Question 1

The negative slope of the production possibilities curve is a graphical way of indicating that

Accepted Answer

A) any economy "can have its cake and eat it too." 
B) to produce more of one product, we must do with less of another. 
C) the principle of increasing opportunity costs applies to only parts of the economy. 
D) consumers buy more when prices are low than when prices are high. 
A) any economy "can have its cake and eat it too." 
B) to produce more of one product, we must do with less of another. 
C) the principle of increasing opportunity costs applies to only parts of the economy. 
D) consumers buy more when prices are low than when prices are high.

Question 2

Because economic generalizations are simplifications from reality, they are impractical and useless.

Accepted Answer

A) True 
 B)False

Question 3

The slope of a line parallel to the vertical axis is

Accepted Answer

A) zero. 
B) one. 
C) infinite. 
D) one-half. 
A) zero. 
B) one. 
C) infinite. 
D) one-half.

Question 4

In a curved graph that is dome-shaped, the tangent line at its maximum, or highest point, has an infinite slope.

Accepted Answer

A) True 
 B)False

Question 5

The slope of a graph with "income" on the horizontal axis and "saving" on the vertical axis is +0.2.This means that if

Accepted Answer

A) income is $100, then saving is $20. 
B) income is 0.20, then saving is zero. 
C) income increases by $100, then saving will rise by $20. 
D) saving rises by $100, then income will rise by $20. 
A) income is $100, then saving is $20. 
B) income is 0.20, then saving is zero. 
C) income increases by $100, then saving will rise by $20. 
D) saving rises by $100, then income will rise by $20.

Question 6

Which of the following do economists consider to be capital?

Accepted Answer

A) a pair of stockings 
B) a construction crane 
C) a savings account 
D) a share of IBM stock 
A) a pair of stockings 
B) a construction crane 
C) a savings account 
D) a share of IBM stock

Question 7

Answer the question on the basis of the following information.Assume that if the interest rate that businesses must pay to borrow funds were 20 percent, it would be unprofitable for businesses to invest in new machinery and equipment, so investment would be zero.But if the interest rate were 16 percent, businesses would find it profitable to invest $10 billion.If the interest rate were 12 percent, $20 billion would be invested.Assume that total investment continues to increase by $10 billion for each
Successive 4 percentage point decline in the interest rate.Refer to the information.Which of the following is an accurate verbal statement of the described relationship?

Accepted Answer

A) There is no regular or dependable relationship between business investment and the interest rate. 
B) The amount of business investment is unaffected by changes in the interest rate. 
C) Investment spending by businesses varies inversely with the interest rate. 
D) Investment spending by businesses varies directly with the interest rate. 
A) There is no regular or dependable relationship between business investment and the interest rate. 
B) The amount of business investment is unaffected by changes in the interest rate. 
C) Investment spending by businesses varies inversely with the interest rate. 
D) Investment spending by businesses varies directly with the interest rate.

Question 8

A normative statement is one that

Accepted Answer

A) is based on the law of averages. 
B) applies only to microeconomics. 
C) applies only to macroeconomics. 
D) is based on value judgments. 
A) is based on the law of averages. 
B) applies only to microeconomics. 
C) applies only to macroeconomics. 
D) is based on value judgments.

Question 9

Suppose that an economy is producing on its production possibilities curve but is not producing quantities of each good where the marginal benefit equals the marginal cost for each good.This economy

Accepted Answer

A) should not change its production, because it cannot improve its allocation by shifting resources. 
B) can improve its allocation by lowering the unemployment rate. 
C) can improve its allocation by producing more of one good and less of the other. 
D) can improve its allocation by producing more of both goods. 
A) should not change its production, because it cannot improve its allocation by shifting resources. 
B) can improve its allocation by lowering the unemployment rate. 
C) can improve its allocation by producing more of one good and less of the other. 
D) can improve its allocation by producing more of both goods.

Question 10

In a relationship between two variables, the "independent variable" refers to the

Accepted Answer

A) one measured on the vertical axis, in the convention of mathematics. 
B) one whose value is assumed constant. 
C) effect or outcome. 
D) cause or source variable. 
A) one measured on the vertical axis, in the convention of mathematics. 
B) one whose value is assumed constant. 
C) effect or outcome. 
D) cause or source variable.

Question 11

Which question is an illustration of a microeconomic question?

Accepted Answer

A) Is the volume of wine produced in one year dependent upon the price of wine? 
B) Does government spending influence interest rates in the economy? 
C) Is the purchasing power of the dollar higher or lower today than it was in 2008? 
D) Which economic system is better for consumers and firms? 
A) Is the volume of wine produced in one year dependent upon the price of wine? 
B) Does government spending influence interest rates in the economy? 
C) Is the purchasing power of the dollar higher or lower today than it was in 2008? 
D) Which economic system is better for consumers and firms?

