Question 1

Which of the following is a problem inherent in centrally planned economies?

Accepted Answer

A)  Households and firms make poor decisions in choosing how resources are allocated. 
B)  There is too little production of low-cost, high-quality goods and services. 
C)  Production managers are more concerned with satisfying consumer wants than with satisfying government's orders. 
D)  Exports tend to exceed imports. 
A)  Households and firms make poor decisions in choosing how resources are allocated. 
B)  There is too little production of low-cost, high-quality goods and services. 
C)  Production managers are more concerned with satisfying consumer wants than with satisfying government's orders. 
D)  Exports tend to exceed imports.

Question 2

Where do economic agents such as individuals, firms, and nations interact with each other?

Accepted Answer

A)  in public locations monitored by the government 
B)  in any arena that brings together buyers and sellers 
C)  in any physical location where people can physically get together for selling goods, such as shopping malls 
D)  in any location where transactions can be monitored by consumer groups and taxed by the government 
A)  in public locations monitored by the government 
B)  in any arena that brings together buyers and sellers 
C)  in any physical location where people can physically get together for selling goods, such as shopping malls 
D)  in any location where transactions can be monitored by consumer groups and taxed by the government

Question 3

If a graph has a line that shows the amount of outsourcing in the last ten years, it is known as

Accepted Answer

A)  a pie chart. 
B)  a time-series graph. 
C)  a demand curve for outsourcing. 
D)  a supply curve of outsourcing. 
A)  a pie chart. 
B)  a time-series graph. 
C)  a demand curve for outsourcing. 
D)  a supply curve of outsourcing.

Question 4

In economics, activities done for others, such as providing house cleaning or dental work, are referred to as

Accepted Answer

A)  technology. 
B)  physical capital. 
C)  services. 
D)  goods. 
A)  technology. 
B)  physical capital. 
C)  services. 
D)  goods.

Question 5

Economics does not study correct or incorrect behaviors but rather it assumes that economic agents behave ________, meaning they make the best decisions given their knowledge of the costs and benefits.

Accepted Answer

A)  equitably 
B)  rationally 
C)  emotionally 
D)  selfishly 
A)  equitably 
B)  rationally 
C)  emotionally 
D)  selfishly

Question 6

Which of the following statements is false?

Accepted Answer

A)  An inverse relationship has a negative slope value. 
B)  A direct relationship has a positive slope value. 
C)  A curved line has slope values that change at every point. 
D)  A straight line has a slope of zero. 
A)  An inverse relationship has a negative slope value. 
B)  A direct relationship has a positive slope value. 
C)  A curved line has slope values that change at every point. 
D)  A straight line has a slope of zero.

Question 7

Which of the following is a positive economic statement?

Accepted Answer

A)  People should not buy imported fruits and vegetables. 
B)  The government should subsidize solar power for homeowners. 
C)  The minimum wage law causes unemployment. 
D)  The number of work visas should not be limited by the government. 
A)  People should not buy imported fruits and vegetables. 
B)  The government should subsidize solar power for homeowners. 
C)  The minimum wage law causes unemployment. 
D)  The number of work visas should not be limited by the government.

Question 8

What is the difference between an invention and an innovation?

Accepted Answer

An invention is the development of a new

Question 9

The relationship between sales and revenue is

Accepted Answer

A)  an inverse relationship. 
B)  a direct relationship. 
C)  a negative relationship. 
D)  independent. 
A)  an inverse relationship. 
B)  a direct relationship. 
C)  a negative relationship. 
D)  independent.

Question 10

Trinh quits his $80,000-a-year job to become a full-time volunteer at a museum. What is the opportunity cost of his decision?

Accepted Answer

A)  0 since he will no longer be earning a salary 
B)  depends on the "going rate" of museum employees 
C)  at least $80,000 
D)  the value he attributes to the joy of working at a museum 
A)  0 since he will no longer be earning a salary 
B)  depends on the "going rate" of museum employees 
C)  at least $80,000 
D)  the value he attributes to the joy of working at a museum

Question 11

In 2017, Smileytown consumed 50,000 tubes of toothpaste. In 2018, toothpaste consumption rose to 62,000 tubes. Calculate the percentage change in toothpaste consumption.

