Question 1

In an economic model, assumptions

Accepted Answer

A)  must be applicable to all real-world situations. 
B)  must be eliminated before being used to make sure the model is realistic. 
C)  are not important in determining the usefulness of the model. 
D)  define the set of circumstances in which the model is most likely to be applicable in the real world. 
A)  must be applicable to all real-world situations. 
B)  must be eliminated before being used to make sure the model is realistic. 
C)  are not important in determining the usefulness of the model. 
D)  define the set of circumstances in which the model is most likely to be applicable in the real world.

Question 2

Why do economists test their hypotheses?

Accepted Answer

A)  to see whether people are motivated by self-interest 
B)  to see whether their models predict the choices people will make 
C)  to determine whether government policies have effectively achieved their goals 
D)  to learn what people are thinking when they make the choices they do 
A)  to see whether people are motivated by self-interest 
B)  to see whether their models predict the choices people will make 
C)  to determine whether government policies have effectively achieved their goals 
D)  to learn what people are thinking when they make the choices they do

Question 3

Wants are

Accepted Answer

A)  another term for needs. 
B)  the things people would consume if they had unlimited incomes. 
C)  the things people consume with their income. 
D)  all the things people really need in order to live comfortably. 
A)  another term for needs. 
B)  the things people would consume if they had unlimited incomes. 
C)  the things people consume with their income. 
D)  all the things people really need in order to live comfortably.

Question 4

What would lead an economist to conclude that Theory A is superior to Theory B?

Accepted Answer

A)  Theory A predicts real-world events better than does Theory B. 
B)  The assumptions underlying Theory A are more realistic than are the assumptions underlying Theory B. 
C)  Theory A explains how people think, whereas Theory B only explains what they do. 
D)  Theory A is based on the assumption that an individual typically cannot determine what is in his or her own best interest, whereas Theory B assumes that each person knows what is in his or her own best interest and acts accordingly. 
A)  Theory A predicts real-world events better than does Theory B. 
B)  The assumptions underlying Theory A are more realistic than are the assumptions underlying Theory B. 
C)  Theory A explains how people think, whereas Theory B only explains what they do. 
D)  Theory A is based on the assumption that an individual typically cannot determine what is in his or her own best interest, whereas Theory B assumes that each person knows what is in his or her own best interest and acts accordingly.

Question 5

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

Accepted Answer

Economists do not assume people are self

Question 6

A fundamental aspect of economics is to

Accepted Answer

A)  ensure that every firm makes a profit. 
B)  analyze how choices are made. 
C)  satisfy all our wants. 
D)  make sure that we always have sufficient resources. 
A)  ensure that every firm makes a profit. 
B)  analyze how choices are made. 
C)  satisfy all our wants. 
D)  make sure that we always have sufficient resources.

Question 7

If a straight line crosses the Y-axis at 2 and crosses the X-axis at 4, we can conclude that the slope of the line is

Accepted Answer

A)  positive. 
B)  negative. 
C)  zero. 
D)  infinity. 
A)  positive. 
B)  negative. 
C)  zero. 
D)  infinity.

Question 8

Normative economic analysis involves

Accepted Answer

A)  positive analysis. 
B)  value judgments. 
C)  if-then statements. 
D)  objective descriptions of the way things are. 
A)  positive analysis. 
B)  value judgments. 
C)  if-then statements. 
D)  objective descriptions of the way things are.

Question 9

Which of the following statements is a normative as opposed to a positive economic statement?

Accepted Answer

A)  Consumer spending helps to create jobs. 
B)  If the price of gasoline goes up, people buy less gasoline. 
C)  Labor unions should be allowed to organize in every industry. 
D)  Government intervention in markets is common in many countries. 
A)  Consumer spending helps to create jobs. 
B)  If the price of gasoline goes up, people buy less gasoline. 
C)  Labor unions should be allowed to organize in every industry. 
D)  Government intervention in markets is common in many countries.

Question 10

The study of how a particular firm might choose to maximize its profits would fall into what type of analysis?

Accepted Answer

A)  macroeconomics 
B)  microeconomics 
C)  political economics 
D)  aggregate economics 
A)  macroeconomics 
B)  microeconomics 
C)  political economics 
D)  aggregate economics

Question 11

Aggregate measures are

Accepted Answer

A)  anything to do with economics. 
B)  a total measure of a variable in the economy. 
C)  used only by policymakers but not by firms. 
D)  determined by the government. 
A)  anything to do with economics. 
B)  a total measure of a variable in the economy. 
C)  used only by policymakers but not by firms. 
D)  determined by the government.

