Question 1

When economists assume that people act rationally, it means they:

Accepted Answer

A) ​make decisions based on complete and accurate information. 
B) ​make decisions that will not be regretted later on. 
C) ​make decisions based on what they believe is best for themselves using available information. 
D) ​make decisions based solely on what is best for society. 
A) ​make decisions based on complete and accurate information. 
B) ​make decisions that will not be regretted later on. 
C) ​make decisions based on what they believe is best for themselves using available information. 
D) ​make decisions based solely on what is best for society.

Question 2

Most students expect that if they spend more time studying, the outcome will be improved grades in the course. This supposes that:

Accepted Answer

A) ​a positive relationship exists between studying and grades. 
B) ​a negative relationship exists between studying and grades. 
C) ​grades are independent variables. 
D) ​grades are not dependent variables. 
A) ​a positive relationship exists between studying and grades. 
B) ​a negative relationship exists between studying and grades. 
C) ​grades are independent variables. 
D) ​grades are not dependent variables.

Question 3

Suppose there are two members of the U.S. Congress who were once economics professors. Why is it important to be able to distinguish their positive from their normative statements about economic policy?

Accepted Answer

A) ​Their positive statements help us understand the economy's response to a particular policy, while their normative statements reflect their value judgments. 
B) ​Their positive statements help us understand the good results of a policy change, and their normative statements help us understand the negative results. 
C) ​We really do not have to worry about them since trained economists never make normative statements. 
D) ​Economists are always making assumptions, and policy should not be based on assumptions. 
A) ​Their positive statements help us understand the economy's response to a particular policy, while their normative statements reflect their value judgments. 
B) ​Their positive statements help us understand the good results of a policy change, and their normative statements help us understand the negative results. 
C) ​We really do not have to worry about them since trained economists never make normative statements. 
D) ​Economists are always making assumptions, and policy should not be based on assumptions.

Question 4

Which of the following forces us to choose among alternatives?

Accepted Answer

A) ​Value 
B) ​Scarcity 
C) ​Rarity 
D) ​Market mechanism 
A) ​Value 
B) ​Scarcity 
C) ​Rarity 
D) ​Market mechanism

Question 5

To an economist, individuals are acting "rationally" if they are striving to do their best to achieve their goals.

Accepted Answer

A) True 
 B)False

Question 6

Economics:

Accepted Answer

A) ​is a narrowly focused discipline. 
B) ​is a broad-ranging, problem-solving discipline. 
C) ​concerns itself only with monetary decisions. 
D) ​says very little about "everyday life." 
A) ​is a narrowly focused discipline. 
B) ​is a broad-ranging, problem-solving discipline. 
C) ​concerns itself only with monetary decisions. 
D) ​says very little about "everyday life."

Question 7

Understanding economics would be helpful to which of the following individuals?

Accepted Answer

A) ​a college student planning her next semester courses 
B) ​a fashion designer selecting fabric for a new spring collection 
C) ​a restaurant owner deciding whether to expand his establishment's hours of operation 
D) ​All of the above 
A) ​a college student planning her next semester courses 
B) ​a fashion designer selecting fabric for a new spring collection 
C) ​a restaurant owner deciding whether to expand his establishment's hours of operation 
D) ​All of the above

Question 8

A theory asserts that manufacturers are less willing to sell units of output as the price of a good decreases, ceteris paribus. However, as the price of computers fell throughout the 1990s, more computers were sold. Which of the following best explains the apparent conflict between theory and data?

Accepted Answer

A) ​The theory must be invalid. 
B) ​The theory rests on assumptions that are too simplistic. 
C) ​It is likely that variables other than the price and quantity of computers sold were changing. 
D) ​All variables other than the price and quantity of computers sold were unchanged. 
A) ​The theory must be invalid. 
B) ​The theory rests on assumptions that are too simplistic. 
C) ​It is likely that variables other than the price and quantity of computers sold were changing. 
D) ​All variables other than the price and quantity of computers sold were unchanged.

