Question 1

The fallacy of composition is:

Accepted Answer

A)  the erroneous view that an economic activity can sometimes exceed the sum of its components. 
B)  the erroneous view that what is true for the individual will also be true for the group. 
C)  the view that the aggregation of economic activity will necessarily lead to an outcome that is different than the outcome generated by each individual in the group. 
D)  the idea that association need not imply causation. 
A)  the erroneous view that an economic activity can sometimes exceed the sum of its components. 
B)  the erroneous view that what is true for the individual will also be true for the group. 
C)  the view that the aggregation of economic activity will necessarily lead to an outcome that is different than the outcome generated by each individual in the group. 
D)  the idea that association need not imply causation.

Question 2

In Europe,birth rates have fallen as the stork population decreased.This is likely

Accepted Answer

A)  a normative statement. 
B)  confusing correlation and causation. 
C)  the fallacy of composition. 
D)  all of the above 
A)  a normative statement. 
B)  confusing correlation and causation. 
C)  the fallacy of composition. 
D)  all of the above

Question 3

Darla is surprised to find that the quality of in-flight service remains much the same despite a steep hike in air-fares recently.What could be wrong in her assumption that a higher price naturally translates into better quality?

Accepted Answer

The fact that two variables might be rel

Question 4

Which of the following topics would be covered in microeconomics?

Accepted Answer

A)  The effects of an increase in the supply of lumber on the homebuilding industry. 
B)  The unemployment rate. 
C)  The effects of interest rates on the overall economy. 
D)  The inflation rate. 
A)  The effects of an increase in the supply of lumber on the homebuilding industry. 
B)  The unemployment rate. 
C)  The effects of interest rates on the overall economy. 
D)  The inflation rate.

Question 5

Which of the following is an example of microeconomic analysis?

Accepted Answer

A)  impact of taxation on national income 
B)  rate of increase in the national debt 
C)  relationship between inflation and interest rates set by the Federal Reserve 
D)  none of the above 
A)  impact of taxation on national income 
B)  rate of increase in the national debt 
C)  relationship between inflation and interest rates set by the Federal Reserve 
D)  none of the above

Question 6

The beginning point of a graph (the 0,0 point)is known as:

Accepted Answer

A)  ground zero. 
B)  the quadrant. 
C)  the origin. 
D)  variable one. 
A)  ground zero. 
B)  the quadrant. 
C)  the origin. 
D)  variable one.

Question 7

Macroeconomics:

Accepted Answer

A)  is narrower in scope than microeconomics. 
B)  analyzes mergers and acquisitions between firms. 
C)  is concerned with the expansion and contraction of the overall economy. 
D)  is primarily concerned with the decisions of individual households. 
A)  is narrower in scope than microeconomics. 
B)  analyzes mergers and acquisitions between firms. 
C)  is concerned with the expansion and contraction of the overall economy. 
D)  is primarily concerned with the decisions of individual households.

Question 8

When economists assume that people act rationally,it means they:

Accepted Answer

A)  make decisions based on complete and accurate information. 
B)  make decisions that will not be regretted later on. 
C)  make decisions based on what they believe is best for themselves using available information. 
D)  make decisions based solely on what is best for society. 
A)  make decisions based on complete and accurate information. 
B)  make decisions that will not be regretted later on. 
C)  make decisions based on what they believe is best for themselves using available information. 
D)  make decisions based solely on what is best for society.

Question 9

Normative statements are:

Accepted Answer

A)  prescriptive, making claims about how the world ought to be. 
B)  descriptive, making claims about how the world is. 
C)  optimistic, putting the best possible interpretation on things. 
D)  statements that establish production goals for the economy. 
A)  prescriptive, making claims about how the world ought to be. 
B)  descriptive, making claims about how the world is. 
C)  optimistic, putting the best possible interpretation on things. 
D)  statements that establish production goals for the economy.

Question 10

Self-interest could never include benevolence.

Accepted Answer

A) True 
 B)False

Question 11

In the discussion of correlation and causation,correlation means:

Accepted Answer

A)  two sets of phenomena may be related, but one does not necessarily cause the other. 
B)  two sets of phenomena are not related and one may in fact cause the other. 
C)  that when two phenomena are repeatedly observed together, one must cause the other. 
D)  that if a groundhog sees his shadow in February, this phenomena causes there to be six more weeks of bad weather. 
A)  two sets of phenomena may be related, but one does not necessarily cause the other. 
B)  two sets of phenomena are not related and one may in fact cause the other. 
C)  that when two phenomena are repeatedly observed together, one must cause the other. 
D)  that if a groundhog sees his shadow in February, this phenomena causes there to be six more weeks of bad weather.

