Question 1

Economists use the term ceteris paribus to indicate that

Accepted Answer

A) supply and demand are in balance. 
B) other things are assumed to be constant. 
C) the analysis is true for the individual but not for the economy as a whole. 
D) their conclusions are based on normative economics rather than positive economic analysis. 
A) supply and demand are in balance. 
B) other things are assumed to be constant. 
C) the analysis is true for the individual but not for the economy as a whole. 
D) their conclusions are based on normative economics rather than positive economic analysis. B

Question 2

In economics, the term marginal refers to

Accepted Answer

A) the change or difference between two alternatives. 
B) man-made resources as opposed to natural resources. 
C) the satisfaction a consumer receives from a good. 
D) holding everything else constant in the analysis. 
A) the change or difference between two alternatives. 
B) man-made resources as opposed to natural resources. 
C) the satisfaction a consumer receives from a good. 
D) holding everything else constant in the analysis. A

Question 3

Which of the following are NOT scarce?

Accepted Answer

A) time for leisure activities 
B) computers 
C) compact discs 
D) the air we breathe 
A) time for leisure activities 
B) computers 
C) compact discs 
D) the air we breathe D

Question 4

When economists say that people choose rationally, this means

Accepted Answer

A) they gather all relevant information before making their purchases 
B) once a pattern of behavior has been established, people tend to become set in their ways 
C) people respond in predictable ways to changes in costs and benefits 
D) people rarely make errors when they are permitted to make transactions 
E) once made, decisions are never reversed 
A) they gather all relevant information before making their purchases 
B) once a pattern of behavior has been established, people tend to become set in their ways 
C) people respond in predictable ways to changes in costs and benefits 
D) people rarely make errors when they are permitted to make transactions 
E) once made, decisions are never reversed

Question 5

When deciding whether to buy a second car, the economic way of thinking indicates that the purchaser should compare

Accepted Answer

A) the benefits expected from two cars with the cost of both. 
B) the additional benefits expected from a second car with the cost of the two cars. 
C) the dollar cost of the two cars with the potential income that the cars will generate. 
D) the additional benefits of the second car with the additional cost of the second car. 
A) the benefits expected from two cars with the cost of both. 
B) the additional benefits expected from a second car with the cost of the two cars. 
C) the dollar cost of the two cars with the potential income that the cars will generate. 
D) the additional benefits of the second car with the additional cost of the second car.

Question 6

Capital is a term economists use to refer to

Accepted Answer

A) man-made resources used to produce other goods and services. 
B) resources that are available in nature such as mineral deposits. 
C) money that is used to consume goods and services, to distinguish it from money that is saved. 
D) the value of the best alternative to an action. 
A) man-made resources used to produce other goods and services. 
B) resources that are available in nature such as mineral deposits. 
C) money that is used to consume goods and services, to distinguish it from money that is saved. 
D) the value of the best alternative to an action.

Question 7

Adam Smith believed that if people were free to pursue their own interests,

Accepted Answer

A) public interest would be served quite well. 
B) less would be produced than if altruism were the guiding principle. 
C) they would generally apply their talents to unproductive activities that would generate little value to society. 
D) they would have little incentive to undertake productive activities. 
A) public interest would be served quite well. 
B) less would be produced than if altruism were the guiding principle. 
C) they would generally apply their talents to unproductive activities that would generate little value to society. 
D) they would have little incentive to undertake productive activities.

Question 8

If economics is correct in its assumption that people are rational, why then would anyone choose to smoke cigarettes?

Accepted Answer

Even though the harmful effects of cigar

Question 9

Andre, a wheat farmer, is deciding whether or not to add fertilizer to his crops. If he adds 1 pound of fertilizer per acre, the value of the resulting crops rises from $80 to $100 per acre. According to marginal analysis, Andre should add fertilizer if it costs less than

Accepted Answer

A) $12.50 per pound. 
B) $20 per pound. 
C) $80 per pound. 
D) $100 per pound. 
A) $12.50 per pound. 
B) $20 per pound. 
C) $80 per pound. 
D) $100 per pound.

Question 10

Legislation to protect red-cockaded woodpeckers created incentives that resulted in premature harvesting of trees the woodpeckers like to nest in. This is an example of which of the following?

Accepted Answer

A) Association is not causation. 
B) the fallacy of composition 
C) the use of ceteris paribus conditions in economic analysis 
D) Good intentions do not always lead to desirable outcomes. 
A) Association is not causation. 
B) the fallacy of composition 
C) the use of ceteris paribus conditions in economic analysis 
D) Good intentions do not always lead to desirable outcomes.