Question 9

Can activities like driving faster than the speed limit or driving without wearing a seat belt be considered rational behavior? Why or why not?

Accepted Answer

These activities would be considered rat

Question 10

Why would economists disagree over positive analysis?

Accepted Answer

Economists might disagree over positive

Question 11

Which of the following best illustrates the fallacy of composition?

Accepted Answer

A) ​I hate driving to work when the traffic is so heavy, so I decide to leave 30 minutes earlier than in the past.If everyone were to leave 30 minutes earlier for work, we'd all get to work faster. 
B) ​A great many people have been immunized against polio because it can be such a devastating disease.As a result, I probably do not personally need to be immunized against polio. 
C) ​Whenever I attend a baseball game at the local stadium, the home team wins.Therefore, if I attend all of the team's local games, they will achieve a perfect winning record at home. 
D) ​The parking at Ohio State University is in short supply on the main campus.It would be better for more people to ride the bus to school. 
A) ​I hate driving to work when the traffic is so heavy, so I decide to leave 30 minutes earlier than in the past.If everyone were to leave 30 minutes earlier for work, we'd all get to work faster. 
B) ​A great many people have been immunized against polio because it can be such a devastating disease.As a result, I probably do not personally need to be immunized against polio. 
C) ​Whenever I attend a baseball game at the local stadium, the home team wins.Therefore, if I attend all of the team's local games, they will achieve a perfect winning record at home. 
D) ​The parking at Ohio State University is in short supply on the main campus.It would be better for more people to ride the bus to school.

Question 12

The term "ceteris paribus" means that:

Accepted Answer

A) ​everything is variable. 
B) ​all variables except those specified are constant. 
C) ​no one knows which variables will change and which will remain constant. 
D) ​what is true for the individual is not necessarily true for the whole. 
A) ​everything is variable. 
B) ​all variables except those specified are constant. 
C) ​no one knows which variables will change and which will remain constant. 
D) ​what is true for the individual is not necessarily true for the whole.

Question 13

Economics:

Accepted Answer

A) ​is a natural science like biology and chemistry. 
B) ​is a science built on survey data and declared preferences (what people say they are going to do) not on revealed preferences (how people actually behave). 
C) ​is a science concerned with reaching generalizations about human behavior, not unlike sociology or psychology. 
D) ​is concerned with predicting business conditions in the future, not with the current state of the stock market. 
A) ​is a natural science like biology and chemistry. 
B) ​is a science built on survey data and declared preferences (what people say they are going to do) not on revealed preferences (how people actually behave). 
C) ​is a science concerned with reaching generalizations about human behavior, not unlike sociology or psychology. 
D) ​is concerned with predicting business conditions in the future, not with the current state of the stock market.

Question 14

"A tax cut will lead to higher inflation" is an example of a positive economic statement.

Accepted Answer

A) True 
 B)False

Question 15

What would not be held constant in testing a theory that if a student studies harder, he will get a better grade?

Accepted Answer

A) ​The course being taken. 
B) ​The ability and effort of the other students in the class. 
C) ​The grading scale in the course. 
D) ​The number of hours the student spends studying. 
A) ​The course being taken. 
B) ​The ability and effort of the other students in the class. 
C) ​The grading scale in the course. 
D) ​The number of hours the student spends studying.

Question 16

Scarcity exists for those with

Accepted Answer

A) ​lower incomes. 
B) ​average incomes. 
C) ​higher incomes. 
D) ​all of the above. 
A) ​lower incomes. 
B) ​average incomes. 
C) ​higher incomes. 
D) ​all of the above.

Question 17

Macroeconomics primarily examines:

Accepted Answer

A) ​the behavior of individual households and firms. 
B) ​how prices are determined within individual markets. 
C) ​the output levels that maximize the profits of business firms. 
D) ​broad issues such as national output, employment and inflation. 
A) ​the behavior of individual households and firms. 
B) ​how prices are determined within individual markets. 
C) ​the output levels that maximize the profits of business firms. 
D) ​broad issues such as national output, employment and inflation.