Question 12

Because resources are scarce relative to wants, the study of economics concerns

Accepted Answer

A)  how money is important to people. 
B)  how individuals, businesses, and governments make choices. 
C)  how money is used to buy what people want. 
D)  None of the above are correct. 
A)  how money is important to people. 
B)  how individuals, businesses, and governments make choices. 
C)  how money is used to buy what people want. 
D)  None of the above are correct.

Question 13

Macroeconomics would be concerned with

Accepted Answer

A)  implications of changes in unemployment and inflation. 
B)  the effects on individual consumers of changes in the price of gasoline for a business. 
C)  the effects of a tax on beer. 
D)  the effects of wage increases on steel manufacturers. 
A)  implications of changes in unemployment and inflation. 
B)  the effects on individual consumers of changes in the price of gasoline for a business. 
C)  the effects of a tax on beer. 
D)  the effects of wage increases on steel manufacturers.

Question 14

Which of the following is an example of a positive statement?

Accepted Answer

A)  It is too hot to go jogging. 
B)  Ceteris paribus, a teacher should award a higher grade if you study more hours for an economics test. 
C)  When the price of an item increases, people respond by reducing their consumption of the item. 
D)  The government should balance the budget. 
A)  It is too hot to go jogging. 
B)  Ceteris paribus, a teacher should award a higher grade if you study more hours for an economics test. 
C)  When the price of an item increases, people respond by reducing their consumption of the item. 
D)  The government should balance the budget.

Question 15

Jose is rational if he

Accepted Answer

A)  does not intentionally make decisions that would leave him worse off. 
B)  never makes a mistake in his life. 
C)  only responds to rewards that involve money. 
D)  always uses a model or mathematical formula to help him make a decision. 
A)  does not intentionally make decisions that would leave him worse off. 
B)  never makes a mistake in his life. 
C)  only responds to rewards that involve money. 
D)  always uses a model or mathematical formula to help him make a decision.

Question 16

During the Middle Ages, heretics were often burned at the stake. Were the heretics violating the assumption of rational self-interest? Explain.

Accepted Answer

For someone today, or even many people l

Question 17

________ are the things that are used to produce items that satisfy people's wants.

Accepted Answer

A)  Concepts 
B)  Production possibilities curves 
C)  Resources 
D)  Costs 
A)  Concepts 
B)  Production possibilities curves 
C)  Resources 
D)  Costs

Question 18

A common approach that economists use to understand, explain and predict economic phenomena is to

Accepted Answer

A)  form a theory or model. 
B)  conduct experiments in a science lab. 
C)  ask what people think. 
D)  examine people's thought processes. 
A)  form a theory or model. 
B)  conduct experiments in a science lab. 
C)  ask what people think. 
D)  examine people's thought processes.

Question 19

Both the social sciences and the natural sciences employ ________ to help them understand the world around them.

Accepted Answer

A)  models 
B)  experiments 
C)  traditional thinking 
D)  implications 
A)  models 
B)  experiments 
C)  traditional thinking 
D)  implications

Question 20

Economics is the study of

Accepted Answer

A)  the allocation of scarce resources to satisfy unlimited wants. 
B)  why some people want certain goods and services. 
C)  earning the most income. 
D)  ways to use fewer resources. 
A)  the allocation of scarce resources to satisfy unlimited wants. 
B)  why some people want certain goods and services. 
C)  earning the most income. 
D)  ways to use fewer resources.

Exam 1: The Nature of Economics

In an economic model, assumptions

Why do economists test their hypotheses?

Wants are

What would lead an economist to conclude that Theory A is superior to Theory B?

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

A fundamental aspect of economics is to

If a straight line crosses the Y-axis at 2 and crosses the X-axis at 4, we can conclude that the slope of the line is

Normative economic analysis involves

Which of the following statements is a normative as opposed to a positive economic statement?

The study of how a particular firm might choose to maximize its profits would fall into what type of analysis?

Aggregate measures are

Because resources are scarce relative to wants, the study of economics concerns

Macroeconomics would be concerned with

Which of the following is an example of a positive statement?

Jose is rational if he

During the Middle Ages, heretics were often burned at the stake. Were the heretics violating the assumption of rational self-interest? Explain.

________ are the things that are used to produce items that satisfy people's wants.

A common approach that economists use to understand, explain and predict economic phenomena is to

Both the social sciences and the natural sciences employ ________ to help them understand the world around them.

Economics is the study of

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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