Question 1

Which of the following statements concerning the distinction between positive and normative economics is TRUE?

Accepted Answer

A)  Positive statements are concerned with what is, while normative statements are concerned with what someone thinks should be. 
B)  Positive statements are concerned with what people think, while normative statements are concerned with what people do. 
C)  Positive statements are true while normative statements are false. 
D)  Positive statements are concerned with what is while normative statements are concerned with what will be. 
A)  Positive statements are concerned with what is, while normative statements are concerned with what someone thinks should be. 
B)  Positive statements are concerned with what people think, while normative statements are concerned with what people do. 
C)  Positive statements are true while normative statements are false. 
D)  Positive statements are concerned with what is while normative statements are concerned with what will be.

Question 2

A scientist who is studying earthquakes includes the impact of wind when performing some tests of damages to structures. This is an example of

Accepted Answer

A)  failing to understand how to do scientific methodology. 
B)  irrational behavior in noneconomic situations. 
C)  accounting for every possible phenomena that may effect the problem under examination. 
D)  failing to hold all other things constant. 
A)  failing to understand how to do scientific methodology. 
B)  irrational behavior in noneconomic situations. 
C)  accounting for every possible phenomena that may effect the problem under examination. 
D)  failing to hold all other things constant.

Question 3

All of the following are aspects of microeconomics EXCEPT

Accepted Answer

A)  monopolies. 
B)  a firm maximizing profit. 
C)  a worker choosing one job over another. 
D)  the average level of prices of all goods and services produced in a country in a year. 
A)  monopolies. 
B)  a firm maximizing profit. 
C)  a worker choosing one job over another. 
D)  the average level of prices of all goods and services produced in a country in a year.

Question 4

What is the type of mechanism that answers the basic economic questions through a decentralized decision making process?

Accepted Answer

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

Question 5

Normative economics involves

Accepted Answer

A)  a statement of fact. 
B)  a statement of "what should be." 
C)  a statement of "what is." 
D)  a statement that is purely descriptive. 
A)  a statement of fact. 
B)  a statement of "what should be." 
C)  a statement of "what is." 
D)  a statement that is purely descriptive.

Question 6

Which of the following statements concerning economic models is FALSE?

Accepted Answer

A)  Economic models must provide usable predictions. 
B)  Economic models are based on data alone and no assumptions. 
C)  Economic models are tested empirically. 
D)  Economic models relate to how people behave. 
A)  Economic models must provide usable predictions. 
B)  Economic models are based on data alone and no assumptions. 
C)  Economic models are tested empirically. 
D)  Economic models relate to how people behave.

Question 7

The relationship between the number of hours a student studies for an exam and the exam grade is most likely graphed as

Accepted Answer

A)  a line sloping down from upper right to lower left. 
B)  a line sloping down from upper left to lower right. 
C)  a line sloping up from lower left to upper right. 
D)  a line sloping up from lower right to upper left. 
A)  a line sloping down from upper right to lower left. 
B)  a line sloping down from upper left to lower right. 
C)  a line sloping up from lower left to upper right. 
D)  a line sloping up from lower right to upper left.

Question 8

A relationship between two variables in which one variable increases at the same time that the other increases is called

Accepted Answer

A)  nonlinear. 
B)  constant. 
C)  inverse. 
D)  direct. 
A)  nonlinear. 
B)  constant. 
C)  inverse. 
D)  direct.

Question 9

The "paired observation" of (-10, -6) means

Accepted Answer

A)  x = -10, y = -6. 
B)  x = -6, y = -10. 
C)  that the distance between the two points will be 16. 
D)  the origin is at -10 and -6. 
A)  x = -10, y = -6. 
B)  x = -6, y = -10. 
C)  that the distance between the two points will be 16. 
D)  the origin is at -10 and -6.

Question 10

Which of the following is a TRUE statement about the economic assumption of rationality?

Accepted Answer

A)  Individuals who are rational necessarily ignore the interests of others. 
B)  Individuals generally act as though they are rational. 
C)  Individual behavior may be irrational but group behavior is always rational. 
D)  People make decisions as if they are most selfish in the world. 
A)  Individuals who are rational necessarily ignore the interests of others. 
B)  Individuals generally act as though they are rational. 
C)  Individual behavior may be irrational but group behavior is always rational. 
D)  People make decisions as if they are most selfish in the world.

Question 11

Mary says she plans to return to college next semester assuming her car keeps running, tuition fees don't go up, and she will still have a student loan. An economist would say that Mary plans to return to college next semester

Accepted Answer

A)  caveat emptor. 
B)  ceteris paribus. 
C)  laissez faire. 
D)  post hoc ergo propter hoc 
A)  caveat emptor. 
B)  ceteris paribus. 
C)  laissez faire. 
D)  post hoc ergo propter hoc

Question 12

Economics deals with choices

Accepted Answer

A)  that involve the wants of individuals. 
B)  that involve what people only need to survive. 
C)  that people make without self-motivated interest. 
D)  that people normally do not make. 
A)  that involve the wants of individuals. 
B)  that involve what people only need to survive. 
C)  that people make without self-motivated interest. 
D)  that people normally do not make.

