Question 1

The basic economic problem is a situation of

Accepted Answer

A)  limited resources and unlimited wants. 
B)  both limited resources and limited wants. 
C)  limited incomes and unlimited choices. 
D)  unlimited incomes and limited choices. 
A)  limited resources and unlimited wants. 
B)  both limited resources and limited wants. 
C)  limited incomes and unlimited choices. 
D)  unlimited incomes and limited choices.

Question 2

The term ceteris paribus is an economic assumption that means

Accepted Answer

A)  let the buyer beware. 
B)  logical common sense. 
C)  the detail is in the interrelationship. 
D)  other things being equal. 
A)  let the buyer beware. 
B)  logical common sense. 
C)  the detail is in the interrelationship. 
D)  other things being equal.

Question 3

Macroeconomics is the study of

Accepted Answer

A)  aggregate economic variables. 
B)  output in particular industries. 
C)  prices in particular industries. 
D)  all of the above. 
A)  aggregate economic variables. 
B)  output in particular industries. 
C)  prices in particular industries. 
D)  all of the above.

Question 4

In economics, items that are used to produce goods and services are known as

Accepted Answer

A)  wants. 
B)  needs. 
C)  outputs. 
D)  resources. 
A)  wants. 
B)  needs. 
C)  outputs. 
D)  resources.

Question 5

Suppose a survey is taken concerning car safety. According to the survey, people strongly desire safer cars and indicate they are willing to pay substantially more for safer cars. Using this information, one auto firm adds numerous safety features to its car, raising the price by several thousand dollars. Sales drop sharply, and the firm loses profits. What went wrong?

Accepted Answer

The automaker was relying on what people

Question 6

Which is NOT true about the use of economic models?

Accepted Answer

A)  Economic models are simplified representations of the real world. 
B)  Economists always use experiments in science laboratories to test their theories. 
C)  Economists use what has already happened in the real world to test their theories. 
D)  Economists are employed to explain economic phenomena but are never used to predict what might happen next. 
A)  Economic models are simplified representations of the real world. 
B)  Economists always use experiments in science laboratories to test their theories. 
C)  Economists use what has already happened in the real world to test their theories. 
D)  Economists are employed to explain economic phenomena but are never used to predict what might happen next.

Question 7

Positive economic analysis is said to be

Accepted Answer

A)  true. 
B)  always accurate. 
C)  value-laden. 
D)  objective. 
A)  true. 
B)  always accurate. 
C)  value-laden. 
D)  objective.

Question 8

One topic of study for a microeconomist would be the

Accepted Answer

A)  causes of inflation. 
B)  causes of a nation's unemployment level. 
C)  effects of a gasoline price increase on consumer behavior. 
D)  effects of an increase in government spending on overall economic activity. 
A)  causes of inflation. 
B)  causes of a nation's unemployment level. 
C)  effects of a gasoline price increase on consumer behavior. 
D)  effects of an increase in government spending on overall economic activity.

Question 9

The assumption underlying economic theory is that

Accepted Answer

A)  people respond only to negative incentives, not to positive ones. 
B)  choices are affected by incentives. 
C)  value judgments do not play a role in the economic decisions people make. 
D)  money is the only incentive that matters. 
A)  people respond only to negative incentives, not to positive ones. 
B)  choices are affected by incentives. 
C)  value judgments do not play a role in the economic decisions people make. 
D)  money is the only incentive that matters.

Question 10

Which of the following is NOT normative economic statement?

Accepted Answer

A)  The minimum wage should be eliminated so unemployment can be reduced. 
B)  Increases in the minimum wage cause increases in unemployment. 
C)  The inflation rate should fall to increase individuals' well being. 
D)  Taxes on cigarettes should be increased to reduce smoking. 
A)  The minimum wage should be eliminated so unemployment can be reduced. 
B)  Increases in the minimum wage cause increases in unemployment. 
C)  The inflation rate should fall to increase individuals' well being. 
D)  Taxes on cigarettes should be increased to reduce smoking.

Question 11

Which of the following is an example of an application of the ceteris paribus assumption?

Accepted Answer

A)  an analysis of how price changes affect how much of a good people will purchase when all other factors are held constant 
B)  an analysis of how people purchase more goods when prices decline and income increases 
C)  After reading an article on the dangers of high-fat diets, an individual buys less red meat when prices increase. 
D)  an analysis of how worker productivity increases when a firm invests in new machines and training programs 
A)  an analysis of how price changes affect how much of a good people will purchase when all other factors are held constant 
B)  an analysis of how people purchase more goods when prices decline and income increases 
C)  After reading an article on the dangers of high-fat diets, an individual buys less red meat when prices increase. 
D)  an analysis of how worker productivity increases when a firm invests in new machines and training programs

Question 12

If a teacher tells a student that those who attend the study session typically score higher on the final exam

Accepted Answer

A)  the student has a positive incentive to attend the study session because she may get a higher grade. 
B)  the student has a negative incentive to attend the study session because she will be punished if she does not go. 
C)  the student has no greater incentive to attend because there is no guarantee she will get a higher grade on the exam. 
D)  a "C" student will be making an irrational decision if she decides to skip the study session since she has plenty of time to go. 
A)  the student has a positive incentive to attend the study session because she may get a higher grade. 
B)  the student has a negative incentive to attend the study session because she will be punished if she does not go. 
C)  the student has no greater incentive to attend because there is no guarantee she will get a higher grade on the exam. 
D)  a "C" student will be making an irrational decision if she decides to skip the study session since she has plenty of time to go.