Question 11

Economics is primarily the study of

Accepted Answer

A) how to make money in the stock market. 
B) how to operate a business successfully. 
C) the allocation of scarce resources in an effort to satisfy wants that are virtually unlimited. 
D) the methods business firms use to reduce their costs of production. 
A) how to make money in the stock market. 
B) how to operate a business successfully. 
C) the allocation of scarce resources in an effort to satisfy wants that are virtually unlimited. 
D) the methods business firms use to reduce their costs of production.

Question 12

Senator DuMonde favors a government program that he believes will help save endangered species. Economic analysis indicates that

Accepted Answer

A) because Senator DuMonde has good intentions, his new program will have the desired results. 
B) Senator DuMonde's new program could have unintended consequences that might result in an outcome different from what was intended. 
C) regardless of any secondary effects, costs should not be considered when designing environmental legislation. 
D) because Senator DuMonde's proposal is a government program, it will not have an opportunity cost. 
A) because Senator DuMonde has good intentions, his new program will have the desired results. 
B) Senator DuMonde's new program could have unintended consequences that might result in an outcome different from what was intended. 
C) regardless of any secondary effects, costs should not be considered when designing environmental legislation. 
D) because Senator DuMonde's proposal is a government program, it will not have an opportunity cost.

Question 13

All but one of the following are elements of the economic way of thinking. Which one is not part of the economic way of thinking?

Accepted Answer

A) Incentives matter. 
B) The value of goods can be determined objectively. 
C) Economic thinking is marginal thinking. 
D) Information is scarce. 
A) Incentives matter. 
B) The value of goods can be determined objectively. 
C) Economic thinking is marginal thinking. 
D) Information is scarce.

Question 14

Positive economics

Accepted Answer

A) postulates relationships among economic variables that are potentially refutable by real-world events. 
B) is strictly quantitative and is, therefore, of little value to policy makers. 
C) will usually indicate which economic policy is best. 
D) is the same as normative economics. 
A) postulates relationships among economic variables that are potentially refutable by real-world events. 
B) is strictly quantitative and is, therefore, of little value to policy makers. 
C) will usually indicate which economic policy is best. 
D) is the same as normative economics.

Question 15

The opportunity cost of going to college is

Accepted Answer

A) the total spent on food, clothing, books, transportation, tuition, lodging, and other expenses. 
B) the value of the best opportunity a student gives up to attend college. 
C) zero for students who are fortunate enough to have all of their college expenses paid by someone else. 
D) zero, since a college education will allow a student to earn a larger income after graduation. 
A) the total spent on food, clothing, books, transportation, tuition, lodging, and other expenses. 
B) the value of the best opportunity a student gives up to attend college. 
C) zero for students who are fortunate enough to have all of their college expenses paid by someone else. 
D) zero, since a college education will allow a student to earn a larger income after graduation.

Question 16

"There is no such thing as a free lunch." This statement best reflects the fact that

Accepted Answer

A) consumers are unwilling to pay for a good unless it provides them with value. 
B) an opportunity cost is always present when scarce resources are used to produce a good. 
C) it generally requires enormous effort to search out the best place to eat lunch. 
D) the value of a good to consumers will decrease as they have more of it. 
A) consumers are unwilling to pay for a good unless it provides them with value. 
B) an opportunity cost is always present when scarce resources are used to produce a good. 
C) it generally requires enormous effort to search out the best place to eat lunch. 
D) the value of a good to consumers will decrease as they have more of it.

Question 17

When the Hometown football team is winning by a lot of points after halftime, they often play their second and third team players. One of the coaches notices that when the third team plays that Oklahoma wins by a bigger margin than when just the first team plays. He recommends that the third team see more playing time as a result. What is wrong with his way of thinking?

Accepted Answer

A) association is not causation 
B) it is a violation of ceteris paribus 
C) the fallacy of composition 
D) good intentions do not guarantee desirable outcomes 
A) association is not causation 
B) it is a violation of ceteris paribus 
C) the fallacy of composition 
D) good intentions do not guarantee desirable outcomes

Question 18

Your professor loves her work, teaching economics. She has been offered other positions in the corporate world that would increase her income by 25 percent, but she has decided to continue working as a professor. Her decision would not change unless

Accepted Answer

A) the marginal cost of teaching increased. 
B) the marginal benefit of teaching increased. 
C) the marginal cost of teaching decreased. 
D) the marginal benefit of a corporate job decreased. 
A) the marginal cost of teaching increased. 
B) the marginal benefit of teaching increased. 
C) the marginal cost of teaching decreased. 
D) the marginal benefit of a corporate job decreased.