Accepted Answer

A)  12% 
B)  16.42% 
C)  19.35% 
D)  24% 
A)  12% 
B)  16.42% 
C)  19.35% 
D)  24%

Question 12

A college must decide if it wants to offer more adult literacy classes. This decision involves answering the economic question of "what to produce."

Accepted Answer

A) True 
 B)False

Question 13

In a market economy, ________ interact in markets to decide the answers to the fundamental economic questions.

Accepted Answer

A)  state and local governments 
B)  large corporations 
C)  households and firms 
D)  the judicial and legislative branches of the federal government 
A)  state and local governments 
B)  large corporations 
C)  households and firms 
D)  the judicial and legislative branches of the federal government

Question 14

A college must decide if it wants to offer more evening and weekend classes. This decision involves answering the economic question of "for whom to produce."

Accepted Answer

A) True 
 B)False

Question 15

All economic questions arise from the fact that resources are scarce.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following best describes an assumption economists make about human behavior?

Accepted Answer

A)  They assume that individuals act rationally all the time in all circumstances. 
B)  They assume that rational behavior is useful in explaining choices people make even though people may not behave rationally all the time. 
C)  They assume that people take into account the question of fairness in all decisions they make. 
D)  They assume that individuals act randomly. 
A)  They assume that individuals act rationally all the time in all circumstances. 
B)  They assume that rational behavior is useful in explaining choices people make even though people may not behave rationally all the time. 
C)  They assume that people take into account the question of fairness in all decisions they make. 
D)  They assume that individuals act randomly.

Question 17

Policies based on normative economic ideas tend to increase economic efficiency and improve equity.

Accepted Answer

A) True 
 B)False

Question 18

In 2017, Smileytown consumed 12,000 gallons of mouthwash. In 2018, mouthwash consumption rose to 17,000 gallons. Calculate the percentage change in mouthwash consumption.

Accepted Answer

A)  17.2% 
B)  29.4% 
C)  41.7% 
D)  70.6% 
A)  17.2% 
B)  29.4% 
C)  41.7% 
D)  70.6%

Question 19

Economists assume that

Accepted Answer

A)  individuals behave in unpredictable ways. 
B)  consumer behavior is explained by the existence of unlimited resources. 
C)  people put other people's interests ahead of their own. 
D)  optimal decisions are made at the margin. 
A)  individuals behave in unpredictable ways. 
B)  consumer behavior is explained by the existence of unlimited resources. 
C)  people put other people's interests ahead of their own. 
D)  optimal decisions are made at the margin.

Question 20

The government makes all economic decisions in a market economy.

Accepted Answer

A) True 
 B)False

Exam 1: Economics: Foundations and Models

Which of the following is a problem inherent in centrally planned economies?

Where do economic agents such as individuals, firms, and nations interact with each other?

If a graph has a line that shows the amount of outsourcing in the last ten years, it is known as

In economics, activities done for others, such as providing house cleaning or dental work, are referred to as

Economics does not study correct or incorrect behaviors but rather it assumes that economic agents behave ________, meaning they make the best decisions given their knowledge of the costs and benefits.

Which of the following statements is false?

Which of the following is a positive economic statement?

What is the difference between an invention and an innovation?

The relationship between sales and revenue is

Trinh quits his $80,000-a-year job to become a full-time volunteer at a museum. What is the opportunity cost of his decision?

In 2017, Smileytown consumed 50,000 tubes of toothpaste. In 2018, toothpaste consumption rose to 62,000 tubes. Calculate the percentage change in toothpaste consumption.

A college must decide if it wants to offer more adult literacy classes. This decision involves answering the economic question of "what to produce."

In a market economy, ________ interact in markets to decide the answers to the fundamental economic questions.

A college must decide if it wants to offer more evening and weekend classes. This decision involves answering the economic question of "for whom to produce."

All economic questions arise from the fact that resources are scarce.

Which of the following best describes an assumption economists make about human behavior?

Policies based on normative economic ideas tend to increase economic efficiency and improve equity.

In 2017, Smileytown consumed 12,000 gallons of mouthwash. In 2018, mouthwash consumption rose to 17,000 gallons. Calculate the percentage change in mouthwash consumption.

Economists assume that

The government makes all economic decisions in a market economy.

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

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