Question 1

A normative economic statement:

Accepted Answer

A)  is a hypothesis used to test economic theory. 
B)  is a statement of fact. 
C)  is a statement of what ought to be, not what is. 
D)  indicates what will occur if certain assumptions are true. 
E)  enables economists to test hypotheses. 
A)  is a hypothesis used to test economic theory. 
B)  is a statement of fact. 
C)  is a statement of what ought to be, not what is. 
D)  indicates what will occur if certain assumptions are true. 
E)  enables economists to test hypotheses.

Question 2

In economics, the term marginal usually refers to:

Accepted Answer

A)  a small change in an economic variable. 
B)  a low-quality product or resource. 
C)  an unimportant and irrelevant economic variable. 
D)  an all-or-nothing economic decision. 
E)  a footnote or minor point. 
A)  a small change in an economic variable. 
B)  a low-quality product or resource. 
C)  an unimportant and irrelevant economic variable. 
D)  an all-or-nothing economic decision. 
E)  a footnote or minor point.

Question 3

Environmentalists have continually argued for the use of alternatives to fossil fuels to generate energy. Harnessing wind power by setting up wind farms had been one alternative proposed and implemented. As it is now known that these wind farms lead to the slicing and dicing of migratory birds and the decimation of the local bat population, we could say that environmentalists have committed the:

Accepted Answer

A)  fallacy of composition. 
B)  fallacy that association is causation. 
C)  fallacy of segmentation. 
D)  mistake of ignoring secondary effects. 
E)  mistake of ignoring the obvious. 
A)  fallacy of composition. 
B)  fallacy that association is causation. 
C)  fallacy of segmentation. 
D)  mistake of ignoring secondary effects. 
E)  mistake of ignoring the obvious.

Question 4

When economists say that people act as rational decision makers, they mean that:

Accepted Answer

A)  people 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 permitted to make transactions. 
E)  once made, decisions are never reversed. 
A)  people 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 permitted to make transactions. 
E)  once made, decisions are never reversed.

Question 5

In economics, capital refers to:

Accepted Answer

A)  money. 
B)  stocks, bonds, and other financial assets. 
C)  the seat of the government. 
D)  machines, buildings, tools, and knowledge. 
E)  net worth (assets minus liabilities). 
A)  money. 
B)  stocks, bonds, and other financial assets. 
C)  the seat of the government. 
D)  machines, buildings, tools, and knowledge. 
E)  net worth (assets minus liabilities).

Question 6

The assumption that individuals act rationally implies that:

Accepted Answer

A)  people think only of themselves and disregard the well-being of others. 
B)  people undertake all those activities that yield benefits to themselves. 
C)  people only consider the costs of an activity to decide whether it is worthwhile. 
D)  the greater the cost of a charitable deed to a benefactor, the more likely he or she is to perform that deed. 
E)  people implicitly calculate the costs and benefits of an activity to decide if it is worthwhile. 
A)  people think only of themselves and disregard the well-being of others. 
B)  people undertake all those activities that yield benefits to themselves. 
C)  people only consider the costs of an activity to decide whether it is worthwhile. 
D)  the greater the cost of a charitable deed to a benefactor, the more likely he or she is to perform that deed. 
E)  people implicitly calculate the costs and benefits of an activity to decide if it is worthwhile.

Question 7

A rational decision maker compares the expected marginal cost to the expected marginal benefit of any activity.

Accepted Answer

A) True 
 B)False

Question 8

Rational choice by an individual implies:

Accepted Answer

A)  the use of a 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 scarcity can be eliminated for that individual. 
A)  the use of a 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 scarcity can be eliminated for that individual.

Question 9

Which of the following is a positive statement?

Accepted Answer

A)  The unemployment rate of 7 percent or higher is a national disgrace. 
B)  Unemployment is a less important problem than inflation. 
C)  When the national unemployment rate is 7 percent, the unemployment rate among inner-city youth is often close to 40 percent. 
D)  Unemployment and inflation are equally important problems. 
E)  An inflation rate of 7 percent is too high. 
A)  The unemployment rate of 7 percent or higher is a national disgrace. 
B)  Unemployment is a less important problem than inflation. 
C)  When the national unemployment rate is 7 percent, the unemployment rate among inner-city youth is often close to 40 percent. 
D)  Unemployment and inflation are equally important problems. 
E)  An inflation rate of 7 percent is too high.

