Question 1

Another term for "economic models" is

Accepted Answer

A)  economic systems. 
B)  economic theories. 
C)  economic science. 
D)  economic institutions. 
A)  economic systems. 
B)  economic theories. 
C)  economic science. 
D)  economic institutions.

Question 2

According to proponents of behavioral economics, because every possible choice cannot be considered, an individual will tend to fall back on methods of making decisions that are simpler than trying to sort through every single possibility, known as

Accepted Answer

A)  rules of thumb. 
B)  rational options. 
C)  irrational choices. 
D)  normative decisions. 
A)  rules of thumb. 
B)  rational options. 
C)  irrational choices. 
D)  normative decisions.

Question 3

The President's statement that "to encourage economic growth, taxes should be cut"

Accepted Answer

A)  would be an example of a normative statement. 
B)  would be an example of a positive statement. 
C)  would be an example of a microeconomic statement. 
D)  would be a statement of mercantilist economic philosophy. 
A)  would be an example of a normative statement. 
B)  would be an example of a positive statement. 
C)  would be an example of a microeconomic statement. 
D)  would be a statement of mercantilist economic philosophy.

Question 4

The assumption that individuals do NOT intentionally make decisions that would leave them worse off is referred to as

Accepted Answer

A)  the premium assumption. 
B)  the law of comparative advantage. 
C)  the rationality assumption. 
D)  a ceteris paribus assumption. 
A)  the premium assumption. 
B)  the law of comparative advantage. 
C)  the rationality assumption. 
D)  a ceteris paribus assumption.

Question 5

Which one of the following is an example of a normative statement?

Accepted Answer

A)  A vacation in Colorado is better than a vacation in Hawaii. 
B)  Hotels in Colorado are more expensive than are hotels in Hawaii. 
C)  The hotel vacancy rate in Hawaii will increase as airfares to Hawaii increase. 
D)  The busiest tourist month in Colorado is July. 
A)  A vacation in Colorado is better than a vacation in Hawaii. 
B)  Hotels in Colorado are more expensive than are hotels in Hawaii. 
C)  The hotel vacancy rate in Hawaii will increase as airfares to Hawaii increase. 
D)  The busiest tourist month in Colorado is July.

Question 6

Economic models are

Accepted Answer

A)  always based on laboratory methods similar to natural sciences. 
B)  a simplified representations of the real world. 
C)  used only in conducting experiments about how people behave. 
D)  used in macroeconomic analysis but not in microeconomic analysis. 
A)  always based on laboratory methods similar to natural sciences. 
B)  a simplified representations of the real world. 
C)  used only in conducting experiments about how people behave. 
D)  used in macroeconomic analysis but not in microeconomic analysis.

Question 7

Incentives are

Accepted Answer

A)  potential rewards available if a particular activity is undertaken. 
B)  ineffective as a device to get people to behave in a certain fashion. 
C)  inappropriate ways to obtain a certain kind of behavior. 
D)  useless when people behave rationally. 
A)  potential rewards available if a particular activity is undertaken. 
B)  ineffective as a device to get people to behave in a certain fashion. 
C)  inappropriate ways to obtain a certain kind of behavior. 
D)  useless when people behave rationally.

Question 8

The distinction between microeconomics and macroeconomics is

Accepted Answer

A)  clearly drawn, and there is no overlap between them. 
B)  determined by economists in a clear and concise manner. 
C)  narrowly drawn, and microeconomic analysis often relies on macroeconomic tools. 
D)  often blurred because aggregates are made up of individuals and firms. 
A)  clearly drawn, and there is no overlap between them. 
B)  determined by economists in a clear and concise manner. 
C)  narrowly drawn, and microeconomic analysis often relies on macroeconomic tools. 
D)  often blurred because aggregates are made up of individuals and firms.

Question 9

An economic model should capture

Accepted Answer

A)  the essential relationships that help to analyze the problem. 
B)  all possible variables that apply to the problem. 
C)  only social value related variables. 
D)  all of the above. 
A)  the essential relationships that help to analyze the problem. 
B)  all possible variables that apply to the problem. 
C)  only social value related variables. 
D)  all of the above.

Question 10

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

Accepted Answer

A)  Farmers need some type of government aid. 
B)  State governments should provide economic assistance to farmers. 
C)  The federal government should provide economic assistance to farmers. 
D)  The amount of financial assistance given to farmers is higher this year than it was 10 years ago. 
A)  Farmers need some type of government aid. 
B)  State governments should provide economic assistance to farmers. 
C)  The federal government should provide economic assistance to farmers. 
D)  The amount of financial assistance given to farmers is higher this year than it was 10 years ago.

Question 11

Behavioral economics is an approach to the study of consumer behavior

Accepted Answer

A)  that emphasizes psychological limitations and complications that potentially interfere with rational decision making. 
B)  that emphasizes the capabilities of individuals to succeed in attaining all their unlimited wants utilizing limited resources. 
C)  that, in contrast to standard approaches in economics, utilizes the ceteris paribus assumption. 
D)  that, in contrast to standard approaches in economics, relies on real-world data to evaluate the usefulness of economic models. 
A)  that emphasizes psychological limitations and complications that potentially interfere with rational decision making. 
B)  that emphasizes the capabilities of individuals to succeed in attaining all their unlimited wants utilizing limited resources. 
C)  that, in contrast to standard approaches in economics, utilizes the ceteris paribus assumption. 
D)  that, in contrast to standard approaches in economics, relies on real-world data to evaluate the usefulness of economic models.

