Question 1

Living in a world of scarcity involves trade-offs.

Accepted Answer

A) True 
 B)False

Question 2

Macroeconomic topics do not usually include:

Accepted Answer

A)  the rate of inflation. 
B)  the rate of unemployment. 
C)  economic growth. 
D)  the profit maximizing decisions of an individual manufacturer. 
A)  the rate of inflation. 
B)  the rate of unemployment. 
C)  economic growth. 
D)  the profit maximizing decisions of an individual manufacturer.

Question 3

What according to an economist,forms the basis of rational human behavior under current and anticipated future circumstances?

Accepted Answer

A)  Scarcity and rarity 
B)  Opportunities and pay-offs 
C)  Values and information 
D)  Legal consequences 
A)  Scarcity and rarity 
B)  Opportunities and pay-offs 
C)  Values and information 
D)  Legal consequences

Question 4

Scarcity is the result of:

Accepted Answer

A)  government decision making. 
B)  inappropriate normative judgments. 
C)  positive economics. 
D)  wants that exceed the resources necessary to provide them. 
A)  government decision making. 
B)  inappropriate normative judgments. 
C)  positive economics. 
D)  wants that exceed the resources necessary to provide them.

Question 5

A good economic theory:

Accepted Answer

A)  includes every detail that affects the economic behavior of interest. 
B)  relies on simplifying assumptions in order to explain economic behavior. 
C)  does not rely on simplifying assumptions. 
D)  is impossible to achieve because of the difficulty of conducting controlled experiments. 
A)  includes every detail that affects the economic behavior of interest. 
B)  relies on simplifying assumptions in order to explain economic behavior. 
C)  does not rely on simplifying assumptions. 
D)  is impossible to achieve because of the difficulty of conducting controlled experiments.

Question 6

Economics is primarily the study of:

Accepted Answer

A)  human greed. 
B)  how firms compete for profits in the marketplace. 
C)  how limited resources are allocated to satisfy unlimited wants. 
D)  how successful investors make money in the stock market. 
A)  human greed. 
B)  how firms compete for profits in the marketplace. 
C)  how limited resources are allocated to satisfy unlimited wants. 
D)  how successful investors make money in the stock market.

Question 7

Adam Smith

Accepted Answer

A)  is considered the founder of modern economics 
B)  wrote An Inquiry into the Nature and Causes of the Wealth of Nations 
C)  believed the wealth of nations came from an accumulation of gold and silver. 
D)  All of the above 
A)  is considered the founder of modern economics 
B)  wrote An Inquiry into the Nature and Causes of the Wealth of Nations 
C)  believed the wealth of nations came from an accumulation of gold and silver. 
D)  All of the above

Question 8

Microeconomic topics do not usually include:

Accepted Answer

A)  the impact of large government budget deficits on private investment spending. 
B)  the determinants of the supply of wheat by farmers. 
C)  the determinants of the demand for DVD players by consumers. 
D)  the impact of a change in the price of leather used to manufacture shoes. 
A)  the impact of large government budget deficits on private investment spending. 
B)  the determinants of the supply of wheat by farmers. 
C)  the determinants of the demand for DVD players by consumers. 
D)  the impact of a change in the price of leather used to manufacture shoes.

Question 9

Economists believe that individuals act as if they are motivated:

Accepted Answer

A)  primarily by the opinions of their peers. 
B)  primarily by human feelings. 
C)  primarily by self-interest. 
D)  only by concern for the larger community. 
A)  primarily by the opinions of their peers. 
B)  primarily by human feelings. 
C)  primarily by self-interest. 
D)  only by concern for the larger community.

Question 10

An economic theory is tested by:

Accepted Answer

A)  assessing the realism of its assumptions. 
B)  polling economists to see if there is consensus as to the validity of the hypothesis. 
C)  comparing and contrasting its simplicity with related theories. 
D)  comparing its predictions with real-world data. 
A)  assessing the realism of its assumptions. 
B)  polling economists to see if there is consensus as to the validity of the hypothesis. 
C)  comparing and contrasting its simplicity with related theories. 
D)  comparing its predictions with real-world data.

Question 11

"The president of the world's biggest polluter (the United States)needs to do more than propose well-intentioned but insufficient measures that amount to using a squirt gun to quell a raging fire." Is this a positive or a normative economic statement? Explain your answer.

Accepted Answer

This statement is normative.Th

Question 12

A testable proposition that predicts how people will react to changed circumstances is called a hypothesis.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following questions is addressed primarily by macroeconomics?

Accepted Answer

A)  The allocation of scarce satellite orbit slots. 
B)  Decisions made by a manufacturer of a particular good. 
C)  Policies to control the inflation rate. 
D)  A consumer's decision to buy more clothing and less food. 
A)  The allocation of scarce satellite orbit slots. 
B)  Decisions made by a manufacturer of a particular good. 
C)  Policies to control the inflation rate. 
D)  A consumer's decision to buy more clothing and less food.

