Question 1

Behavioral assumptions

Accepted Answer

A) make economic models more complex than if these assumptions were removed 
B) pertain only to consumers 
C) hold all other things constant 
D) are ways to test a hypothesis 
E) describe how individuals are expected to behave 
A) make economic models more complex than if these assumptions were removed 
B) pertain only to consumers 
C) hold all other things constant 
D) are ways to test a hypothesis 
E) describe how individuals are expected to behave E

Question 2

Economics is best defined as the study of how individuals decide to uselimited resources in an attempt to satisfy unlimited wants.

Accepted Answer

A) True 
 B)False  True

Question 3

Rational choice by an individual implies

Accepted Answer

A) the use of some mathematical model when solving a problem 
B) making decisions aimed at achieving some predetermined goal 
C) that only monetary costs and benefits are weighed 
D) that an individual will never regret any action taken 
E) that scarcity can be eliminated for that individual 
A) the use of some mathematical model when solving a problem 
B) making decisions aimed at achieving some predetermined goal 
C) that only monetary costs and benefits are weighed 
D) that an individual will never regret any action taken 
E) that scarcity can be eliminated for that individual B

Question 4

Rent is the payment received by resource owners for the use of their naturalresources.

Accepted Answer

A) True 
 B)False

Question 5

Scarcity

Accepted Answer

A) exists because people have wants that are unlimited relative to the availability of resources to satisfy those
Wants 
B) applies when a resource is not freely available 
C) means that each society and each individual must make choices 
D) exists in all societies 
E) all of the above are true 
A) exists because people have wants that are unlimited relative to the availability of resources to satisfy those
Wants 
B) applies when a resource is not freely available 
C) means that each society and each individual must make choices 
D) exists in all societies 
E) all of the above are true

Question 6

A market

Accepted Answer

A) is often a physical place 
B) facilitates exchanges between buyers and sellers 
C) typically involves monetary transactions 
D) might not have well­defined geographical limits 
E) all of the above 
A) is often a physical place 
B) facilitates exchanges between buyers and sellers 
C) typically involves monetary transactions 
D) might not have well­defined geographical limits 
E) all of the above

Question 7

One problem with rent controls is that policy makers often ignore itssecondary effects.

Accepted Answer

A) True 
 B)False

Question 8

The difference between a positive economic statement and a normativestatement is that

Accepted Answer

A) a positive statement must be true; a normative statement is often not true 
B) a normative statement must be true; a positive statement is often not true 
C) a positive statement can be verified; a normative statement cannot 
D) a normative statements can be verified; a positive statement cannot 
E) a positive economic statement is a moral judgment; a normative economic statement is not a
Moral judgment 
A) a positive statement must be true; a normative statement is often not true 
B) a normative statement must be true; a positive statement is often not true 
C) a positive statement can be verified; a normative statement cannot 
D) a normative statements can be verified; a positive statement cannot 
E) a positive economic statement is a moral judgment; a normative economic statement is not a
Moral judgment

Question 9

A good or service is considered scarce if

Accepted Answer

A) any quantity of it can be consumed at a zero price 
B) the amount people desire exceeds the amount available at a zero price 
C) the amount people desire exceeds the amount available at any price 
D) the amount people desire is less than the amount available at any price 
E) the amount people desire is less than the amount available at a zero price 
A) any quantity of it can be consumed at a zero price 
B) the amount people desire exceeds the amount available at a zero price 
C) the amount people desire exceeds the amount available at any price 
D) the amount people desire is less than the amount available at any price 
E) the amount people desire is less than the amount available at a zero price

Question 10

Resources are used only in the production of goods, not services.

Accepted Answer

A) True 
 B)False

Question 11

)The problem of scarce resources

Accepted Answer

A) means that in some cities there are not enough jobs 
B) could be solved if the unemployment rate fell 
C) is that there are not enough resources to satisfy people's unlimited wants 
D) is that resources are used inefficiently 
E) can be solved by lowering taxes 
A) means that in some cities there are not enough jobs 
B) could be solved if the unemployment rate fell 
C) is that there are not enough resources to satisfy people's unlimited wants 
D) is that resources are used inefficiently 
E) can be solved by lowering taxes

Question 12

An economist would classify 100 shares of Apple Computer stock ascapital.

