Question 1

Which of the following is NOT one of the basic questions that an economic system attempts to answer?

Accepted Answer

A)  How to identify what people need? 
B)  What to produce? 
C)  How will goods and services be produced? 
D)  For whom will goods and services be produced? 
A)  How to identify what people need? 
B)  What to produce? 
C)  How will goods and services be produced? 
D)  For whom will goods and services be produced?

Question 2

In economics

Accepted Answer

A)  both resources and wants are limited. 
B)  both resources and wants are unlimited. 
C)  resources are limited but wants are unlimited. 
D)  resources are unlimited but wants are limited. 
A)  both resources and wants are limited. 
B)  both resources and wants are unlimited. 
C)  resources are limited but wants are unlimited. 
D)  resources are unlimited but wants are limited.

Question 3

Self-interest

Accepted Answer

A)  implies that a person must try to increase wealth at all times. 
B)  implies that people will not give away wealth. 
C)  is consistent with many goals that people pursue, including betterment of others. 
D)  applies only to people in market settings. 
A)  implies that a person must try to increase wealth at all times. 
B)  implies that people will not give away wealth. 
C)  is consistent with many goals that people pursue, including betterment of others. 
D)  applies only to people in market settings.

Question 4

According to economists, when two people make exactly the opposite decision

Accepted Answer

A)  one of them is acting irrationally. 
B)  each person evaluates the situation according to his/her individual self-interest. 
C)  one of them is acting out of spite. 
D)  one of them should compromise. 
A)  one of them is acting irrationally. 
B)  each person evaluates the situation according to his/her individual self-interest. 
C)  one of them is acting out of spite. 
D)  one of them should compromise.

Question 5

Jane is currently developing a model to explain the national unemployment rate. This is an example of

Accepted Answer

A)  a microeconomic topic. 
B)  normative analysis. 
C)  positive analysis. 
D)  how people act in an irrational manner. 
A)  a microeconomic topic. 
B)  normative analysis. 
C)  positive analysis. 
D)  how people act in an irrational manner.

Question 6

One major assumption of economics is that people

Accepted Answer

A)  act as if they systematically pursue self-interest. 
B)  behave randomly without any predictable pattern. 
C)  are sometimes rational and sometimes irrational. 
D)  always pursue the interests of others. 
A)  act as if they systematically pursue self-interest. 
B)  behave randomly without any predictable pattern. 
C)  are sometimes rational and sometimes irrational. 
D)  always pursue the interests of others.

Question 7

Which of the following is NOT a positive statement?

Accepted Answer

A)  The unemployment rate is 5.8 percent. 
B)  The inflation rate for 2002 was 2.3 percent. 
C)  The national debt is too high. 
D)  The federal government budget for 2004 is $2.2 trillion. 
A)  The unemployment rate is 5.8 percent. 
B)  The inflation rate for 2002 was 2.3 percent. 
C)  The national debt is too high. 
D)  The federal government budget for 2004 is $2.2 trillion.

Question 8

The economic way of thinking will help you

Accepted Answer

A)  make decisions in financing your home. 
B)  analyze solutions to economic problems. 
C)  make better decisions concerning your education. 
D)  all of the above 
A)  make decisions in financing your home. 
B)  analyze solutions to economic problems. 
C)  make better decisions concerning your education. 
D)  all of the above

Question 9

Resources are

Accepted Answer

A)  unlimited. 
B)  able to be replicated in large quantities. 
C)  what people would buy if their income was unlimited. 
D)  used to produce goods and services to satisfy people's wants. 
A)  unlimited. 
B)  able to be replicated in large quantities. 
C)  what people would buy if their income was unlimited. 
D)  used to produce goods and services to satisfy people's wants.

Question 10

The usefulness of a model is determined by

Accepted Answer

A)  whether it helps to explain or predict real world phenomena. 
B)  whether it possesses realistic assumptions. 
C)  how well it uses the ceteris paribus assumption. 
D)  how many of the possible relationships that exist are included in the model. 
A)  whether it helps to explain or predict real world phenomena. 
B)  whether it possesses realistic assumptions. 
C)  how well it uses the ceteris paribus assumption. 
D)  how many of the possible relationships that exist are included in the model.

Question 11

Economics is a

Accepted Answer

A)  hard science. 
B)  physical science. 
C)  natural science. 
D)  social science. 
A)  hard science. 
B)  physical science. 
C)  natural science. 
D)  social science.

Question 12

The United States is best known as a

Accepted Answer

A)  pure market system. 
B)  dictatorship. 
C)  command and control system. 
D)  mixed economic system. 
A)  pure market system. 
B)  dictatorship. 
C)  command and control system. 
D)  mixed economic system.

