Question 1

Can activities like driving faster than the speed limit or driving without wearing a seat belt be considered rational behavior? Why or why not?

Accepted Answer

These activities would be considered rat

Question 2

Macroeconomics primarily examines:

Accepted Answer

A)  the behavior of individual households and firms. 
B)  how prices are determined within individual markets. 
C)  the output levels that maximize the profits of business firms. 
D)  broad issues such as national output, employment and inflation. 
A)  the behavior of individual households and firms. 
B)  how prices are determined within individual markets. 
C)  the output levels that maximize the profits of business firms. 
D)  broad issues such as national output, employment and inflation.

Question 3

"I woke up earlier today to beat other fishermen to the fish and yet I caught the same number of fish at 5 a.m.as I did at noon." Which of the following best explains this occurrence?

Accepted Answer

A)  Many other fishermen also believe that they can catch a greater quantity of fish if they arrive earlier at the fishing area. So the area is crowded early in the day. 
B)  The fish do not care when they eat, so they are likely to bite on the bait at any time during the day. 
C)  The catching of fish is mostly luck, so timing is not important. 
D)  The early bird catches the worm. 
A)  Many other fishermen also believe that they can catch a greater quantity of fish if they arrive earlier at the fishing area. So the area is crowded early in the day. 
B)  The fish do not care when they eat, so they are likely to bite on the bait at any time during the day. 
C)  The catching of fish is mostly luck, so timing is not important. 
D)  The early bird catches the worm.

Question 4

A positive statement is prescriptive-it prescribes what should be done.

Accepted Answer

A) True 
 B)False

Question 5

A theory asserts that manufacturers are less willing to sell units of output as the price of a good decreases,ceteris paribus.However,as the price of computers fell throughout the 1990s,more computers were sold.Which of the following best explains the apparent conflict between theory and data?

Accepted Answer

A)  The theory must be invalid. 
B)  The theory rests on assumptions that are too simplistic. 
C)  It is likely that variables other than the price and quantity of computers sold were changing. 
D)  All variables other than the price and quantity of computers sold were unchanged. 
A)  The theory must be invalid. 
B)  The theory rests on assumptions that are too simplistic. 
C)  It is likely that variables other than the price and quantity of computers sold were changing. 
D)  All variables other than the price and quantity of computers sold were unchanged.

Question 6

Many people have heard that the stock market rises when a team from the National Football Conference (NFC)wins the Super Bowl,and falls when a team from the American Football Conference (AFC)is victorious.If you conclude that there is a causal relationship between the outcome of the Super Bowl and stock prices,you probably are:

Accepted Answer

A)  confusing correlation with causation. 
B)  committing the fallacy of composition. 
C)  confusing the direction of causality, since everyone knows that stock prices determine which team wins the Super Bowl. 
D)  none of the above 
A)  confusing correlation with causation. 
B)  committing the fallacy of composition. 
C)  confusing the direction of causality, since everyone knows that stock prices determine which team wins the Super Bowl. 
D)  none of the above

Question 7

A good economic theory is more useful when it includes detailed facts even if the facts are not relevant to the questions being investigated.

Accepted Answer

A) True 
 B)False

Question 8

A leading game-console manufacturer slashes the price of its flagship product by ten percent.Holding other things such as income and preferences constant,which of the following is the most likely group behavior prediction?

Accepted Answer

A)  Price reduction will have no impact on purchase patterns. 
B)  Price reduction will be associated with a reduction in quality; thereby reducing sales. 
C)  More game consoles will be sold at lower prices. 
D)  Group behavior cannot be predicted. 
A)  Price reduction will have no impact on purchase patterns. 
B)  Price reduction will be associated with a reduction in quality; thereby reducing sales. 
C)  More game consoles will be sold at lower prices. 
D)  Group behavior cannot be predicted.

Question 9

From an economists' perspective,which of the following observations is not true?

Accepted Answer

A)  Self-interest is purely monetary in nature. 
B)  Self-interest can include benevolence. 
C)  Self-interest is a good predictor of human behavior in most situations. 
D)  Self-interest is not the same as selfishness. 
A)  Self-interest is purely monetary in nature. 
B)  Self-interest can include benevolence. 
C)  Self-interest is a good predictor of human behavior in most situations. 
D)  Self-interest is not the same as selfishness.

Question 10

Which of the following best illustrates the fallacy of composition?

Accepted Answer

A)  If the price of a product rises, the quantity supplied will decline. 
B)  The average wage rate tends to increase at approximately the same rate as inflation; hence, wage increases must cause inflation. 
C)  Resources are scarce; therefore, there is no such thing as a free lunch. 
D)  If I talk loudly at a party, I have a better chance of being heard by my listeners. If everyone at the party talks loudly, everyone can be heard more clearly. 
A)  If the price of a product rises, the quantity supplied will decline. 
B)  The average wage rate tends to increase at approximately the same rate as inflation; hence, wage increases must cause inflation. 
C)  Resources are scarce; therefore, there is no such thing as a free lunch. 
D)  If I talk loudly at a party, I have a better chance of being heard by my listeners. If everyone at the party talks loudly, everyone can be heard more clearly.

Question 11

"The hotter it gets,the more water people drink." This statement implies that the relationship between temperature and water consumption must have:

Accepted Answer

A)  no relationship. 
B)  a negative slope. 
C)  a positive slope. 
D)  either positive or negative slope. 
A)  no relationship. 
B)  a negative slope. 
C)  a positive slope. 
D)  either positive or negative slope.

