Question 1

Economics is an empirical science, which means that economists

Accepted Answer

A)  must use laboratory experiments to test their theories. 
B)  evaluate a model or theory by whether its assumptions are consistent with the real world. 
C)  try to prove their models are true by referring to logic. 
D)  look for evidence to determine whether the model is useful or not. 
A)  must use laboratory experiments to test their theories. 
B)  evaluate a model or theory by whether its assumptions are consistent with the real world. 
C)  try to prove their models are true by referring to logic. 
D)  look for evidence to determine whether the model is useful or not.

Question 2

Distinguish between macroeconomics and microeconomics.

Accepted Answer

Macroeconomics is concerned with the beh

Question 3

Economics is the study of

Accepted Answer

A)  how to get rich. 
B)  how people allocate their limited resources to satisfy their unlimited wants. 
C)  how people spend their income. 
D)  why people want certain goods and services rather than other goods and services. 
A)  how to get rich. 
B)  how people allocate their limited resources to satisfy their unlimited wants. 
C)  how people spend their income. 
D)  why people want certain goods and services rather than other goods and services.

Question 4

Father says, "Earn a B-average on your next report card and I'll help you buy a car." An economist would say that this parent is providing his child a(n)

Accepted Answer

A)  study disincentive. 
B)  reason to slack off and not worry about her grades. 
C)  bribe. 
D)  incentive. 
A)  study disincentive. 
B)  reason to slack off and not worry about her grades. 
C)  bribe. 
D)  incentive.

Question 5

Which of the following is a positive statement?

Accepted Answer

A)  We need to carefully protect our borders. 
B)  Hyperinflation is the most damaging thing that can occur in an economy. 
C)  When tax revenues are less than government spending there is a budget deficit. 
D)  Foreign aid should be reduced to help our budget deficit. 
A)  We need to carefully protect our borders. 
B)  Hyperinflation is the most damaging thing that can occur in an economy. 
C)  When tax revenues are less than government spending there is a budget deficit. 
D)  Foreign aid should be reduced to help our budget deficit.

Question 6

Which of the following is a characteristic or focus of economics?

Accepted Answer

A)  allocation of limited resources in an effort to satisfy potentially unlimited wants 
B)  positive economic analysis 
C)  empirical analysis 
D)  all of the above 
A)  allocation of limited resources in an effort to satisfy potentially unlimited wants 
B)  positive economic analysis 
C)  empirical analysis 
D)  all of the above

Question 7

In building a model to analyze economic situations, one of the important assumptions is

Accepted Answer

A)  ceteris paribus. 
B)  scarcity. 
C)  conversion abstraction. 
D)  cognitive dissonance. 
A)  ceteris paribus. 
B)  scarcity. 
C)  conversion abstraction. 
D)  cognitive dissonance.

Question 8

Economic analysis is a tool that

Accepted Answer

A)  aids all decision making. 
B)  helps us understand why people make mistakes. 
C)  helps us forgive selfish people. 
D)  complicates decision making. 
A)  aids all decision making. 
B)  helps us understand why people make mistakes. 
C)  helps us forgive selfish people. 
D)  complicates decision making.

Question 9

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

Accepted Answer

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

Question 10

What does scarcity have to do with the fact that people must make choices?

Accepted Answer

Scarcity implies that people cannot have

Question 11

Economics deals with

Accepted Answer

A)  how to profit from the stock market. 
B)  how to satisfy limited human wants. 
C)  how society allocates unlimited resources. 
D)  how individuals allocate scarce resources to satisfy unlimited human wants. 
A)  how to profit from the stock market. 
B)  how to satisfy limited human wants. 
C)  how society allocates unlimited resources. 
D)  how individuals allocate scarce resources to satisfy unlimited human wants.

