Question 1

The combination of psychology and economics to determine individual decision making is known as

Accepted Answer

A)  behavioral economics. 
B)  psychonomics. 
C)  neuronomics. 
D)  positive analysis. 
A)  behavioral economics. 
B)  psychonomics. 
C)  neuronomics. 
D)  positive analysis.

Question 2

A politician says that the government should tax behavior they want less of and subsidize behavior they want more of. This is an example of

Accepted Answer

A)  cynical behavior in modern democracies. 
B)  failing to consider the alternatives available to the government. 
C)  a concern that people are not rational when they make decisions. 
D)  using incentives to alter behavior. 
A)  cynical behavior in modern democracies. 
B)  failing to consider the alternatives available to the government. 
C)  a concern that people are not rational when they make decisions. 
D)  using incentives to alter behavior.

Question 3

Professor's economics students are constructing models for how gasoline prices change. Maria's model has very realistic assumptions and is quite complex. Anna's model is less complicated and less realistic. Maria's model correctly predicts gas price increases 5% of the time. Anna's model predicts correctly 15% of the time. On the basis of usefulness or "goodness," Professor will give which student's model the higher grade and why?

Accepted Answer

A)  Maria's model gets the higher grade because it is more complex. 
B)  Anna's model gets the higher grade because it is simpler. 
C)  Maria's model gets the higher grade because it is more realistic. 
D)  Anna's model gets the higher grade because it predicts accurately more often. 
A)  Maria's model gets the higher grade because it is more complex. 
B)  Anna's model gets the higher grade because it is simpler. 
C)  Maria's model gets the higher grade because it is more realistic. 
D)  Anna's model gets the higher grade because it predicts accurately more often.

Question 4

Which of the following is always TRUE of rational behavior?

Accepted Answer

A)  It always entails pursuing one's own best interest. 
B)  It always yields the best possible outcome for all individuals. 
C)  It never involves the pursuit of greedy self-interest. 
D)  It never involves taking into account the interests of others. 
A)  It always entails pursuing one's own best interest. 
B)  It always yields the best possible outcome for all individuals. 
C)  It never involves the pursuit of greedy self-interest. 
D)  It never involves taking into account the interests of others.

Question 5

Economists assume that people are motivated by

Accepted Answer

A)  a desire to please others. 
B)  the interests of the community at large. 
C)  self-interest. 
D)  morally correct behavior. 
A)  a desire to please others. 
B)  the interests of the community at large. 
C)  self-interest. 
D)  morally correct behavior.

Question 6

The slope of a straight line

Accepted Answer

A)  is the same at all points along that line. 
B)  cannot be defined. 
C)  changes from one point to the next on that line. 
D)  is always equal to zero. 
A)  is the same at all points along that line. 
B)  cannot be defined. 
C)  changes from one point to the next on that line. 
D)  is always equal to zero.

Question 7

Describe the signaling aspect of the price system regarding the three basic economic questions.

Accepted Answer

In the price system, prices provide info

Question 8

A difference between biology and economics is that

Accepted Answer

A)  economists use models and biologists use theories. 
B)  biologists often use laboratory experiments and economists do less often. 
C)  economics explains events while biology predict events. 
D)  biologists use the scientific method while economists do not. 
A)  economists use models and biologists use theories. 
B)  biologists often use laboratory experiments and economists do less often. 
C)  economics explains events while biology predict events. 
D)  biologists use the scientific method while economists do not.

Question 9

Macroeconomics is best defined by which of the following statements?

Accepted Answer

A)  Macroeconomics is the study of how firms attempt to maximize profits. 
B)  Macroeconomics is the study of the behavior of the economy as a whole. 
C)  Macroeconomics is the study of individual households. 
D)  Macroeconomics is the study of how the prices of individual goods are determined. 
A)  Macroeconomics is the study of how firms attempt to maximize profits. 
B)  Macroeconomics is the study of the behavior of the economy as a whole. 
C)  Macroeconomics is the study of individual households. 
D)  Macroeconomics is the study of how the prices of individual goods are determined.

Question 10

Economics seeks to use only positive analysis to

Accepted Answer

A)  provide a value-free analysis. 
B)  seek the best answer. 
C)  explain what is wrong with people. 
D)  provide normative values. 
A)  provide a value-free analysis. 
B)  seek the best answer. 
C)  explain what is wrong with people. 
D)  provide normative values.

Question 11

A friend wants to learn how a nation's unemployment rate is calculated and how it changes over time. He asks you which economics course to take and you advise him to enroll in

Accepted Answer

A)  macroeconomics. 
B)  microeconomics. 
C)  either micro- or macroeconomics. They both concentrate equally on those issues. 
D)  political science because economics doesn't address those topics in its courses. 
A)  macroeconomics. 
B)  microeconomics. 
C)  either micro- or macroeconomics. They both concentrate equally on those issues. 
D)  political science because economics doesn't address those topics in its courses.