Question 19

Standby passengers on airlines who pay low rates for seats benefit from the low price. How are the airlines affected?

Accepted Answer

A) They lose, because the standby passengers do not cover the full cost of the seats. 
B) They gain, because the additional revenue covers the "fixed costs" of the flight. 
C) They lose, because the gain of the passengers must necessarily come at the expense of the airline. 
D) They benefit as long as the additional revenue from the passengers exceeds the marginal cost. 
A) They lose, because the standby passengers do not cover the full cost of the seats. 
B) They gain, because the additional revenue covers the "fixed costs" of the flight. 
C) They lose, because the gain of the passengers must necessarily come at the expense of the airline. 
D) They benefit as long as the additional revenue from the passengers exceeds the marginal cost.

Question 20

"The standard of living is too low for many individuals in the United States. The government should implement policies designed to achieve a more equal distribution of income." The preceding statements are

Accepted Answer

A) positive economic statements based on cause and effect. 
B) normative economic statements based on value judgments. 
C) based on the fallacy of composition argument. 
D) an empirically validated economic principle. 
A) positive economic statements based on cause and effect. 
B) normative economic statements based on value judgments. 
C) based on the fallacy of composition argument. 
D) an empirically validated economic principle.

Economists use the term ceteris paribus to indicate that

In economics, the term marginal refers to

Which of the following are NOT scarce?

When economists say that people choose rationally, this means

When deciding whether to buy a second car, the economic way of thinking indicates that the purchaser should compare

Capital is a term economists use to refer to

Adam Smith believed that if people were free to pursue their own interests,

If economics is correct in its assumption that people are rational, why then would anyone choose to smoke cigarettes?

Andre, a wheat farmer, is deciding whether or not to add fertilizer to his crops. If he adds 1 pound of fertilizer per acre, the value of the resulting crops rises from $80 to $100 per acre. According to marginal analysis, Andre should add fertilizer if it costs less than

Legislation to protect red-cockaded woodpeckers created incentives that resulted in premature harvesting of trees the woodpeckers like to nest in. This is an example of which of the following?

Economics is primarily the study of

Senator DuMonde favors a government program that he believes will help save endangered species. Economic analysis indicates that

All but one of the following are elements of the economic way of thinking. Which one is not part of the economic way of thinking?

Positive economics

The opportunity cost of going to college is

"There is no such thing as a free lunch." This statement best reflects the fact that

Your professor loves her work, teaching economics. She has been offered other positions in the corporate world that would increase her income by 25 percent, but she has decided to continue working as a professor. Her decision would not change unless

Standby passengers on airlines who pay low rates for seats benefit from the low price. How are the airlines affected?

"The standard of living is too low for many individuals in the United States. The government should implement policies designed to achieve a more equal distribution of income." The preceding statements are

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy, Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Filters

Exam 1: The Economic Approach

Economists use the term ceteris paribus to indicate that

In economics, the term marginal refers to

Which of the following are NOT scarce?

When economists say that people choose rationally, this means

When deciding whether to buy a second car, the economic way of thinking indicates that the purchaser should compare

Capital is a term economists use to refer to

Adam Smith believed that if people were free to pursue their own interests,

If economics is correct in its assumption that people are rational, why then would anyone choose to smoke cigarettes?

Andre, a wheat farmer, is deciding whether or not to add fertilizer to his crops. If he adds 1 pound of fertilizer per acre, the value of the resulting crops rises from $80 to $100 per acre. According to marginal analysis, Andre should add fertilizer if it costs less than

Legislation to protect red-cockaded woodpeckers created incentives that resulted in premature harvesting of trees the woodpeckers like to nest in. This is an example of which of the following?

Economics is primarily the study of

Senator DuMonde favors a government program that he believes will help save endangered species. Economic analysis indicates that

All but one of the following are elements of the economic way of thinking. Which one is not part of the economic way of thinking?

Positive economics

The opportunity cost of going to college is

"There is no such thing as a free lunch." This statement best reflects the fact that

Your professor loves her work, teaching economics. She has been offered other positions in the corporate world that would increase her income by 25 percent, but she has decided to continue working as a professor. Her decision would not change unless

Standby passengers on airlines who pay low rates for seats benefit from the low price. How are the airlines affected?

"The standard of living is too low for many individuals in the United States. The government should implement policies designed to achieve a more equal distribution of income." The preceding statements are

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy, Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Filters