Question 1

The real core of the economic problem is to:

Accepted Answer

A)  increase the amount of leisure time available to people. 
B)  guarantee everyone on the planet a minimum level of food, shelter and clean water. 
C)  allocate limited resources among competing uses. 
D)  eliminate scarcity. 
A)  increase the amount of leisure time available to people. 
B)  guarantee everyone on the planet a minimum level of food, shelter and clean water. 
C)  allocate limited resources among competing uses. 
D)  eliminate scarcity.

Question 2

The importance of the ceteris paribus assumption is that it:

Accepted Answer

A)  allows one to separate normative economic issues from positive economic ones. 
B)  allows one to generalize from the whole to the individual. 
C)  allows one to analyze the relationship between two variables apart from the influence of other variables. 
D)  allows one to hold all variables constant so the economy can be carefully observed in a suspended state. 
A)  allows one to separate normative economic issues from positive economic ones. 
B)  allows one to generalize from the whole to the individual. 
C)  allows one to analyze the relationship between two variables apart from the influence of other variables. 
D)  allows one to hold all variables constant so the economy can be carefully observed in a suspended state.

Question 3

A hypothesis is:

Accepted Answer

A)  a normative economic statement. 
B)  a testable proposition. 
C)  a statement that cannot be evaluated using real-world data. 
D)  a model with no connection to the real world. 
A)  a normative economic statement. 
B)  a testable proposition. 
C)  a statement that cannot be evaluated using real-world data. 
D)  a model with no connection to the real world.

Question 4

Which of the following statements most likely lies within the realm of microeconomics?

Accepted Answer

A)  Unemployment rises during a recession and falls during an expansion. 
B)  A rapid acceleration of the supply of money may create inflation. 
C)  An increase in government spending will increase the aggregate demand for goods and services in the economy. 
D)  An increase in labor costs will increase the additional cost of producing another airplane. 
A)  Unemployment rises during a recession and falls during an expansion. 
B)  A rapid acceleration of the supply of money may create inflation. 
C)  An increase in government spending will increase the aggregate demand for goods and services in the economy. 
D)  An increase in labor costs will increase the additional cost of producing another airplane.

Question 5

"Ceteris paribus" is a Latin expression that means "holding everything else constant."

Accepted Answer

A) True 
 B)False

Question 6

An economist at the University of Alaska at Anchorage has been asked to explain why the price of Alaskan crude oil has fallen recently.In order to assemble a scholarly answer,the professor should take which steps?

Accepted Answer

A)  Develop a hypothesis, test the proposition by engaging in empirical analysis, and examine the data to see if it fits with the facts. 
B)  Gather data on crude oil prices and seemingly unrelated variables in order to look for associations, then formulate a hypothesis based on those unexpected associations. 
C)  Ask people in Alaska why they are not purchasing oil. 
D)  None of the above. The oil industry is controlled by a cartel; therefore price changes in the industry cannot be explained using economic theories. 
A)  Develop a hypothesis, test the proposition by engaging in empirical analysis, and examine the data to see if it fits with the facts. 
B)  Gather data on crude oil prices and seemingly unrelated variables in order to look for associations, then formulate a hypothesis based on those unexpected associations. 
C)  Ask people in Alaska why they are not purchasing oil. 
D)  None of the above. The oil industry is controlled by a cartel; therefore price changes in the industry cannot be explained using economic theories.

Question 7

Scarcity,as defined by an economist,means:

Accepted Answer

A)  demand exceeds supply at the current market price. 
B)  consumers are too poor to purchase the available goods and services. 
C)  supply exceeds demand at the current market price. 
D)  the desire for goods exceeds our ability to produce them with limited available resources. 
A)  demand exceeds supply at the current market price. 
B)  consumers are too poor to purchase the available goods and services. 
C)  supply exceeds demand at the current market price. 
D)  the desire for goods exceeds our ability to produce them with limited available resources.

Question 8

A person behaving rationally will attempt to:

Accepted Answer

A)  always avoid illegal actions. 
B)  explain or rationalize a decision. 
C)  refrain from normative analysis. 
D)  consider the future consequences of her/his behavior. 
A)  always avoid illegal actions. 
B)  explain or rationalize a decision. 
C)  refrain from normative analysis. 
D)  consider the future consequences of her/his behavior.

Question 9

Economists believe that individuals act as if they are motivated by self-interest and:

Accepted Answer

A)  respond selfishly. 
B)  respond in predictable ways to changing circumstances. 
C)  it leads to inconsistent and unpredictable behavior. 
D)  all of the above. 
A)  respond selfishly. 
B)  respond in predictable ways to changing circumstances. 
C)  it leads to inconsistent and unpredictable behavior. 
D)  all of the above.

Question 10

"A tax cut will lead to higher inflation" is an example of a positive economic statement.

Accepted Answer

A) True 
 B)False

Question 11

"A reduction in the rate at which stock dividends are taxed will lead to greater investment in the stock market." This is an example of:

Accepted Answer

A)  a positive economic statement. 
B)  a negative economic statement. 
C)  the fallacy of composition. 
D)  a normative economic statement. 
A)  a positive economic statement. 
B)  a negative economic statement. 
C)  the fallacy of composition. 
D)  a normative economic statement.

Question 12

Since resources are abundant,we do not have to make choices about their use.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following best illustrates the fallacy of composition?

