Question 1

The rationality assumption says that

Accepted Answer

A)  people do not intentionally make decisions that would leave them worse off. 
B)  people never make decisions that would leave them worse off. 
C)  people do not respond to incentives since incentives require scarce resources. 
D)  all economic analysis must be normative. 
A)  people do not intentionally make decisions that would leave them worse off. 
B)  people never make decisions that would leave them worse off. 
C)  people do not respond to incentives since incentives require scarce resources. 
D)  all economic analysis must be normative.

Question 2

The potential rewards that are available to an individual if a particular activity is undertaken are known as

Accepted Answer

A)  greed. 
B)  irrational thought processes. 
C)  incentives. 
D)  intrinsic values. 
A)  greed. 
B)  irrational thought processes. 
C)  incentives. 
D)  intrinsic values.

Question 3

Assumptions in models tend to make

Accepted Answer

A)  the model predict what the scientist wants the results to be. 
B)  the model more realistic. 
C)  the model more applicable to specific circumstances. 
D)  the model always predict the future accurately. 
A)  the model predict what the scientist wants the results to be. 
B)  the model more realistic. 
C)  the model more applicable to specific circumstances. 
D)  the model always predict the future accurately.

Question 4

In an inverse relationship

Accepted Answer

A)  one variable rises while the other falls. 
B)  both variables rise together. 
C)  both variables fall together. 
D)  the two variables has not related to each other. 
A)  one variable rises while the other falls. 
B)  both variables rise together. 
C)  both variables fall together. 
D)  the two variables has not related to each other.

Question 5

The study of the aggregate economic variables is

Accepted Answer

A)  macroeconomics. 
B)  microeconomics. 
C)  positive economics. 
D)  normative economics. 
A)  macroeconomics. 
B)  microeconomics. 
C)  positive economics. 
D)  normative economics.

Question 6

Self-interest

Accepted Answer

A)  relates strictly to material well-being, such as a person's stock of wealth at a point in time. 
B)  is measured entirely based on an individual's income, whether earned from labor or inherited. 
C)  is inconsistent with economic analysis, which suggests that self-interest is irrational. 
D)  can involve any action that makes a person feel better off, such as charitable contributions. 
A)  relates strictly to material well-being, such as a person's stock of wealth at a point in time. 
B)  is measured entirely based on an individual's income, whether earned from labor or inherited. 
C)  is inconsistent with economic analysis, which suggests that self-interest is irrational. 
D)  can involve any action that makes a person feel better off, such as charitable contributions.

Question 7

Explain the study of economics.

Accepted Answer

Economics is the study of how people all

Question 8

Microeconomics is concerned with studying which of the following?

Accepted Answer

A)  the determinants of national unemployment 
B)  the effects of monetary policy 
C)  the study of a nation's workforce 
D)  none of the above 
A)  the determinants of national unemployment 
B)  the effects of monetary policy 
C)  the study of a nation's workforce 
D)  none of the above

Question 9

Normative economics is

Accepted Answer

A)  analysis involving value judgments about economic policies; or a statement of "what ought to be." 
B)  analysis that is strictly limited to making either purely descriptive statements or scientific predictions. 
C)  analysis of the behavior of the economy as a whole. 
D)  decision making undertaken by households and business firms. 
A)  analysis involving value judgments about economic policies; or a statement of "what ought to be." 
B)  analysis that is strictly limited to making either purely descriptive statements or scientific predictions. 
C)  analysis of the behavior of the economy as a whole. 
D)  decision making undertaken by households and business firms.

Question 10

Father says, "Earn a B-average on your next report card and I'll help you buy a car." An economist would say that this parent is providing his child a(n)

Accepted Answer

A)  study disincentive. 
B)  reason to slack off and not worry about her grades. 
C)  bribe. 
D)  incentive. 
A)  study disincentive. 
B)  reason to slack off and not worry about her grades. 
C)  bribe. 
D)  incentive.

Question 11

An inverse relationship will be graphed as

Accepted Answer

A)  a line that is upward sloping. 
B)  a line that is downward sloping. 
C)  a loop. 
D)  a U-shaped curve. 
A)  a line that is upward sloping. 
B)  a line that is downward sloping. 
C)  a loop. 
D)  a U-shaped curve.

Question 12

Which of the following is TRUE of incentives?

Accepted Answer

A)  Different people are motivated by different incentives. 
B)  Money is the only measure of incentives. 
C)  All of the people in a particular nation are motivated by the same incentives. 
D)  In economics, people are assumed to respond to disincentives instead of incentives. 
A)  Different people are motivated by different incentives. 
B)  Money is the only measure of incentives. 
C)  All of the people in a particular nation are motivated by the same incentives. 
D)  In economics, people are assumed to respond to disincentives instead of incentives.