Question 12

The fallacy of composition is essentially the error of:

Accepted Answer

A)  confusing association with causation. 
B)  confusing normative economics with positive economics. 
C)  generalizing from the individual to the whole. 
D)  omitting relevant variables from an economic model. 
A)  confusing association with causation. 
B)  confusing normative economics with positive economics. 
C)  generalizing from the individual to the whole. 
D)  omitting relevant variables from an economic model.

Question 13

Which of the following lies primarily within the realm of macroeconomics?

Accepted Answer

A)  a study of the elasticity of demand for gasoline 
B)  a study of how tax cuts stimulate aggregate production 
C)  an analysis of supply and demand conditions in the electricity market 
D)  a study of the impact of "mad cow" disease on the price of beef worldwide 
A)  a study of the elasticity of demand for gasoline 
B)  a study of how tax cuts stimulate aggregate production 
C)  an analysis of supply and demand conditions in the electricity market 
D)  a study of the impact of "mad cow" disease on the price of beef worldwide

Question 14

Economics can be divided into two main branches of study:

Accepted Answer

A)  capitalism and communism. 
B)  capitalism and socialism. 
C)  demand and supply. 
D)  microeconomics and macroeconomics. 
A)  capitalism and communism. 
B)  capitalism and socialism. 
C)  demand and supply. 
D)  microeconomics and macroeconomics.

Question 15

Which of the following is a statement of positive economics?

Accepted Answer

A)  The income tax reduces after-tax incomes of the rich. 
B)  A reduction in tax rates makes the after-tax distribution of income fairer. 
C)  Tax rates ought to be reduced so that people will work more. 
D)  All of the above are statements of positive economics. 
A)  The income tax reduces after-tax incomes of the rich. 
B)  A reduction in tax rates makes the after-tax distribution of income fairer. 
C)  Tax rates ought to be reduced so that people will work more. 
D)  All of the above are statements of positive economics.

Question 16

Identify whether each of the following topics would be primarily a concern of microeconomics or macroeconomics:

Accepted Answer

Microeconomic topics

Question 17

Your mother tells you,"Watching ten hours of TV per day will make you stupid." This is a positive statement because:

Accepted Answer

A)  your mother says it with a positive tone in her voice. 
B)  it is your mother's opinion. 
C)  it is a proposition that can be tested. 
D)  your mother is only thinking of your best interest. 
A)  your mother says it with a positive tone in her voice. 
B)  it is your mother's opinion. 
C)  it is a proposition that can be tested. 
D)  your mother is only thinking of your best interest.

Question 18

Economics is a science that:

Accepted Answer

A)  typically uses controlled experiments to learn about consumer and firm behavior. 
B)  uses models that cannot be tested empirically due to the complex nature of the economy. 
C)  explores how choices are made between conflicting wants and desires in a world of scarcity. 
D)  relies entirely upon normative analysis. 
A)  typically uses controlled experiments to learn about consumer and firm behavior. 
B)  uses models that cannot be tested empirically due to the complex nature of the economy. 
C)  explores how choices are made between conflicting wants and desires in a world of scarcity. 
D)  relies entirely upon normative analysis.

Question 19

Most of economic analysis assumes that people's actions are:

Accepted Answer

A)  motivated by submerged emotional needs. 
B)  driven by magnetic forces generated by planetary movements. 
C)  motivated primarily by concern for the well-being of others. 
D)  motivated by self-interest. 
A)  motivated by submerged emotional needs. 
B)  driven by magnetic forces generated by planetary movements. 
C)  motivated primarily by concern for the well-being of others. 
D)  motivated by self-interest.

Question 20

Economics is a social science that primarily explores how:

Accepted Answer

A)  businesses market products under competitive conditions. 
B)  stock and bond prices fluctuate when there are changes in demand or supply. 
C)  the government allocates its budget among competing political interests. 
D)  goods and services are produced and distributed in a world with limited resources. 
A)  businesses market products under competitive conditions. 
B)  stock and bond prices fluctuate when there are changes in demand or supply. 
C)  the government allocates its budget among competing political interests. 
D)  goods and services are produced and distributed in a world with limited resources.

Exam 1: The Role and Method of Economics

Can activities like driving faster than the speed limit or driving without wearing a seat belt be considered rational behavior? Why or why not?

Macroeconomics primarily examines:

"I woke up earlier today to beat other fishermen to the fish and yet I caught the same number of fish at 5 a.m.as I did at noon." Which of the following best explains this occurrence?

A positive statement is prescriptive-it prescribes what should be done.

A theory asserts that manufacturers are less willing to sell units of output as the price of a good decreases,ceteris paribus.However,as the price of computers fell throughout the 1990s,more computers were sold.Which of the following best explains the apparent conflict between theory and data?

A good economic theory is more useful when it includes detailed facts even if the facts are not relevant to the questions being investigated.

A leading game-console manufacturer slashes the price of its flagship product by ten percent.Holding other things such as income and preferences constant,which of the following is the most likely group behavior prediction?

From an economists' perspective,which of the following observations is not true?

Which of the following best illustrates the fallacy of composition?

"The hotter it gets,the more water people drink." This statement implies that the relationship between temperature and water consumption must have:

The fallacy of composition is essentially the error of:

Which of the following lies primarily within the realm of macroeconomics?

Economics can be divided into two main branches of study:

Which of the following is a statement of positive economics?

Identify whether each of the following topics would be primarily a concern of microeconomics or macroeconomics:

Your mother tells you,"Watching ten hours of TV per day will make you stupid." This is a positive statement because:

Economics is a science that:

Most of economic analysis assumes that people's actions are:

Economics is a social science that primarily explores how:

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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