Question 1

Because information is costly to acquire,

Accepted Answer

A)  people will rationally choose not to become fully informed when making decisions. 
B)  people will generally choose to become as fully informed as possible when making decisions. 
C)  people will generally choose to acquire no information that would be relevant to their decisions. 
D)  none of the above are true.

Question 2

During the first 125 years of the United States,

Accepted Answer

A)  there were no constitutional constraints on the spending of the federal government. 
B)  real spending per person by the federal government rose by a factor of 60. 
C)  most of the government spending was undertaken at the state and local levels. 
D)  most of the government spending was undertaken at the federal level.

Question 3

A student noted that the football team won by a larger margin when the third-string played more minutes. Therefore, he recommended that the third-stringers become the first team. His conclusion was probably erroneous because he

Accepted Answer

A)  confused positive and normative analysis. 
B)  committed the fallacy of composition. 
C)  failed to recognize that association is not causation. 
D)  confused macroeconomics with microeconomics.

Question 4

The value of a good

Accepted Answer

A)  depends on many factors, including who uses it and under what circumstances. 
B)  is determined by the cost of producing it. 
C)  depends on the labor necessary to supply the good. 
D)  can be measured objectively by a survey of manufacturers of the good.

Question 5

The economizing problem is essentially one of deciding how to make the best use of

Accepted Answer

A)  limited resources to satisfy limited wants. 
B)  unlimited resources to satisfy limited wants. 
C)  limited resources to satisfy virtually unlimited wants. 
D)  unlimited resources to satisfy unlimited wants.

Question 6

From the viewpoint of the entire economy, the cost of government is

Accepted Answer

A)  equal to the amount of taxes collected. 
B)  greater than the amount of taxes collected. 
C)  less than the amount of taxes collected. 
D)  equal to the level of government expenditures.

Question 7

Since 1960, the share of federal spending allocated to national defense

Accepted Answer

A)  declined sharply, while the share allocated to health care increased substantially. 
B)  rose sharply, while the share allocated to health care declined substantially. 
C)  was relatively constant, while the share allocated to health care declined modestly. 
D)  declined modestly, while the share allocated to health care was relatively constant.

Question 8

Which of the following is a positive economic statement?

Accepted Answer

A)  Too much government spending is the biggest problem facing the U.S. economy. 
B)  Creating jobs is the most serious problem facing the U.S. economy. 
C)  Raising taxes provides additional revenue that should be used to finance health care. 
D)  If taxes are over 50 percent of national income, job creation falls.

Question 9

When the government borrows funds in order to pay for its current expenditures,

Accepted Answer

A)  the government will have to repay the borrowed funds within five years. 
B)  the government can spend without having to increase taxes, either now or in the future. 
C)  future taxes will have to be higher in order to pay the interest on the borrowed funds. 
D)  the cost imposed on the private sector is virtually eliminated because taxes can remain constant.

Question 10

Compared to the situation during the first 125 years of the United States (1790-1915), today total government expenditures are ____ share of the economy, and a greater proportion of those expenditures take place at the ____ level. (Fill in the blanks)

Accepted Answer

A)  a smaller; federal 
B)  about the same; federal 
C)  a larger; federal 
D)  a larger; state and local

Question 11

"The resources now going into the War on Terrorism and into improved airport security would save more lives if they were invested in medical research." This statement most clearly reflects which of the following?

Accepted Answer

A)  The best test of an economic theory is its ability to predict. 
B)  There is no such thing as a free lunch--the use of scarce resources always has an opportunity cost. 
C)  selfishness; if people were not selfish, we could have more of everything. 
D)  The value of goods can be determined objectively.

Question 12

The opportunity cost of an action is

Accepted Answer

A)  the monetary payment the action required. 
B)  the total time spent by all parties in carrying out the action. 
C)  the value of the best opportunity that must be sacrificed in order to take the action. 
D)  the cost of all alternative actions that could have been taken, added together.

Question 13

As real incomes grow, what happens to federal tax revenues as a share of the economy?

Accepted Answer

The answer of As real incomes grow, what happens to...

Question 14

During the last 20 years, what has happened to the marginal tax rates imposed on high-income taxpayers and the personal income tax revenues collected from them?

Accepted Answer

A)  Both the rates imposed and the revenues collected from the rich have increased. 
B)  Both the rates imposed and the revenues collected from the rich have declined. 
C)  The tax rates imposed on the rich have declined, but the revenues collected from them have increased. 
D)  The tax rates imposed on the rich have increased, but the revenues collected from them have declined.