Question 12

Positive statements are expressions of value judgments.

Accepted Answer

A) True 
 B)False

Question 13

Economics involves marginal analysis because

Accepted Answer

A) most decisions involve changes from the present situation. 
B) marginal benefits always exceed marginal costs. 
C) marginal costs always exceed marginal benefits. 
D) much economic behavior is irrational. 
A) most decisions involve changes from the present situation. 
B) marginal benefits always exceed marginal costs. 
C) marginal costs always exceed marginal benefits. 
D) much economic behavior is irrational.

Question 14

In the graph for the linear equation S = 15 - 5T, with T on the horizontal axis, the vertical intercept of the graph is -5.

Accepted Answer

A) True 
 B)False

Question 15

Normative statements are expressions of facts.

Accepted Answer

A) True 
 B)False

Question 16

The term "other things equal" means that

Accepted Answer

A) the associated statement is normative. 
B) many variables affect the variable under consideration. 
C) a number of relevant variables are assumed to be constant. 
D) when variable X increases, so does related variable Y. 
A) the associated statement is normative. 
B) many variables affect the variable under consideration. 
C) a number of relevant variables are assumed to be constant. 
D) when variable X increases, so does related variable Y.

Question 17

A positive statement is concerned primarily with

Accepted Answer

A) some goal that is desirable to society. 
B) what should be. 
C) what is. 
D) the formulation of economic policy. 
A) some goal that is desirable to society. 
B) what should be. 
C) what is. 
D) the formulation of economic policy.

Question 18

If economic resources are perfectly interchangeable between the two products shown on a production possibilities graph,

Accepted Answer

A) the economy will always be at full employment. 
B) more of one product can be produced without producing less of the other product. 
C) the production possibilities curve would be a straight line. 
D) the two products are of equal value to the economy. 
A) the economy will always be at full employment. 
B) more of one product can be produced without producing less of the other product. 
C) the production possibilities curve would be a straight line. 
D) the two products are of equal value to the economy.

Question 19

Some agricultural sub-Saharan nations of Africa have overfarmed and overgrazed their land to the extent that significant portions of it have turned into desert.This suggests that

Accepted Answer

A) the production possibilities curves of such nations are more bowed out from the origin. 
B) the production possibilities curves of such nations have shifted inward. 
C) the production possibilities curves of such nations have shifted outward. 
D) these nations are operating at some point outside of their production possibilities curves. 
A) the production possibilities curves of such nations are more bowed out from the origin. 
B) the production possibilities curves of such nations have shifted inward. 
C) the production possibilities curves of such nations have shifted outward. 
D) these nations are operating at some point outside of their production possibilities curves.

Question 20

A person observes that consumer prices often fall when a nation experiences economic growth.The person then concludes that falling consumer prices lead to economic growth.This would be an example of

Accepted Answer

A) the fallacy of composition. 
B) biases. 
C) confusing correlation and causation. 
D) the use of loaded terminology. 
A) the fallacy of composition. 
B) biases. 
C) confusing correlation and causation. 
D) the use of loaded terminology.

Exam 1: Limits, Alternatives, and Choices

The negative slope of the production possibilities curve is a graphical way of indicating that

Because economic generalizations are simplifications from reality, they are impractical and useless.

The slope of a line parallel to the vertical axis is

In a curved graph that is dome-shaped, the tangent line at its maximum, or highest point, has an infinite slope.

The slope of a graph with "income" on the horizontal axis and "saving" on the vertical axis is +0.2.This means that if

Which of the following do economists consider to be capital?

A normative statement is one that

Suppose that an economy is producing on its production possibilities curve but is not producing quantities of each good where the marginal benefit equals the marginal cost for each good.This economy

In a relationship between two variables, the "independent variable" refers to the

Which question is an illustration of a microeconomic question?

Positive statements are expressions of value judgments.

Economics involves marginal analysis because

In the graph for the linear equation S = 15 - 5T, with T on the horizontal axis, the vertical intercept of the graph is -5.

Normative statements are expressions of facts.

The term "other things equal" means that

A positive statement is concerned primarily with

If economic resources are perfectly interchangeable between the two products shown on a production possibilities graph,

Some agricultural sub-Saharan nations of Africa have overfarmed and overgrazed their land to the extent that significant portions of it have turned into desert.This suggests that

A person observes that consumer prices often fall when a nation experiences economic growth.The person then concludes that falling consumer prices lead to economic growth.This would be an example of

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, Rd, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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