Question 13

Which of the following would most likely be part of the study of microeconomics?

Accepted Answer

A)  how General Motors makes decisions regarding its production goals 
B)  national income 
C)  the total economic output of our domestic economy 
D)  overall price stability in the United States 
A)  how General Motors makes decisions regarding its production goals 
B)  national income 
C)  the total economic output of our domestic economy 
D)  overall price stability in the United States

Question 14

When the president says that "High inflation rates are a much more serious economic problem than high unemployment rates," it is an example of

Accepted Answer

A)  a normative statement. 
B)  an empirically proven fact. 
C)  a positive statement. 
D)  an irrational argument. 
A)  a normative statement. 
B)  an empirically proven fact. 
C)  a positive statement. 
D)  an irrational argument.

Question 15

Holding all variables constant but one and assessing the impact of the one variable that has changed is an example of using

Accepted Answer

A)  the ceteris paribus assumption. 
B)  an economic model based on unrealistic assumptions. 
C)  a flawed economic model. 
D)  an untestable proposition. 
A)  the ceteris paribus assumption. 
B)  an economic model based on unrealistic assumptions. 
C)  a flawed economic model. 
D)  an untestable proposition.

Question 16

A poll conducted by a national firm finds that most Americans say they care more about safety when buying a car than about fuel efficiency. As a result, a car maker produces a car with many safety features, but it doesn't sell well. This behavior

Accepted Answer

A)  contradicts economic theory because the people didn't do what they said they would do. 
B)  contradicts economic theory because it is irrational not to purchase safer cars. 
C)  does not contradict economic theory because economists focus on what people do rather than on what they say. 
D)  does not contradict economic theory because economic theory only relates to prices and not to features such as safety. 
A)  contradicts economic theory because the people didn't do what they said they would do. 
B)  contradicts economic theory because it is irrational not to purchase safer cars. 
C)  does not contradict economic theory because economists focus on what people do rather than on what they say. 
D)  does not contradict economic theory because economic theory only relates to prices and not to features such as safety.

Question 17

An economic theory is also known as an economic

Accepted Answer

A)  model. 
B)  prediction. 
C)  conclusion. 
D)  assumption. 
A)  model. 
B)  prediction. 
C)  conclusion. 
D)  assumption.

Question 18

The way that a society uses to allocate resources to satisfy human wants is called

Accepted Answer

A)  an economic system. 
B)  an assumption. 
C)  realism. 
D)  a physical science. 
A)  an economic system. 
B)  an assumption. 
C)  realism. 
D)  a physical science.

Question 19

A useful economic model

Accepted Answer

A)  utilizes only the two most important factors to analyze the problem under consideration. 
B)  generates statements that are incapable of refutation. 
C)  represents every detail of the real world. 
D)  yields usable predictions and implications for the real world. 
A)  utilizes only the two most important factors to analyze the problem under consideration. 
B)  generates statements that are incapable of refutation. 
C)  represents every detail of the real world. 
D)  yields usable predictions and implications for the real world.

Question 20

"Rational, self-interested people would never end up worse off by any decision they make. Obviously, people often make mistakes or have regrets. Therefore, people do not act rationally or out of self-interest." Do you agree with these statements? Why or why not?

Accepted Answer

No. People may make mistakes because the

Exam 1: The Nature of Economics

Which of the following statements concerning the distinction between positive and normative economics is TRUE?

A scientist who is studying earthquakes includes the impact of wind when performing some tests of damages to structures. This is an example of

All of the following are aspects of microeconomics EXCEPT

What is the type of mechanism that answers the basic economic questions through a decentralized decision making process?

Normative economics involves

Which of the following statements concerning economic models is FALSE?

The relationship between the number of hours a student studies for an exam and the exam grade is most likely graphed as

A relationship between two variables in which one variable increases at the same time that the other increases is called

The "paired observation" of (-10, -6) means

Which of the following is a TRUE statement about the economic assumption of rationality?

Mary says she plans to return to college next semester assuming her car keeps running, tuition fees don't go up, and she will still have a student loan. An economist would say that Mary plans to return to college next semester

Economics deals with choices

Which of the following would most likely be part of the study of microeconomics?

When the president says that "High inflation rates are a much more serious economic problem than high unemployment rates," it is an example of

Holding all variables constant but one and assessing the impact of the one variable that has changed is an example of using

A poll conducted by a national firm finds that most Americans say they care more about safety when buying a car than about fuel efficiency. As a result, a car maker produces a car with many safety features, but it doesn't sell well. This behavior

An economic theory is also known as an economic

The way that a society uses to allocate resources to satisfy human wants is called

A useful economic model

"Rational, self-interested people would never end up worse off by any decision they make. Obviously, people often make mistakes or have regrets. Therefore, people do not act rationally or out of self-interest." Do you agree with these statements? Why or why not?

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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