Question 12

According to the bounded rationality hypothesis, an individual confronting a large number of complicated choices is most likely to respond by

Accepted Answer

A)  using a simple rule of thumb to choose among a subset of easiest-to-evaluate options. 
B)  using the ceteris paribus assumption to assist in simplifying and examining each of the possible options. 
C)  utilizing readily available empirical evidence to assist in evaluating every option. 
D)  assessing every available choice by developing sophisticated theories regarding each option. 
A)  using a simple rule of thumb to choose among a subset of easiest-to-evaluate options. 
B)  using the ceteris paribus assumption to assist in simplifying and examining each of the possible options. 
C)  utilizing readily available empirical evidence to assist in evaluating every option. 
D)  assessing every available choice by developing sophisticated theories regarding each option.

Question 13

Economics is concerned with choices

Accepted Answer

A)  that involve the wants of individuals. 
B)  that involve the political goals of professional associations. 
C)  made by individuals only when they are consuming goods or services. 
D)  that involve making money. 
A)  that involve the wants of individuals. 
B)  that involve the political goals of professional associations. 
C)  made by individuals only when they are consuming goods or services. 
D)  that involve making money.

Question 14

In a market system, the what, how and for whom questions in economics are determined by

Accepted Answer

A)  those who are not in the market. 
B)  buyers and sellers together. 
C)  the central authority. 
D)  no one. 
A)  those who are not in the market. 
B)  buyers and sellers together. 
C)  the central authority. 
D)  no one.

Question 15

Self-interest

Accepted Answer

A)  implies that a person must try to increase wealth at all times. 
B)  implies that people will not give away wealth. 
C)  is consistent with many goals that people pursue, including betterment of others. 
D)  applies only to people in market settings. 
A)  implies that a person must try to increase wealth at all times. 
B)  implies that people will not give away wealth. 
C)  is consistent with many goals that people pursue, including betterment of others. 
D)  applies only to people in market settings.

Question 16

Which of the following is a macroeconomic concern?

Accepted Answer

A)  the unemployment rate in a specific industry 
B)  the national output of the United States 
C)  wage levels in specific industries 
D)  the operation of an individual firm 
A)  the unemployment rate in a specific industry 
B)  the national output of the United States 
C)  wage levels in specific industries 
D)  the operation of an individual firm

Question 17

The ceteris paribus assumption means

Accepted Answer

A)  favors are returned in kind. 
B)  this is the proof of the matter. 
C)  from many, one. 
D)  other things are equal. 
A)  favors are returned in kind. 
B)  this is the proof of the matter. 
C)  from many, one. 
D)  other things are equal.

Question 18

"Economists assume people are selfish." Do you agree with this statement or not? Explain.

Accepted Answer

Economists do not assume people are self

Question 19

In economics, items that are used to produce goods and services are known as

Accepted Answer

A)  wants. 
B)  aggregates. 
C)  factors of need. 
D)  resources. 
A)  wants. 
B)  aggregates. 
C)  factors of need. 
D)  resources.

Question 20

Which of the following describes that people cannot examine every possible choice available to them but instead use simple rules of thumb to sort among the alternatives that happen to occur to them?

Accepted Answer

A)  self-interest 
B)  bounded rationality 
C)  ceteris paribus 
D)  normative economics 
A)  self-interest 
B)  bounded rationality 
C)  ceteris paribus 
D)  normative economics

Exam 1: The Nature of Economics

Economics is an empirical science, which means that economists

Distinguish between macroeconomics and microeconomics.

Economics is the study of

Father says, "Earn a B-average on your next report card and I'll help you buy a car." An economist would say that this parent is providing his child a(n)

Which of the following is a positive statement?

Which of the following is a characteristic or focus of economics?

In building a model to analyze economic situations, one of the important assumptions is

Economic analysis is a tool that

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

What does scarcity have to do with the fact that people must make choices?

Economics deals with

According to the bounded rationality hypothesis, an individual confronting a large number of complicated choices is most likely to respond by

Economics is concerned with choices

In a market system, the what, how and for whom questions in economics are determined by

Self-interest

Which of the following is a macroeconomic concern?

The ceteris paribus assumption means

"Economists assume people are selfish." Do you agree with this statement or not? Explain.

In economics, items that are used to produce goods and services are known as

Which of the following describes that people cannot examine every possible choice available to them but instead use simple rules of thumb to sort among the alternatives that happen to occur to them?

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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