Question 12

Economics is most importantly concerned with:

Accepted Answer

A)  how to profit from trading in the stock market. 
B)  government taxation and spending. 
C)  studying how we allocate scarce resources to satisfy unlimited wants. 
D)  how to successfully launch a business. 
A)  how to profit from trading in the stock market. 
B)  government taxation and spending. 
C)  studying how we allocate scarce resources to satisfy unlimited wants. 
D)  how to successfully launch a business.

Question 13

Which of the following is most likely a topic of discussion in macroeconomics?

Accepted Answer

A)  an increase in the price of a pizza 
B)  a decrease in the production of DVD players by a consumer electronics company 
C)  an increase in the wage rate paid to automobile workers 
D)  a decrease in the unemployment rate 
A)  an increase in the price of a pizza 
B)  a decrease in the production of DVD players by a consumer electronics company 
C)  an increase in the wage rate paid to automobile workers 
D)  a decrease in the unemployment rate

Question 14

In order to determine if a hypothesis is valid we must utilize

Accepted Answer

A)  qualitative analysis. 
B)  empirical analysis. 
C)  marginal analysis. 
D)  average analysis. 
A)  qualitative analysis. 
B)  empirical analysis. 
C)  marginal analysis. 
D)  average analysis.

Question 15

Exhibit 1-1   Referring to Exhibit 1-1,which point on the demand curve represents the maximum number of DVDs purchased?

Accepted Answer

A)  A 
B)  B 
C)  D 
D)  E 
A)  A 
B)  B 
C)  D 
D)  E

Question 16

Scarcity applies to decision makers in macroeconomics but not in microeconomics.

Accepted Answer

A) True 
 B)False

Question 17

Positive statements are:

Accepted Answer

A)  prescriptive, making claims about how the world ought to be. 
B)  descriptive, making claims about how the world is. 
C)  optimistic, putting the best possible interpretation on things. 
D)  affirmative, justifying existing economic policy. 
A)  prescriptive, making claims about how the world ought to be. 
B)  descriptive, making claims about how the world is. 
C)  optimistic, putting the best possible interpretation on things. 
D)  affirmative, justifying existing economic policy.

Question 18

If individuals who sit in the back of the classroom receive lower grades on average than the rest of the class,does that mean that sitting in the back of a classroom causes one to perform poorly on exams?

Accepted Answer

A)  Not necessarily. The reoccurrence of a certain relationship between two variables does not necessarily imply causation. 
B)  It is not possible for an economist to determine causation between variables. 
C)  The reoccurrence of such a relationship is sufficient evidence that sitting in the back of a classroom will lead to lower grades. 
D)  none of the above 
A)  Not necessarily. The reoccurrence of a certain relationship between two variables does not necessarily imply causation. 
B)  It is not possible for an economist to determine causation between variables. 
C)  The reoccurrence of such a relationship is sufficient evidence that sitting in the back of a classroom will lead to lower grades. 
D)  none of the above

Question 19

A normative statement is descriptive-it describes what happens and why it happens.

Accepted Answer

A) True 
 B)False

Question 20

Economics is the study of how people cope with:

Accepted Answer

A)  fluctuations in stock prices. 
B)  greed. 
C)  limited human wants. 
D)  limited resources. 
A)  fluctuations in stock prices. 
B)  greed. 
C)  limited human wants. 
D)  limited resources.

Exam 1: The Role and Method of Economics

The fallacy of composition is:

In Europe,birth rates have fallen as the stork population decreased.This is likely

Darla is surprised to find that the quality of in-flight service remains much the same despite a steep hike in air-fares recently.What could be wrong in her assumption that a higher price naturally translates into better quality?

Which of the following topics would be covered in microeconomics?

Which of the following is an example of microeconomic analysis?

The beginning point of a graph (the 0,0 point)is known as:

Macroeconomics:

When economists assume that people act rationally,it means they:

Normative statements are:

Self-interest could never include benevolence.

In the discussion of correlation and causation,correlation means:

Economics is most importantly concerned with:

Which of the following is most likely a topic of discussion in macroeconomics?

In order to determine if a hypothesis is valid we must utilize

Exhibit 1-1 Referring to Exhibit 1-1,which point on the demand curve represents the maximum number of DVDs purchased?

Scarcity applies to decision makers in macroeconomics but not in microeconomics.

Positive statements are:

If individuals who sit in the back of the classroom receive lower grades on average than the rest of the class,does that mean that sitting in the back of a classroom causes one to perform poorly on exams?

A normative statement is descriptive-it describes what happens and why it happens.

Economics is the study of how people cope with:

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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