Question 12

Under a pure price system, the decision of resource allocation is made by

Accepted Answer

A)  the head of the government. 
B)  those who have the right to vote in government elections. 
C)  individuals who own the resources. 
D)  no one. 
A)  the head of the government. 
B)  those who have the right to vote in government elections. 
C)  individuals who own the resources. 
D)  no one.

Question 13

What assumption about human motivation is made in economics? Explain.

Accepted Answer

Economists assume that people act as if

Question 14

A negative slope

Accepted Answer

A)  represents an inverse relationship, such as beers consumed and test score. 
B)  represents a direct relationship, such as snow fall and car accidents. 
C)  indicates that there is no relationship between two variables, such as women's wages and likelihood of sunshine. 
D)  means that the line crosses below the x-axis. 
A)  represents an inverse relationship, such as beers consumed and test score. 
B)  represents a direct relationship, such as snow fall and car accidents. 
C)  indicates that there is no relationship between two variables, such as women's wages and likelihood of sunshine. 
D)  means that the line crosses below the x-axis.

Question 15

Microeconomics focuses on

Accepted Answer

A)  individual decision makers. 
B)  decisions only on small expenses. 
C)  small changes in an economy. 
D)  satisfying the specific needs of a community. 
A)  individual decision makers. 
B)  decisions only on small expenses. 
C)  small changes in an economy. 
D)  satisfying the specific needs of a community.

Question 16

Which expression below matches most closely the way economists go about testing their models?

Accepted Answer

A)  "Consistency is the hobgoblin of small minds." 
B)  "Seeing the results is the only way to know if you are right." 
C)  "A bird in the hand is worth two in the bush." 
D)  "In the long run, we are all dead." 
A)  "Consistency is the hobgoblin of small minds." 
B)  "Seeing the results is the only way to know if you are right." 
C)  "A bird in the hand is worth two in the bush." 
D)  "In the long run, we are all dead."

Question 17

The intersection of the x axis and the y axis is called the

Accepted Answer

A)  "meeting point." 
B)  origin. 
C)  "zero" point. 
D)  corresponding point. 
A)  "meeting point." 
B)  origin. 
C)  "zero" point. 
D)  corresponding point.

Question 18

John has a math test tomorrow. He has decided to go to the gym today and then study math for several hours. Which of the following statements is TRUE?

Accepted Answer

A)  John did not use the economic way of thinking because his decision on how to allocate his time did not involve money. 
B)  John's decision on how to allocate his time is inconsistent with the rationality assumption since he has decided to go to the gym. 
C)  John's decision on how to allocate his time is consistent with the rationality assumption since the decision is intended to make him better off. 
D)  John's decision does not involve his pursuit of self-interest. 
A)  John did not use the economic way of thinking because his decision on how to allocate his time did not involve money. 
B)  John's decision on how to allocate his time is inconsistent with the rationality assumption since he has decided to go to the gym. 
C)  John's decision on how to allocate his time is consistent with the rationality assumption since the decision is intended to make him better off. 
D)  John's decision does not involve his pursuit of self-interest.

Question 19

The assumption that individuals will not intentionally make decisions that will leave them worse off is known as

Accepted Answer

A)  microeconomic analysis. 
B)  macroeconomic analysis. 
C)  a model or theory. 
D)  the rationality assumption. 
A)  microeconomic analysis. 
B)  macroeconomic analysis. 
C)  a model or theory. 
D)  the rationality assumption.

Question 20

An incentive is a

Accepted Answer

A)  need. 
B)  want. 
C)  reward for desired behavior. 
D)  concept that does not actually affect people's behavior. 
A)  need. 
B)  want. 
C)  reward for desired behavior. 
D)  concept that does not actually affect people's behavior.

Exam 1: The Nature of Economics

The combination of psychology and economics to determine individual decision making is known as

A politician says that the government should tax behavior they want less of and subsidize behavior they want more of. This is an example of

Which of the following is always TRUE of rational behavior?

Economists assume that people are motivated by

The slope of a straight line

Describe the signaling aspect of the price system regarding the three basic economic questions.

A difference between biology and economics is that

Macroeconomics is best defined by which of the following statements?

Economics seeks to use only positive analysis to

A friend wants to learn how a nation's unemployment rate is calculated and how it changes over time. He asks you which economics course to take and you advise him to enroll in

Under a pure price system, the decision of resource allocation is made by

What assumption about human motivation is made in economics? Explain.

A negative slope

Microeconomics focuses on

Which expression below matches most closely the way economists go about testing their models?

The intersection of the x axis and the y axis is called the

John has a math test tomorrow. He has decided to go to the gym today and then study math for several hours. Which of the following statements is TRUE?

The assumption that individuals will not intentionally make decisions that will leave them worse off is known as

An incentive is a

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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