Question 18

An economic theory is tested by:

Accepted Answer

A) ​assessing the realism of its assumptions. 
B) ​polling economists to see if there is consensus as to the validity of the hypothesis. 
C) ​comparing and contrasting its simplicity with related theories. 
D) ​comparing its predictions with real-world data. 
A) ​assessing the realism of its assumptions. 
B) ​polling economists to see if there is consensus as to the validity of the hypothesis. 
C) ​comparing and contrasting its simplicity with related theories. 
D) ​comparing its predictions with real-world data.

Question 19

An economist at the University of Alaska at Anchorage has been asked to explain why the price of Alaskan crude oil has fallen recently. In order to assemble a scholarly answer, the professor should take which steps?

Accepted Answer

A) ​Develop a hypothesis, test the proposition by engaging in empirical analysis, and examine the data to see if it fits with the facts. 
B) ​Gather data on crude oil prices and seemingly unrelated variables in order to look for associations, then formulate a hypothesis based on those unexpected associations. 
C) ​Ask people in Alaska why they are not purchasing oil. 
D) ​None of the above.The oil industry is controlled by a cartel; therefore price changes in the industry cannot be explained using economic theories. 
A) ​Develop a hypothesis, test the proposition by engaging in empirical analysis, and examine the data to see if it fits with the facts. 
B) ​Gather data on crude oil prices and seemingly unrelated variables in order to look for associations, then formulate a hypothesis based on those unexpected associations. 
C) ​Ask people in Alaska why they are not purchasing oil. 
D) ​None of the above.The oil industry is controlled by a cartel; therefore price changes in the industry cannot be explained using economic theories.

Question 20

Which of the following represents a normative statement?

Accepted Answer

A) ​A decrease in price leads to an increase in quantity demanded. 
B) ​The study of economics is more important than the study of history. 
C) ​People will buy less butter at $1.50 per pound then they will at $1.00 per pound. 
D) ​As an economy develops, the nation's birth rate tends to fall. 
A) ​A decrease in price leads to an increase in quantity demanded. 
B) ​The study of economics is more important than the study of history. 
C) ​People will buy less butter at $1.50 per pound then they will at $1.00 per pound. 
D) ​As an economy develops, the nation's birth rate tends to fall.

Exam 1: The Role and Method of Economics

When economists assume that people act rationally, it means they:

Most students expect that if they spend more time studying, the outcome will be improved grades in the course. This supposes that:

Suppose there are two members of the U.S. Congress who were once economics professors. Why is it important to be able to distinguish their positive from their normative statements about economic policy?

Which of the following forces us to choose among alternatives?

To an economist, individuals are acting "rationally" if they are striving to do their best to achieve their goals.

Economics:

Understanding economics would be helpful to which of the following individuals?

A theory asserts that manufacturers are less willing to sell units of output as the price of a good decreases, ceteris paribus. However, as the price of computers fell throughout the 1990s, more computers were sold. Which of the following best explains the apparent conflict between theory and data?

Can activities like driving faster than the speed limit or driving without wearing a seat belt be considered rational behavior? Why or why not?

Why would economists disagree over positive analysis?

Which of the following best illustrates the fallacy of composition?

The term "ceteris paribus" means that:

Economics:

"A tax cut will lead to higher inflation" is an example of a positive economic statement.

What would not be held constant in testing a theory that if a student studies harder, he will get a better grade?

Scarcity exists for those with

Macroeconomics primarily examines:

An economic theory is tested by:

An economist at the University of Alaska at Anchorage has been asked to explain why the price of Alaskan crude oil has fallen recently. In order to assemble a scholarly answer, the professor should take which steps?

Which of the following represents a normative statement?

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

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