Question 1

-The figure above shows that in 1996, unemployment was equal to about _ and the inflation rate was equal to about _ .

Accepted Answer

A)  6.0 percent; 4.0 percent 
B)  5.5 percent; 3.0 percent 
C)  7.0 percent; 3.0 percent 
D)  3.0 percent; 5.5 percent

Question 2

A lawn service is deciding whether to add an additional employee to its summer crew. The marginal cost of hiring this worker depends on the

Accepted Answer

A)  total amount paid to the new worker. 
B)  the additional revenue created by having an additional worker. 
C)  total amount paid to all previously hired workers. 
D)  the total amount paid to all the workers, both the new one and the previously hired workers.

Question 3

"As interest rates rise, people save more money." A graph displaying this relationship would show

Accepted Answer

A)  an inverse relationship. 
B)  a cross- section graph. 
C)  a positive then a negative relationship. 
D)  a positive relationship.

Question 4

"As part of the financial crisis bailout plan in 2008, the Federal Reserve will buy equity stakes in banks. This will result in an increase in the inflation rate." This is an example of

Accepted Answer

A)  the big tradeoff. 
B)  a microeconomic statement. 
C)  a normative statement. 
D)  a positive statement.

Question 5

-In the figure above, what can you deduce about the slope of the curve?

Accepted Answer

The answer of 
-In the figure above, what can you...

Question 6

An economic model is

Accepted Answer

A)  a statement that describes how the world should be. 
B)  a collection of facts that describe the real world. 
C)  a description of some aspect of the economic world that includes only those features of the world that are needed for the purpose at hand. 
D)  a generalization that summarizes all the normative assumptions we make about a particular issue.

Question 7

A trend shows

Accepted Answer

A)  the scale used to measure to variables. 
B)  the degree of correlation between two variables. 
C)  the general tendency for a variable to rise or fall. 
D)  the increases in one variable.

Question 8

When a lawyer decides to type a brief on a computer rather than use a typewriter, the lawyer is answering the question.

Accepted Answer

A)  "what" 
B)  "why" 
C)  "how" 
D)  "scarcity"

Question 9

What are the four categories into which factors of production are grouped?

Accepted Answer

A)  land, labor, capital, and entrepreneurship 
B)  profit, wages, rent, and interest 
C)  entrepreneurship, profit, labor, and wages 
D)  capital, human capital, land, and labor

Question 10

A scatter diagram with the price of peanut butter on the vertical axis and the price of jelly on the horizontal axis shows a negative relationship. If the price of jelly was placed on the vertical axis and the price of peanut butter was placed on the horizontal axis, the relationship would be a

Accepted Answer

A)  negative relationship, also called a direct relationship. 
B)  positive relationship, also called a direct relationship. 
C)  positive relationship, also called an inverse relationship. 
D)  negative relationship, also called an inverse relationship.

Question 11

Making a choice at the margin means .

Accepted Answer

A)  letting someone else choose for you 
B)  making a choice by comparing the total benefit and the total cost 
C)  deciding to do a little bit more or a little bit less of an activity 
D)  waiting until the last minute to make a choice

Question 12

The statement that "peach ice cream is better than chocolate ice cream"

Accepted Answer

A)  can be tested using the scientific approach. 
B)  is a normative statement. 
C)  provides a basis for predicting which type of ice cream will exhibit the most sales. 
D)  is a positive statement.

Question 13

Scarcity is common to all economic systems because resources are

Accepted Answer

A)  unlimited due to constant technological advances. 
B)  unlimited and so are human desires and wants. 
C)  limited and so are human desires and wants. 
D)  limited, but human desires and wants are unlimited.

Question 14

During the summer you have made the decision to attend summer school, which prevents you from working at your usual summer job in which you normally earn $6,000 for the summer. Your tuition cost is $3,000 and books and supplies cost $1,300. The opportunity cost of attending summer school is

Accepted Answer

A)  $10,300. 
B)  $4,300. 
C)  $3,300. 
D)  $6,000.

Question 15

As a firm expands its output, cost per unit of output (average cost) decreases and then increases. Average cost and output have

Accepted Answer

A)  a relationship with a maximum. 
B)  no relationship. 
C)  a relationship with a minimum. 
D)  a linear positive relationship.

Question 16

Which of the following is a normative statement?

Accepted Answer

A)  The unemployment rate rose last month. 
B)  The unemployment rate is too high. 
C)  Forty percent of the public believes that the unemployment rate is too high. 
D)  all of the above

Question 17

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

Accepted Answer

A)  We should cut back on our use of carbon- based fuels such as coal and oil. 
B)  Every American should have equal access to health care. 
C)  The Federal Reserve ought to cut the interest rate. 
D)  Increasing the minimum wage results in more unemployment.

Question 18

all the objects that we value and are willing to pay for.

Accepted Answer

A)  Capital is 
B)  Wants are 
C)  Resources are 
D)  Goods and services are

Question 19

On Saturday morning, you rank your choices for activities in the following order: go to the library, work out at the gym, have breakfast with friends, and sleep late. Suppose you decide to go to the library. Your opportunity cost is

Accepted Answer

A)  zero because you do not have to pay money to use the library. 
B)  not clear because not enough information is given. 
C)  working out at the gym, having breakfast with friends, and sleeping late. 
D)  working out at the gym.

Question 20

When an economist talks of scarcity, the economist is referring to the

Accepted Answer

A)  ability of society to employ all of its resources. 
B)  inability of society to satisfy all human wants because of limited resources. 
C)  ability of society to continually make technological breakthroughs and increase production. 
D)  ability of society to consume all that it produces.

Exam 1: What Is Economics