior. Therefore,

Accepted Answer

A)  the assumptions must be complex while the model itself is simple. 
B)  the model must be complex. 
C)  the model must be simple. 
D)  the model can be either simple or complex so long as it explains economic behavior. 
A)  the assumptions must be complex while the model itself is simple. 
B)  the model must be complex. 
C)  the model must be simple. 
D)  the model can be either simple or complex so long as it explains economic behavior.

Question 3

By using the ceteris paribus assumption in conjunction with a model, economists can

Accepted Answer

A)  suspend the rationality assumption. 
B)  avoid having their model depend on any additional assumptions. 
C)  hold certain factors constant. 
D)  be sure that the model will predict correctly. 
A)  suspend the rationality assumption. 
B)  avoid having their model depend on any additional assumptions. 
C)  hold certain factors constant. 
D)  be sure that the model will predict correctly.

Question 4

In economics, the concept that individuals are motivated by self-interest and respond predictably to opportunities for gain is known as

Accepted Answer

A)  rational self-interest. 
B)  altruism. 
C)  sufficiency. 
D)  empiricism. 
A)  rational self-interest. 
B)  altruism. 
C)  sufficiency. 
D)  empiricism.

Question 5

Which of the following is NOT studied in microeconomics?

Accepted Answer

A)  the effect of an increase in gasoline taxes on the purchase of gasoline 
B)  the impact of an increase in the unemployment rate on economic production 
C)  the impact of firms' collective hiring choices on the aggregate unemployment rate 
D)  the impact of higher fuel prices on the cost of airline tickets 
A)  the effect of an increase in gasoline taxes on the purchase of gasoline 
B)  the impact of an increase in the unemployment rate on economic production 
C)  the impact of firms' collective hiring choices on the aggregate unemployment rate 
D)  the impact of higher fuel prices on the cost of airline tickets

Question 6

Economics seeks to use only positive analysis to

Accepted Answer

A)  provide a value-free analysis. 
B)  seek the best answer. 
C)  predict how people should act. 
D)  provide normative values. 
A)  provide a value-free analysis. 
B)  seek the best answer. 
C)  predict how people should act. 
D)  provide normative values.

Question 7

If the slope of a curve is 1/5, we know that

Accepted Answer

A)  the relationship is linear, and the line moves from lower left to upper right. 
B)  the relationship is non-linear, and the line moves from lower left to upper right. 
C)  the relationship is linear, and the line moves from upper left to lower right. 
D)  the relationship is non-linear, and the line moves from upper left to lower right. 
A)  the relationship is linear, and the line moves from lower left to upper right. 
B)  the relationship is non-linear, and the line moves from lower left to upper right. 
C)  the relationship is linear, and the line moves from upper left to lower right. 
D)  the relationship is non-linear, and the line moves from upper left to lower right.

Question 8

In constructing models, economists

Accepted Answer

A)  include all independent variables. 
B)  include all available information. 
C)  attempt to duplicate the real world. 
D)  make simplifying assumptions. 
A)  include all independent variables. 
B)  include all available information. 
C)  attempt to duplicate the real world. 
D)  make simplifying assumptions.

Question 9

A macroeconomist would study

Accepted Answer

A)  the price changes at K-Mart. 
B)  the cost problems at several airlines. 
C)  the economy's unemployment level. 
D)  none of the above. 
A)  the price changes at K-Mart. 
B)  the cost problems at several airlines. 
C)  the economy's unemployment level. 
D)  none of the above.

Question 10

"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?

Accepted Answer

No. People may make mistakes because the

Question 11

The assumption that nothing changes except the factor being studied is

Accepted Answer

A)  the ceteris paribus assumption. 
B)  the rationality assumption. 
C)  positive economic analysis. 
D)  normative economic analysis. 
A)  the ceteris paribus assumption. 
B)  the rationality assumption. 
C)  positive economic analysis. 
D)  normative economic analysis.

Question 12

Which of the following is true of incentives?

Accepted Answer

A)  Different people are motivated by different incentives. 
B)  Money is the only measure of incentives. 
C)  All of the people in a particular nation are motivated by the same incentives. 
D)  In economics, people are assumed to respond to disincentives instead of incentives. 
A)  Different people are motivated by different incentives. 
B)  Money is the only measure of incentives. 
C)  All of the people in a particular nation are motivated by the same incentives. 
D)  In economics, people are assumed to respond to disincentives instead of incentives.

Question 13

Which of the following is an example of an inverse relationship?