Accepted Answer

A) True 
 B)False

Question 13

The other­things­constant assumption

Accepted Answer

A) allows the economist to make useful predictions 
B) is a prediction 
C) applies only to consumers' decisions, not to those of firms 
D) forces the economist to ignore reality, where things are constantly changing 
E) implies rational self­interest on the part of all economic actors 
A) allows the economist to make useful predictions 
B) is a prediction 
C) applies only to consumers' decisions, not to those of firms 
D) forces the economist to ignore reality, where things are constantly changing 
E) implies rational self­interest on the part of all economic actors

Question 14

The expression "There's no such thing as a free lunch" means

Accepted Answer

A) that even if the lunch is free, we pay for it in extra calories 
B) that resources used up in producing the lunch are not available to satisfy other wants 
C) the same thing as "The best things in life are free" 
D) you can eat only if you work first 
E) neither sea water nor air is free 
A) that even if the lunch is free, we pay for it in extra calories 
B) that resources used up in producing the lunch are not available to satisfy other wants 
C) the same thing as "The best things in life are free" 
D) you can eat only if you work first 
E) neither sea water nor air is free

Question 15

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

Accepted Answer

A) The moon is made of green cheese. 
B) Women should earn the same income as men. 
C) When the price of a good rises, people will buy more of it. 
D) The more time you spend studying, the higher your economics test scores will be. 
E) The more time you spend studying for chemistry, the higher your economics test score will be. 
A) The moon is made of green cheese. 
B) Women should earn the same income as men. 
C) When the price of a good rises, people will buy more of it. 
D) The more time you spend studying, the higher your economics test scores will be. 
E) The more time you spend studying for chemistry, the higher your economics test score will be.

Question 16

"There should be less discrimination against the elderly." This is anexample of a

Accepted Answer

A) normative statement 
B) positive statement 
C) forecast 
D) hypothesis 
E) prediction 
A) normative statement 
B) positive statement 
C) forecast 
D) hypothesis 
E) prediction

Question 17

Economists often focus on average behavior because it is easier to predict.

Accepted Answer

A) True 
 B)False

Question 18

Someone who committed the association­is­causation fallacy mightconclude that

Accepted Answer

A) event B, which follows event A, was caused by the event A 
B) event B, which follows event A, was not necessarily caused by event A 
C) the simplest model is the best predictor 
D) what is true for the individual is also true for the group 
E) what is true for the individual is not necessarily true for the group 
A) event B, which follows event A, was caused by the event A 
B) event B, which follows event A, was not necessarily caused by event A 
C) the simplest model is the best predictor 
D) what is true for the individual is also true for the group 
E) what is true for the individual is not necessarily true for the group

Question 19

Which of the following is a service?

Accepted Answer

A) anything that is scarce and that satisfies unlimited human wants 
B) a thing for which people pay money 
C) an intangible activity that satisfies human wants 
D) any output produced by a service­sector industry, such as fast food 
E) something less desirable than a good 
A) anything that is scarce and that satisfies unlimited human wants 
B) a thing for which people pay money 
C) an intangible activity that satisfies human wants 
D) any output produced by a service­sector industry, such as fast food 
E) something less desirable than a good

Question 20

Economics is best described as the

Accepted Answer

A) study of choice when scarcity exists 
B) study of the production of goods and services 
C) theory of consumer behavior 
D) science of money 
E) art of spending money wisely 
A) study of choice when scarcity exists 
B) study of the production of goods and services 
C) theory of consumer behavior 
D) science of money 
E) art of spending money wisely

Exam 1: The Art and Science of Economic Analysis

Behavioral assumptions

Economics is best defined as the study of how individuals decide to uselimited resources in an attempt to satisfy unlimited wants.

Rational choice by an individual implies

Rent is the payment received by resource owners for the use of their naturalresources.

Scarcity

A market

One problem with rent controls is that policy makers often ignore itssecondary effects.

The difference between a positive economic statement and a normativestatement is that

A good or service is considered scarce if

Resources are used only in the production of goods, not services.

)The problem of scarce resources

An economist would classify 100 shares of Apple Computer stock ascapital.

The other­things­constant assumption

The expression "There's no such thing as a free lunch" means

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

"There should be less discrimination against the elderly." This is anexample of a

Economists often focus on average behavior because it is easier to predict.

Someone who committed the association­is­causation fallacy mightconclude that

Which of the following is a service?

Economics is best described as the

Economic Tools and Economics Systems

Economic Decision Makers

Demand Supply and Markets

Elasticity of Demand and Supply

Consumer Choice and Demand

Production and Cost in the Firm

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Resource Markets

Labor Markets and Labor Unions

Capital Interest Entrepreneurship and Corporate Finance

Transaction Costs Imperfect Information and Behavioral Economics

Economic Regulation and Antitrust Policy

Public Goods and Public Choice

Externalities and the Environment

Income Distribution and Poverty

International Trade

International Finance

Economic Development

Filters

The otherthingsconstant assumption

Someone who committed the associationiscausation fallacy mightconclude that