Accepted Answer

A)  If Mr. Smith had more money, he could buy more scarce goods; if the Adams family had more money, it could buy additional goods. 
B)  If Ms. Spann had more money, she could buy more scarce goods; if the nation had more money, everyone could buy more scarce goods. 
C)  If other variables are not held constant, economists may not observe the relationship between price and quantity demanded that is expected. 
D)  Aggregate consumption may not behave in the same manner as the consumption of a particular individual. 
A)  If Mr. Smith had more money, he could buy more scarce goods; if the Adams family had more money, it could buy additional goods. 
B)  If Ms. Spann had more money, she could buy more scarce goods; if the nation had more money, everyone could buy more scarce goods. 
C)  If other variables are not held constant, economists may not observe the relationship between price and quantity demanded that is expected. 
D)  Aggregate consumption may not behave in the same manner as the consumption of a particular individual.

Question 14

In a congressional debate about agricultural price supports,senators,members of congress,and other experts made the following four statements.Which of these is a normative statement?

Accepted Answer

A)  "Price supports are important because America should preserve the small family farm." 
B)  "Without price supports, the price of wheat and corn will fall by over twenty percent." 
C)  "The decline in commodity prices caused by the removal of price supports will result in fewer, larger farms." 
D)  "The decline in commodity prices caused by the removal of price supports will reduce the number of tractors sold in the United States." 
A)  "Price supports are important because America should preserve the small family farm." 
B)  "Without price supports, the price of wheat and corn will fall by over twenty percent." 
C)  "The decline in commodity prices caused by the removal of price supports will result in fewer, larger farms." 
D)  "The decline in commodity prices caused by the removal of price supports will reduce the number of tractors sold in the United States."

Question 15

A good economic theory:

Accepted Answer

A)  rests on realistic assumptions. 
B)  explains economic behavior and predicts well. 
C)  can best be expressed mathematically. 
D)  always provides a highly detailed analysis of an economic sector. 
A)  rests on realistic assumptions. 
B)  explains economic behavior and predicts well. 
C)  can best be expressed mathematically. 
D)  always provides a highly detailed analysis of an economic sector.

Question 16

An economic theory:

Accepted Answer

A)  should be as detailed as possible in order to model the complexity of an economy. 
B)  is an abstraction from reality. 
C)  is only useful if it rests on realistic assumptions. 
D)  is unrealistic and therefore of dubious usefulness in explaining what occurs in a complex economy. 
A)  should be as detailed as possible in order to model the complexity of an economy. 
B)  is an abstraction from reality. 
C)  is only useful if it rests on realistic assumptions. 
D)  is unrealistic and therefore of dubious usefulness in explaining what occurs in a complex economy.

Question 17

The fallacy of composition is the erroneous view that:

Accepted Answer

A)  an increase in the supply of money will cause a general increase in the level of prices. 
B)  a small change in an economic variable will have an unrecognizable but significant effect on the economy. 
C)  when two events are associated, the one observed first must have caused the second. 
D)  if something is true for an individual, then it must also be true for a group. 
A)  an increase in the supply of money will cause a general increase in the level of prices. 
B)  a small change in an economic variable will have an unrecognizable but significant effect on the economy. 
C)  when two events are associated, the one observed first must have caused the second. 
D)  if something is true for an individual, then it must also be true for a group.

Question 18

An economic hypothesis:

Accepted Answer

A)  can be tested using empirical analysis. 
B)  can be tested using normative analysis. 
C)  cannot be tested since it is normative in nature. 
D)  cannot be tested since it is a positive economic statement. 
A)  can be tested using empirical analysis. 
B)  can be tested using normative analysis. 
C)  cannot be tested since it is normative in nature. 
D)  cannot be tested since it is a positive economic statement.

Exam 1: The Role and Method of Economics

The real core of the economic problem is to:

The importance of the ceteris paribus assumption is that it:

A hypothesis is:

Which of the following statements most likely lies within the realm of microeconomics?

"Ceteris paribus" is a Latin expression that means "holding everything else constant."

An economist at the University of Alaska at Anchorage has been asked to explain why the price of Alaskan crude oil has fallen recently.In order to assemble a scholarly answer,the professor should take which steps?

Scarcity,as defined by an economist,means:

A person behaving rationally will attempt to:

Economists believe that individuals act as if they are motivated by self-interest and:

"A tax cut will lead to higher inflation" is an example of a positive economic statement.

"A reduction in the rate at which stock dividends are taxed will lead to greater investment in the stock market." This is an example of:

Since resources are abundant,we do not have to make choices about their use.

Which of the following best illustrates the fallacy of composition?

In a congressional debate about agricultural price supports,senators,members of congress,and other experts made the following four statements.Which of these is a normative statement?

A good economic theory:

An economic theory:

The fallacy of composition is the erroneous view that:

An economic hypothesis:

Economics: Eight Powerful Ideas

Scarcity, Trade-Offs, and Production Possibilities

Demand, Supply, and Market Equilibrium

Markets in Motion and Price Controls

Elasticities

Market Efficiency and Welfare

Market Failure

Public Finance and Public Choice

Consumer Choice Theory

The Firm: Production and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Product Differentiation

Oligopoly and Strategic Behavior

The Markets for Labor, Capital, and Land

Income, Poverty, and Health Care

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Measuring Economic Performance

Economic Growth in the Global Economy

Financial Markets, Saving, and Investment

Aggregate Demand and Aggregate Supply

The Aggregate Expenditure Model

Monetary Institutions

The Federal Reserve System and Monetary Policy

Issues in Macroeconomic Theory and Policy

International Trade

International Finance

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