Question 13

Which of the following topics is a macroeconomic subject?

Accepted Answer

A)  a proposed merger between two companies 
B)  the level of sales at a particular department store 
C)  increases in the overall price level of a nation 
D)  the pricing decision of a firm 
A)  a proposed merger between two companies 
B)  the level of sales at a particular department store 
C)  increases in the overall price level of a nation 
D)  the pricing decision of a firm

Question 14

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

Accepted Answer

A)  A smart phone costs more than a laptop computer. 
B)  Most smart phones sold in the United States are imported from other countries. 
C)  Every student in college should have a smart phone. 
D)  More people will buy smart phones as their prices decline. 
A)  A smart phone costs more than a laptop computer. 
B)  Most smart phones sold in the United States are imported from other countries. 
C)  Every student in college should have a smart phone. 
D)  More people will buy smart phones as their prices decline.

Question 15

The impact of an increase in the gasoline tax on sales of electric vehicles is

Accepted Answer

A)  a macroeconomics topic because it deals with taxes. 
B)  a microeconomics topic because it deals with one industry. 
C)  not an economic issue, but rather a political issue. 
D)  a normative issue and so it is not an economic topic. 
A)  a macroeconomics topic because it deals with taxes. 
B)  a microeconomics topic because it deals with one industry. 
C)  not an economic issue, but rather a political issue. 
D)  a normative issue and so it is not an economic topic.

Question 16

Ceteris paribus means

Accepted Answer

A)  "all variables are independent." 
B)  "other things being constant." 
C)  "some assumptions are unrealistic." 
D)  "some theories are not rational." 
A)  "all variables are independent." 
B)  "other things being constant." 
C)  "some assumptions are unrealistic." 
D)  "some theories are not rational."

Question 17

The term or phrase most likely to indicate a normative statement is

Accepted Answer

A)  "ceteris paribus." 
B)  "factual." or "what is" statement. 
C)  "holding other things constant." 
D)  "should" or "ought to." 
A)  "ceteris paribus." 
B)  "factual." or "what is" statement. 
C)  "holding other things constant." 
D)  "should" or "ought to."

Question 18

"A positive economic statement is always true and a normative economic statement is always false." Do you agree or disagree with this statement? Explain.

Accepted Answer

Disagree. A positive statement is one th

Question 19

In economics, the concept that individuals are motivated by self-interest and respond predictably to opportunities is known as

Accepted Answer

A)  rational behavior. 
B)  altruism. 
C)  normative bias. 
D)  empiricism. 
A)  rational behavior. 
B)  altruism. 
C)  normative bias. 
D)  empiricism.

Question 20

The threat of a large fine for failure to pay income taxes is an example of

Accepted Answer

A)  the excessive power of the Internal Revenue Service. 
B)  the ineffectiveness of incentives to get people to pay their taxes. 
C)  a negative incentive to get all people to pay taxes. 
D)  people failing to consider all the benefits the government provides them. 
A)  the excessive power of the Internal Revenue Service. 
B)  the ineffectiveness of incentives to get people to pay their taxes. 
C)  a negative incentive to get all people to pay taxes. 
D)  people failing to consider all the benefits the government provides them.

Exam 1: The Nature of Economics

The basic economic problem is a situation of

The term ceteris paribus is an economic assumption that means

Macroeconomics is the study of

In economics, items that are used to produce goods and services are known as

Which is NOT true about the use of economic models?

Positive economic analysis is said to be

One topic of study for a microeconomist would be the

The assumption underlying economic theory is that

Which of the following is NOT normative economic statement?

Which of the following is an example of an application of the ceteris paribus assumption?

If a teacher tells a student that those who attend the study session typically score higher on the final exam

Which of the following topics is a macroeconomic subject?

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

The impact of an increase in the gasoline tax on sales of electric vehicles is

Ceteris paribus means

The term or phrase most likely to indicate a normative statement is

"A positive economic statement is always true and a normative economic statement is always false." Do you agree or disagree with this statement? Explain.

In economics, the concept that individuals are motivated by self-interest and respond predictably to opportunities is known as

The threat of a large fine for failure to pay income taxes is an example 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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