Question 13

If an increase in one variable causes a decrease in another variable, this is

Accepted Answer

A)  a direct relationship. 
B)  a dependent relationship. 
C)  an independent relationship. 
D)  a negative relationship. 
A)  a direct relationship. 
B)  a dependent relationship. 
C)  an independent relationship. 
D)  a negative relationship.

Question 14

Sara looks into her closet and discovers a pair of like-new shoes she no longer wears because they are out of fashion. From the economist's perspective, was Sara behaving rationally when she bought those shoes?

Accepted Answer

A)  No. If any of a person's decisions have poor results, that person is irrational. 
B)  Yes, Sara didn't buy those shoes when they were out of fashion. 
C)  No. The rationality assumption states that rational people never make mistakes. 
D)  It's not clear because psychology, not economics, deals with the rationality assumption. 
A)  No. If any of a person's decisions have poor results, that person is irrational. 
B)  Yes, Sara didn't buy those shoes when they were out of fashion. 
C)  No. The rationality assumption states that rational people never make mistakes. 
D)  It's not clear because psychology, not economics, deals with the rationality assumption.

Question 15

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

Accepted Answer

A)  In order to reduce the budget deficit, tax rates should be increased. 
B)  In order to increase employment, the minimum wage must be decreased. 
C)  If payroll taxes are raised, then the government budget will show a surplus. 
D)  If gas prices fall, consumers should purchase more gas. 
A)  In order to reduce the budget deficit, tax rates should be increased. 
B)  In order to increase employment, the minimum wage must be decreased. 
C)  If payroll taxes are raised, then the government budget will show a surplus. 
D)  If gas prices fall, consumers should purchase more gas.

Question 16

Which of the following is a normative economic statement?

Accepted Answer

A)  An increase in corporate income taxes will cause the unemployment rate to increase. 
B)  The costs of medical care are increasing faster than the incomes of U.S. citizens. 
C)  Teenage unemployment is over 12 percent today. 
D)  Teenage unemployment is too high for the United States. 
A)  An increase in corporate income taxes will cause the unemployment rate to increase. 
B)  The costs of medical care are increasing faster than the incomes of U.S. citizens. 
C)  Teenage unemployment is over 12 percent today. 
D)  Teenage unemployment is too high for the United States.

Question 17

Economics is a study of

Accepted Answer

A)  how to make money in the stock market. 
B)  how to run a business successfully. 
C)  the allocation of scarce resources. 
D)  personal finance. 
A)  how to make money in the stock market. 
B)  how to run a business successfully. 
C)  the allocation of scarce resources. 
D)  personal finance.

Question 18

If the slope of a curve is 1/3, we know that

Accepted Answer

A)  the relationship is linear, and the line moves from lower left to upper right. 
B)  the relationship is non-linear, and the line moves from lower left to upper right. 
C)  the relationship is linear, and the line moves from upper left to lower right. 
D)  the relationship is non-linear, and the line moves from upper left to lower right. 
A)  the relationship is linear, and the line moves from lower left to upper right. 
B)  the relationship is non-linear, and the line moves from lower left to upper right. 
C)  the relationship is linear, and the line moves from upper left to lower right. 
D)  the relationship is non-linear, and the line moves from upper left to lower right.

Question 19

The author of the book An Inquiry into the Nature and Causes of the Wealth of Nations is

Accepted Answer

A)  Thorstein Veblen. 
B)  Adam Smith. 
C)  Donald Trump. 
D)  Janet Yellen. 
A)  Thorstein Veblen. 
B)  Adam Smith. 
C)  Donald Trump. 
D)  Janet Yellen.

Question 20

Microeconomics is the study of

Accepted Answer

A)  the behavior of the economy as a whole. 
B)  a nation from the perspective of the whole world. 
C)  how individuals and firms make decisions. 
D)  the effect that money has in the economic system. 
A)  the behavior of the economy as a whole. 
B)  a nation from the perspective of the whole world. 
C)  how individuals and firms make decisions. 
D)  the effect that money has in the economic system.

Exam 1: The Nature of Economics

The rationality assumption says that

The potential rewards that are available to an individual if a particular activity is undertaken are known as

Assumptions in models tend to make

In an inverse relationship

The study of the aggregate economic variables is

Self-interest

Explain the study of economics.

Microeconomics is concerned with studying which of the following?

Normative economics is

Father says, "Earn a B-average on your next report card and I'll help you buy a car." An economist would say that this parent is providing his child a(n)

An inverse relationship will be graphed as

Which of the following is TRUE of incentives?

If an increase in one variable causes a decrease in another variable, this is

Sara looks into her closet and discovers a pair of like-new shoes she no longer wears because they are out of fashion. From the economist's perspective, was Sara behaving rationally when she bought those shoes?

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

Which of the following is a normative economic statement?

Economics is a study of

If the slope of a curve is 1/3, we know that

The author of the book An Inquiry into the Nature and Causes of the Wealth of Nations is

Microeconomics is the study 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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