Question 13

The hypothesis that people are nearly, but not fully rational, cannot possibly fully examine every available choice, and utilize simple rules of thumb in making decisions is known as the

Accepted Answer

A)  irrationality hypothesis. 
B)  ceteris paribus hypothesis. 
C)  individual aggregation hypothesis. 
D)  bounded rationality hypothesis. 
A)  irrationality hypothesis. 
B)  ceteris paribus hypothesis. 
C)  individual aggregation hypothesis. 
D)  bounded rationality hypothesis.

Question 14

Individual decision making by consumers and producers is the focus of

Accepted Answer

A)  macroeconomics. 
B)  microeconomics. 
C)  aggregate measures. 
D)  any economic model. 
A)  macroeconomics. 
B)  microeconomics. 
C)  aggregate measures. 
D)  any economic model.

Question 15

Economists develop models to

Accepted Answer

A)  capture every detail of the real world. 
B)  make their arguments more realistic. 
C)  justify the assumptions they make about people's behavior. 
D)  help us understand economic phenomena in the real world. 
A)  capture every detail of the real world. 
B)  make their arguments more realistic. 
C)  justify the assumptions they make about people's behavior. 
D)  help us understand economic phenomena in the real world.

Question 16

Economic models are used to

Accepted Answer

A)  simplify reality to predict outcomes. 
B)  exactly replicate reality. 
C)  predict all possible outcomes of a study. 
D)  determine the thoughts of individuals. 
A)  simplify reality to predict outcomes. 
B)  exactly replicate reality. 
C)  predict all possible outcomes of a study. 
D)  determine the thoughts of individuals.

Question 17

Given a linear curve, the value on the y-axis changes from 120 to 100 when the value on the x-axis changes from 10 to 20, then the slope of that curve is

Accepted Answer

A)  -20. 
B)  +20. 
C)  -2. 
D)  +2. 
A)  -20. 
B)  +20. 
C)  -2. 
D)  +2.

Question 18

A macroeconomist would most likely study

Accepted Answer

A)  the effects of changing grape prices on the market for oranges. 
B)  the effects of an increase in wage rates on a woman's decision to enter the labor force. 
C)  the effects of a lower income tax rates on the nation's total production of goods and services. 
D)  the effect of increased union wages on the cost of producing automobiles. 
A)  the effects of changing grape prices on the market for oranges. 
B)  the effects of an increase in wage rates on a woman's decision to enter the labor force. 
C)  the effects of a lower income tax rates on the nation's total production of goods and services. 
D)  the effect of increased union wages on the cost of producing automobiles.

Question 19

"If event X occurs then event Y will follow" is a

Accepted Answer

A)  positive statement. 
B)  normative statement. 
C)  non-testable statement. 
D)  statement lacking in logic. 
A)  positive statement. 
B)  normative statement. 
C)  non-testable statement. 
D)  statement lacking in logic.

Question 20

Based on your understanding of your roommate's preferences, you predict that he will select the spaghetti for his lunch at the cafeteria, but instead he chooses the gyros. How do you describe this event in terms of economic theory?

Accepted Answer

A)  Your roommate is irrational. 
B)  Your roommate does not know what is in his own best interests. 
C)  You roommate does not know his own preferences as well as you do. 
D)  You constructed a model that made a prediction, and the prediction was refuted. 
A)  Your roommate is irrational. 
B)  Your roommate does not know what is in his own best interests. 
C)  You roommate does not know his own preferences as well as you do. 
D)  You constructed a model that made a prediction, and the prediction was refuted.

Exam 1: The Nature of Economics

Which of the following is NOT one of the basic questions that an economic system attempts to answer?

In economics

Self-interest

According to economists, when two people make exactly the opposite decision

Jane is currently developing a model to explain the national unemployment rate. This is an example of

One major assumption of economics is that people

Which of the following is NOT a positive statement?

The economic way of thinking will help you

Resources are

The usefulness of a model is determined by

Economics is a

The United States is best known as a

The hypothesis that people are nearly, but not fully rational, cannot possibly fully examine every available choice, and utilize simple rules of thumb in making decisions is known as the

Individual decision making by consumers and producers is the focus of

Economists develop models to

Economic models are used to

Given a linear curve, the value on the y-axis changes from 120 to 100 when the value on the x-axis changes from 10 to 20, then the slope of that curve is

A macroeconomist would most likely study

"If event X occurs then event Y will follow" is a

Based on your understanding of your roommate's preferences, you predict that he will select the spaghetti for his lunch at the cafeteria, but instead he chooses the gyros. How do you describe this event in terms of economic theory?

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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