Question 1

The branch of economics that studies the aggregate decisions of all households and all firms is called:

Accepted Answer

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

Question 2

Microeconomics differs from macroeconomics in that:

Accepted Answer

A) ​microeconomics studies individual decision making while macroeconomics examines aggregate decision making. 
B) ​microeconomics studies aggregate decision making while macroeconomics examines individual decision making. 
C) ​microeconomics utilizes positive economic analysis while macroeconomics utilizes normative economic analysis. 
D) ​microeconomics is concerned with consumer behavior while macroeconomics is concerned with firm behavior. 
A) ​microeconomics studies individual decision making while macroeconomics examines aggregate decision making. 
B) ​microeconomics studies aggregate decision making while macroeconomics examines individual decision making. 
C) ​microeconomics utilizes positive economic analysis while macroeconomics utilizes normative economic analysis. 
D) ​microeconomics is concerned with consumer behavior while macroeconomics is concerned with firm behavior. A

Question 3

The fundamental economic problem is:

Accepted Answer

A) ​poverty. 
B) ​unemployment. 
C) ​scarcity. 
D) ​inflation. 
A) ​poverty. 
B) ​unemployment. 
C) ​scarcity. 
D) ​inflation. C

Question 4

Difficulty in prediction social sciences is the result of analyzing ____ but can be overcome by focusing on ____ groups.

Accepted Answer

A) ​experiments; small groups 
B) ​experiments; large groups 
C) ​human behavior; small groups 
D) ​human behavior; large groups 
A) ​experiments; small groups 
B) ​experiments; large groups 
C) ​human behavior; small groups 
D) ​human behavior; large groups

Question 5

Which of the following questions is addressed primarily by macroeconomics?

Accepted Answer

A) ​The allocation of scarce satellite orbit slots. 
B) ​Decisions made by a manufacturer of a particular good. 
C) ​Policies to control the inflation rate. 
D) ​A consumer's decision to buy more clothing and less food. 
A) ​The allocation of scarce satellite orbit slots. 
B) ​Decisions made by a manufacturer of a particular good. 
C) ​Policies to control the inflation rate. 
D) ​A consumer's decision to buy more clothing and less food.

Question 6

The problem of scarcity:

Accepted Answer

A) ​exists because resources are limited relative to wants. 
B) ​exists because resources are unlimited relative to wants. 
C) ​can be eliminated through appropriate government intervention into markets. 
D) ​does not exist in communist societies. 
A) ​exists because resources are limited relative to wants. 
B) ​exists because resources are unlimited relative to wants. 
C) ​can be eliminated through appropriate government intervention into markets. 
D) ​does not exist in communist societies.

Question 7

Which of the following topics would be covered in microeconomics?

Accepted Answer

A) ​The effects of an increase in the supply of lumber on the homebuilding industry. 
B) ​The unemployment rate. 
C) ​The effects of interest rates on the overall economy. 
D) ​The inflation rate. 
A) ​The effects of an increase in the supply of lumber on the homebuilding industry. 
B) ​The unemployment rate. 
C) ​The effects of interest rates on the overall economy. 
D) ​The inflation rate.

Question 8

The branch of economics that studies the economy as a whole is:

Accepted Answer

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

Question 9

"The government should levy higher taxes on the rich and use the additional revenues to provide better housing for the poor." This statement illustrates:

Accepted Answer

A) ​the fallacy of composition. 
B) ​the basic principle of economics. 
C) ​a normative economic statement. 
D) ​a positive economic statement. 
A) ​the fallacy of composition. 
B) ​the basic principle of economics. 
C) ​a normative economic statement. 
D) ​a positive economic statement.

Question 10

In his book, The Wealth of Nations, Adam Smith made the following observation?

Accepted Answer

A) ​There is no such thing as a free lunch. 
B) ​People buy more when prices are low than when prices are high. 
C) ​No matter how much people make, they tend to spend more than they make. 
D) ​People tend to pursue their own personal interest and that an invisible hand (the market) guides their self-interest, increasing social welfare and economic well being. 
A) ​There is no such thing as a free lunch. 
B) ​People buy more when prices are low than when prices are high. 
C) ​No matter how much people make, they tend to spend more than they make. 
D) ​People tend to pursue their own personal interest and that an invisible hand (the market) guides their self-interest, increasing social welfare and economic well being.

Question 11

"A reduction in the rate at which stock dividends are taxed will lead to greater investment in the stock market." This is an example of:

Accepted Answer

A) ​a positive economic statement. 
B) ​a negative economic statement. 
C) ​the fallacy of composition. 
D) ​a normative economic statement. 
A) ​a positive economic statement. 
B) ​a negative economic statement. 
C) ​the fallacy of composition. 
D) ​a normative economic statement.