Question 15

Which of the following is part of the economic way of thinking?

Accepted Answer

A)  The accuracy of the assumptions is the best test of an economic theory. 
B)  When an option becomes more expensive, people will be less likely to choose it. 
C)  The value of a good can be determined objectively by measuring the amount of labor required for its production. 
D)  All of the above.

Question 16

According to Adam Smith, individual self-interest

Accepted Answer

A)  is a powerful force for economic progress when it is directed by competitive markets. 
B)  is a powerful force for economic progress when individuals are wisely directed by a strong central government. 
C)  is a major factor in retarding the economic progress of humankind. 
D)  could be either a positive or negative force for economic progress, depending on the moral influences of political leaders.

Question 17

The fallacy of composition is the incorrect view that

Accepted Answer

A)  everything else is always held constant when a change occurs. 
B)  a small change in an economic variable will have unrecognizable but significant consequences on the economy. 
C)  when two events are associated, the one observed first must have caused the second. 
D)  if something is true for an individual, then it must also be true for the group.

Question 18

Economic analysis is based on the premise that

Accepted Answer

A)  people act only out of selfish motives. 
B)  people are always fully informed when making choices. 
C)  changes in the personal benefits or costs of an action influence behavior in a predictable way. 
D)  most human behavior is unpredictable.

Question 19

The highest valued alternative option that must be given up in order to choose an action is called its

Accepted Answer

A)  utility. 
B)  opportunity cost. 
C)  capital. 
D)  ceteris paribus

Question 20

The Latin phrase "ceteris paribus" means

Accepted Answer

A)  that one event causes another. 
B)  that one event is associated with, but not caused by, another. 
C)  that other potential causes are assumed to remain constant. 
D)  the way things should be.

Exam 1: The Economic Approach

Because information is costly to acquire,

During the first 125 years of the United States,

A student noted that the football team won by a larger margin when the third-string played more minutes. Therefore, he recommended that the third-stringers become the first team. His conclusion was probably erroneous because he

The value of a good

The economizing problem is essentially one of deciding how to make the best use of

From the viewpoint of the entire economy, the cost of government is

Since 1960, the share of federal spending allocated to national defense

Which of the following is a positive economic statement?

When the government borrows funds in order to pay for its current expenditures,

Compared to the situation during the first 125 years of the United States (1790-1915) , today total government expenditures are share of the economy, and a greater proportion of those expenditures take place at the level. (Fill in the blanks)

"The resources now going into the War on Terrorism and into improved airport security would save more lives if they were invested in medical research." This statement most clearly reflects which of the following?

The opportunity cost of an action is

As real incomes grow, what happens to federal tax revenues as a share of the economy?

During the last 20 years, what has happened to the marginal tax rates imposed on high-income taxpayers and the personal income tax revenues collected from them?

Which of the following is part of the economic way of thinking?

According to Adam Smith, individual self-interest

The fallacy of composition is the incorrect view that

Economic analysis is based on the premise that

The highest valued alternative option that must be given up in order to choose an action is called its

The Latin phrase "ceteris paribus" means

Exam 1: The Economic Approach

Because information is costly to acquire,

During the first 125 years of the United States,

A student noted that the football team won by a larger margin when the third-string played more minutes. Therefore, he recommended that the third-stringers become the first team. His conclusion was probably erroneous because he

The value of a good

The economizing problem is essentially one of deciding how to make the best use of

From the viewpoint of the entire economy, the cost of government is

Since 1960, the share of federal spending allocated to national defense

Which of the following is a positive economic statement?

When the government borrows funds in order to pay for its current expenditures,

Compared to the situation during the first 125 years of the United States (1790-1915) , today total government expenditures are ____ share of the economy, and a greater proportion of those expenditures take place at the ____ level. (Fill in the blanks)

"The resources now going into the War on Terrorism and into improved airport security would save more lives if they were invested in medical research." This statement most clearly reflects which of the following?

The opportunity cost of an action is

As real incomes grow, what happens to federal tax revenues as a share of the economy?

During the last 20 years, what has happened to the marginal tax rates imposed on high-income taxpayers and the personal income tax revenues collected from them?

Which of the following is part of the economic way of thinking?

According to Adam Smith, individual self-interest

The fallacy of composition is the incorrect view that

Economic analysis is based on the premise that

The highest valued alternative option that must be given up in order to choose an action is called its

The Latin phrase "ceteris paribus" means

Compared to the situation during the first 125 years of the United States (1790-1915) , today total government expenditures are share of the economy, and a greater proportion of those expenditures take place at the level. (Fill in the blanks)