Question 14

Microeconomics differs from macroeconomics in that:

Accepted Answer

A)  microeconomics studies individual decision making while macroeconomics examines aggregate decision making. 
B)  microeconomics studies aggregate decision making while macroeconomics examines individual decision making. 
C)  microeconomics utilizes positive economic analysis while macroeconomics utilizes normative economic analysis. 
D)  microeconomics is concerned with consumer behavior while macroeconomics is concerned with firm behavior. 
A)  microeconomics studies individual decision making while macroeconomics examines aggregate decision making. 
B)  microeconomics studies aggregate decision making while macroeconomics examines individual decision making. 
C)  microeconomics utilizes positive economic analysis while macroeconomics utilizes normative economic analysis. 
D)  microeconomics is concerned with consumer behavior while macroeconomics is concerned with firm behavior.

Question 15

Microeconomics primarily models:

Accepted Answer

A)  the overall economy. 
B)  the behavior of firms but not households. 
C)  the behavior of households but not firms. 
D)  the behavior of both firms and households and how they interact in the marketplace. 
A)  the overall economy. 
B)  the behavior of firms but not households. 
C)  the behavior of households but not firms. 
D)  the behavior of both firms and households and how they interact in the marketplace.

Question 16

The term "ceteris paribus" means that:

Accepted Answer

A)  everything is variable. 
B)  all variables except those specified are constant. 
C)  no one knows which variables will change and which will remain constant. 
D)  what is true for the individual is not necessarily true for the whole. 
A)  everything is variable. 
B)  all variables except those specified are constant. 
C)  no one knows which variables will change and which will remain constant. 
D)  what is true for the individual is not necessarily true for the whole.

Question 17

When making decisions,economists believe that individuals act rationally if they:

Accepted Answer

A)  seek to improve their own situations and not try to anticipate future consequences of their actions. 
B)  only pursue the goals of the community. 
C)  try to anticipate future consequences and seek to improve their own situations. 
D)  always choose alternatives that offer the greatest financial reward. 
A)  seek to improve their own situations and not try to anticipate future consequences of their actions. 
B)  only pursue the goals of the community. 
C)  try to anticipate future consequences and seek to improve their own situations. 
D)  always choose alternatives that offer the greatest financial reward.

Question 18

An economist might hypothesize that people will buy less gasoline at a price of $4.00 per gallon than at $3.50 per gallon.In order for the hypothesis to become a theory,it would have to be tested.Which of the following observations would seem to support this hypothesis?

Accepted Answer

A)  People in each region buy the same amount of gasoline regardless of the price. 
B)  Gasoline consumption varies with the quantity of cars purchased in each region. 
C)  Individuals line up to purchase more gasoline at higher prices with the expectation that the fuel will be of higher quality. 
D)  Individuals in each region respond to an increase in price by purchasing less gasoline. 
A)  People in each region buy the same amount of gasoline regardless of the price. 
B)  Gasoline consumption varies with the quantity of cars purchased in each region. 
C)  Individuals line up to purchase more gasoline at higher prices with the expectation that the fuel will be of higher quality. 
D)  Individuals in each region respond to an increase in price by purchasing less gasoline.

Question 19

Scarcity exists because of:

Accepted Answer

A)  the allocation of goods by prices. 
B)  specialization and division of labor. 
C)  the market mechanism. 
D)  unlimited wants and limited resources. 
A)  the allocation of goods by prices. 
B)  specialization and division of labor. 
C)  the market mechanism. 
D)  unlimited wants and limited resources.

Question 20

Which of the following statements can explain why an association between Event A and Event B may not imply causality from A to B?

Accepted Answer

A)  The observed association may be coincidental. 
B)  There may be a third variable that is responsible for causing both events. 
C)  Causality may run from Event B to Event A instead of in the opposite direction. 
D)  All of the above can explain why an association between Event A and Event B may not imply causality from A to B. 
A)  The observed association may be coincidental. 
B)  There may be a third variable that is responsible for causing both events. 
C)  Causality may run from Event B to Event A instead of in the opposite direction. 
D)  All of the above can explain why an association between Event A and Event B may not imply causality from A to B.

Exam 1: The Role and Method of Economics

Living in a world of scarcity involves trade-offs.

Macroeconomic topics do not usually include:

What according to an economist,forms the basis of rational human behavior under current and anticipated future circumstances?

Scarcity is the result of:

A good economic theory:

Economics is primarily the study of:

Adam Smith

Microeconomic topics do not usually include:

Economists believe that individuals act as if they are motivated:

An economic theory is tested by:

"The president of the world's biggest polluter (the United States)needs to do more than propose well-intentioned but insufficient measures that amount to using a squirt gun to quell a raging fire." Is this a positive or a normative economic statement? Explain your answer.

A testable proposition that predicts how people will react to changed circumstances is called a hypothesis.

Which of the following questions is addressed primarily by macroeconomics?

Microeconomics differs from macroeconomics in that:

Microeconomics primarily models:

The term "ceteris paribus" means that:

When making decisions,economists believe that individuals act rationally if they:

An economist might hypothesize that people will buy less gasoline at a price of $4.00 per gallon than at $3.50 per gallon.In order for the hypothesis to become a theory,it would have to be tested.Which of the following observations would seem to support this hypothesis?

Scarcity exists because of:

Which of the following statements can explain why an association between Event A and Event B may not imply causality from A to B?

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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