Question 12

When people make choices they typically know with certainty which choice is best.

Accepted Answer

A) True 
 B)False

Question 13

"The minimum wage should be increased so that low-income workers can afford to feed their families." This is an example of:

Accepted Answer

A) ​a positive economic statement. 
B) ​a negative economic statement. 
C) ​the fallacy of composition. 
D) ​a normative economic statement. 
A) ​a positive economic statement. 
B) ​a negative economic statement. 
C) ​the fallacy of composition. 
D) ​a normative economic statement.

Question 14

Scarcity is the result of:

Accepted Answer

A) ​government decision making. 
B) ​inappropriate normative judgments. 
C) ​positive economics. 
D) ​wants that exceed the resources necessary to provide them. 
A) ​government decision making. 
B) ​inappropriate normative judgments. 
C) ​positive economics. 
D) ​wants that exceed the resources necessary to provide them.

Question 15

An economic study concludes that an investment tax credit would increase business investment next year. This is an example of:

Accepted Answer

A) ​normative analysis. 
B) ​positive analysis. 
C) ​negative economic analysis. 
D) ​the fallacy of composition. 
A) ​normative analysis. 
B) ​positive analysis. 
C) ​negative economic analysis. 
D) ​the fallacy of composition.

Question 16

How do we find the slope of a nonlinear curve?

Accepted Answer

We can find the slope at a given point b

Question 17

A good economic theory:

Accepted Answer

A) ​includes every detail that affects the economic behavior of interest. 
B) ​relies on simplifying assumptions in order to explain economic behavior. 
C) ​does not rely on simplifying assumptions. 
D) ​is impossible to achieve because of the difficulty of conducting controlled experiments. 
A) ​includes every detail that affects the economic behavior of interest. 
B) ​relies on simplifying assumptions in order to explain economic behavior. 
C) ​does not rely on simplifying assumptions. 
D) ​is impossible to achieve because of the difficulty of conducting controlled experiments.

Question 18

If we choose more work we sacrifice leisure.

Accepted Answer

A) True 
 B)False

Question 19

A good economic theory, or model, weeds out the irrelevant facts from the relevant ones.

Accepted Answer

A) True 
 B)False

Question 20

"When one basketball team spends a large sum of money acquiring better players, it is better off. If all teams do the same thing, all of them are better off." These statements demonstrate:

Accepted Answer

A) ​the fallacy of composition. 
B) ​confusing association with causation. 
C) ​a misunderstanding of the direction of causality. 
D) ​the ceteris paribus condition. 
A) ​the fallacy of composition. 
B) ​confusing association with causation. 
C) ​a misunderstanding of the direction of causality. 
D) ​the ceteris paribus condition.

Exam 1: The Role and Method of Economics

The branch of economics that studies the aggregate decisions of all households and all firms is called:

Microeconomics differs from macroeconomics in that:

The fundamental economic problem is:

Difficulty in prediction social sciences is the result of analyzing ____ but can be overcome by focusing on ____ groups.

Which of the following questions is addressed primarily by macroeconomics?

The problem of scarcity:

Which of the following topics would be covered in microeconomics?

The branch of economics that studies the economy as a whole is:

"The government should levy higher taxes on the rich and use the additional revenues to provide better housing for the poor." This statement illustrates:

In his book, The Wealth of Nations, Adam Smith made the following observation?

"A reduction in the rate at which stock dividends are taxed will lead to greater investment in the stock market." This is an example of:

When people make choices they typically know with certainty which choice is best.

"The minimum wage should be increased so that low-income workers can afford to feed their families." This is an example of:

Scarcity is the result of:

An economic study concludes that an investment tax credit would increase business investment next year. This is an example of:

How do we find the slope of a nonlinear curve?

A good economic theory:

If we choose more work we sacrifice leisure.

A good economic theory, or model, weeds out the irrelevant facts from the relevant ones.

"When one basketball team spends a large sum of money acquiring better players, it is better off. If all teams do the same thing, all of them are better off." These statements demonstrate:

Eight Powerful Ideas

Scarcity, Trade-Offs, and Production Possibilities

Demand, Supply, and Market Equilibrium

Market in Motion and Price Controls

Elasticities

Market Efficiency and Welfare

Market Failure

Public Finance and Public Choice

Consumer Choice Theory

The Firm: Production and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Product Differentiation

Oligopoly and Strategic Behavior

The Markets for Labor, Capital, and Land

Income, Poverty and Health Care

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Measuring Economic Performance

Economic Growth in the Global Economy

Financial Markets, Saving, and Investment

Filters

Difficulty in prediction social sciences is the result of analyzing but can be overcome by focusing on groups.