Question 12

An appropriate test of the effectiveness of an economic model is

Accepted Answer

A)  the number of variables contained within the model. 
B)  the model's ability to predict future economic activity. 
C)  the number of economists who have worked on the model. 
D)  the number of assumptions which the economist has made. 
A)  the number of variables contained within the model. 
B)  the model's ability to predict future economic activity. 
C)  the number of economists who have worked on the model. 
D)  the number of assumptions which the economist has made.

Question 13

How does the science of economics deal with the fact that we all have different values?

Accepted Answer

A)  by assuming that values don't play a role in economic behavior 
B)  by seeking to discover the sources of different value systems 
C)  by using positive analysis 
D)  by surveying the public to see what the most common values are, and then incorporating those as assumptions into their models 
A)  by assuming that values don't play a role in economic behavior 
B)  by seeking to discover the sources of different value systems 
C)  by using positive analysis 
D)  by surveying the public to see what the most common values are, and then incorporating those as assumptions into their models

Question 14

Which of the following is a normative statement?

Accepted Answer

A)  The Gross Domestic Product is the dollar value of all goods and services produced in a country in a year. 
B)  Fiscal policy is determined by the Congress and the president. 
C)  Tax cuts ought to be enacted for the good of the economy. 
D)  Monetary policy is determined by the Federal Reserve System. 
A)  The Gross Domestic Product is the dollar value of all goods and services produced in a country in a year. 
B)  Fiscal policy is determined by the Congress and the president. 
C)  Tax cuts ought to be enacted for the good of the economy. 
D)  Monetary policy is determined by the Federal Reserve System.

Question 15

When we say that an individual behaves according to "rational self-interest," we mean that this individual

Accepted Answer

A)  is motivated by greed. 
B)  will always buy the most fashionable items available. 
C)  never considers the well being of any other individual. 
D)  is making choices that he or she believes will leave him or her better off. 
A)  is motivated by greed. 
B)  will always buy the most fashionable items available. 
C)  never considers the well being of any other individual. 
D)  is making choices that he or she believes will leave him or her better off.

Question 16

The term ceteris paribus means

Accepted Answer

A)  the greatest good for all. 
B)  the study of scarcity and choice. 
C)  all other things remaining constant or equal. 
D)  value-free and testable. 
A)  the greatest good for all. 
B)  the study of scarcity and choice. 
C)  all other things remaining constant or equal. 
D)  value-free and testable.

Question 17

Positive analysis can be described as

Accepted Answer

A)  the study of whether people respond to positive incentives. 
B)  the study of whether people respond to negative incentives. 
C)  a value-free approach to inquiry. 
D)  a study that is not tested empirically. 
A)  the study of whether people respond to positive incentives. 
B)  the study of whether people respond to negative incentives. 
C)  a value-free approach to inquiry. 
D)  a study that is not tested empirically.

Question 18

-In the above graphs a direct relationship is shown by

Accepted Answer

A)  Graph A. 
B)  Graph B. 
C)  Graph C. 
D)  Graph D. 
A)  Graph A. 
B)  Graph B. 
C)  Graph C. 
D)  Graph D.

Question 19

Suppose that on average there are three more car accidents for every extra inch of snowfall in a certain region. If snowfall is graphed on the y axis and car accidents on the x axis, then if we graph this relationship, the slope of the line will be

Accepted Answer

A)  9. 
B)  3. 
C)  1/3. 
D)  1. 
A)  9. 
B)  3. 
C)  1/3. 
D)  1.

Question 20

According to behaviorial economists, traditional economic models assume all the following characteristics EXCEPT

Accepted Answer

A)  unbounded selfishness. 
B)  unbounded resources. 
C)  unbounded willpower. 
D)  unbounded rationality. 
A)  unbounded selfishness. 
B)  unbounded resources. 
C)  unbounded willpower. 
D)  unbounded rationality.

Exam 1: The Nature of Economics

Another term for "economic models" is

According to proponents of behavioral economics, because every possible choice cannot be considered, an individual will tend to fall back on methods of making decisions that are simpler than trying to sort through every single possibility, known as

The President's statement that "to encourage economic growth, taxes should be cut"

The assumption that individuals do NOT intentionally make decisions that would leave them worse off is referred to as

Which one of the following is an example of a normative statement?

Economic models are

Incentives are

The distinction between microeconomics and macroeconomics is

An economic model should capture

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

Behavioral economics is an approach to the study of consumer behavior

An appropriate test of the effectiveness of an economic model is

How does the science of economics deal with the fact that we all have different values?

Which of the following is a normative statement?

When we say that an individual behaves according to "rational self-interest," we mean that this individual

The term ceteris paribus means

Positive analysis can be described as

-In the above graphs a direct relationship is shown by

Suppose that on average there are three more car accidents for every extra inch of snowfall in a certain region. If snowfall is graphed on the y axis and car accidents on the x axis, then if we graph this relationship, the slope of the line will be

According to behaviorial economists, traditional economic models assume all the following characteristics EXCEPT

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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