Accepted Answer

A)  hours of study and test grade 
B)  calories eliminated from diet and weight loss 
C)  beers consumed while studying and test grade 
D)  amount of snowfall and profits of ski resorts 
A)  hours of study and test grade 
B)  calories eliminated from diet and weight loss 
C)  beers consumed while studying and test grade 
D)  amount of snowfall and profits of ski resorts

Question 14

Consider the case of a teacher who tells students that those who miss more than three classes for any reason will automatically receive a lower grade.

Accepted Answer

A)  This is an example of a positive incentive for students to attend class. 
B)  This is an example of a negative incentive for students to attend class. 
C)  The teacher is assuming that students are irrational, and she must force them to attend class. 
D)  Students who miss more than three classes are irrational. 
A)  This is an example of a positive incentive for students to attend class. 
B)  This is an example of a negative incentive for students to attend class. 
C)  The teacher is assuming that students are irrational, and she must force them to attend class. 
D)  Students who miss more than three classes are irrational.

Question 15

In economic analysis, people's resources are

Accepted Answer

A)  limited and their wants are unlimited. 
B)  unlimited and their wants are also unlimited. 
C)  limited and their wants are also limited. 
D)  unlimited and their wants are limited. 
A)  limited and their wants are unlimited. 
B)  unlimited and their wants are also unlimited. 
C)  limited and their wants are also limited. 
D)  unlimited and their wants are limited.

Question 16

Which of the following is an aggregate?

Accepted Answer

A)  the number of shoes in one man's closet 
B)  the bushels of apples one farmer sells 
C)  the price of a particular textbook 
D)  the total production of all goods and services 
A)  the number of shoes in one man's closet 
B)  the bushels of apples one farmer sells 
C)  the price of a particular textbook 
D)  the total production of all goods and services

Question 17

Normative economic statements

Accepted Answer

A)  are statements of "what ought to be." 
B)  are statements of "what is." 
C)  are statements that may be tested by referring to facts and data. 
D)  do not involve value judgments. 
A)  are statements of "what ought to be." 
B)  are statements of "what is." 
C)  are statements that may be tested by referring to facts and data. 
D)  do not involve value judgments.

Question 18

Models must

Accepted Answer

A)  be able to yield useable predictions. 
B)  be totally realistic in every detail. 
C)  be a complete reproduction of the real world. 
D)  include every relationship that exists. 
A)  be able to yield useable predictions. 
B)  be totally realistic in every detail. 
C)  be a complete reproduction of the real world. 
D)  include every relationship that exists.

Question 19

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

Accepted Answer

A)  empirical 
B)  exact 
C)  assumptive 
D)  soft 
A)  empirical 
B)  exact 
C)  assumptive 
D)  soft

Question 20

A poll conducted by a national firm finds that most Americans say they care more about safety when buying a car than about fuel efficiency. As a result, a car maker produces a car with many safety features, but it doesn't sell well. This behavior

Accepted Answer

A)  contradicts economic theory because the people didn't do what they said they would do. 
B)  contradicts economic theory because it is irrational not to purchase safer cars. 
C)  does not contradict economic theory because economists focus on what people do rather than on what they say. 
D)  does not contradict economic theory because economic theory only relates to prices and not to features such as safety. 
A)  contradicts economic theory because the people didn't do what they said they would do. 
B)  contradicts economic theory because it is irrational not to purchase safer cars. 
C)  does not contradict economic theory because economists focus on what people do rather than on what they say. 
D)  does not contradict economic theory because economic theory only relates to prices and not to features such as safety.

Exam 1: The Nature of Economics

It is assumed in economics that people make decisions based upon

A model is used to explain economic behavior. Therefore,

By using the ceteris paribus assumption in conjunction with a model, economists can

In economics, the concept that individuals are motivated by self-interest and respond predictably to opportunities for gain is known as

Which of the following is NOT studied in microeconomics?

Economics seeks to use only positive analysis to

If the slope of a curve is 1/5, we know that

In constructing models, economists

A macroeconomist would study

"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?

The assumption that nothing changes except the factor being studied is

Which of the following is true of incentives?

Which of the following is an example of an inverse relationship?

Consider the case of a teacher who tells students that those who miss more than three classes for any reason will automatically receive a lower grade.

In economic analysis, people's resources are

Which of the following is an aggregate?

Normative economic statements

Models must

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

A poll conducted by a national firm finds that most Americans say they care more about safety when buying a car than about fuel efficiency. As a result, a car maker produces a car with many safety features, but it doesn't sell well. This behavior

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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