Question 10

A good economic theory brings clarity to chaos.

Accepted Answer

A) True 
 B)False

Question 11

Sara is considering the purchase of a new car. Rational self-interest demands that she do an exhaustive research study to acquire every bit of information possible about her potential options.

Accepted Answer

A) True 
 B)False

Question 12

An economic model will produce poor predictions if it includes assumptions.

Accepted Answer

A) True 
 B)False

Question 13

Economic decision makers will continue to acquire information only as long as the expected additional benefit exceeds the expected additional cost of the information.

Accepted Answer

A) True 
 B)False

Question 14

It is always rational to acquire more information before making a decision.

Accepted Answer

A) True 
 B)False

Question 15

You currently subscribe to two magazines and are trying to decide whether you should subscribe to a third. What should determine your decision if you are economically rational?

Accepted Answer

A)  The total cost of the magazines compared to the total satisfaction you would receive 
B)  The total amount of satisfaction you would get from the magazines 
C)  The enjoyment you would get from the third magazine 
D)  The cost of the third magazine including the time it takes to read it 
E)  The cost of the third magazine compared to the additional enjoyment you would get from it 
A)  The total cost of the magazines compared to the total satisfaction you would receive 
B)  The total amount of satisfaction you would get from the magazines 
C)  The enjoyment you would get from the third magazine 
D)  The cost of the third magazine including the time it takes to read it 
E)  The cost of the third magazine compared to the additional enjoyment you would get from it

Question 16

Someone who commits the fallacy of composition is likely to assume that:

Accepted Answer

A)  the simplest model is the best predictor. 
B)  event B, which followed event A, was caused by event A. 
C)  event B, which followed event A, was not necessarily caused by event A. 
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)  the simplest model is the best predictor. 
B)  event B, which followed event A, was caused by event A. 
C)  event B, which followed event A, was not necessarily caused by event A. 
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 17

The assumption of rational self-interest does not rule out the possibility of concern for other individuals.

Accepted Answer

A) True 
 B)False

Question 18

The fact that people have unlimited wants means that:

Accepted Answer

A)  they always want more of at least one good. 
B)  each person has an unlimited desire for every good. 
C)  labor unions demand wage increases. 
D)  selfish people are not concerned about others. 
E)  people buy goods without regard to what they can afford. 
A)  they always want more of at least one good. 
B)  each person has an unlimited desire for every good. 
C)  labor unions demand wage increases. 
D)  selfish people are not concerned about others. 
E)  people buy goods without regard to what they can afford.

Question 19

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.

Question 20

Economics is as much an art as it is a science.

Accepted Answer

A) True 
 B)False

A normative economic statement:

In economics, the term marginal usually refers to:

When economists say that people act as rational decision makers, they mean that:

In economics, capital refers to:

The assumption that individuals act rationally implies that:

A rational decision maker compares the expected marginal cost to the expected marginal benefit of any activity.

Rational choice by an individual implies:

Which of the following is a positive statement?

A good economic theory brings clarity to chaos.

Sara is considering the purchase of a new car. Rational self-interest demands that she do an exhaustive research study to acquire every bit of information possible about her potential options.

An economic model will produce poor predictions if it includes assumptions.

Economic decision makers will continue to acquire information only as long as the expected additional benefit exceeds the expected additional cost of the information.

It is always rational to acquire more information before making a decision.

You currently subscribe to two magazines and are trying to decide whether you should subscribe to a third. What should determine your decision if you are economically rational?

Someone who commits the fallacy of composition is likely to assume that:

The assumption of rational self-interest does not rule out the possibility of concern for other individuals.

The fact that people have unlimited wants means that:

Economics is best described as the:

Economics is as much an art as it is a science.

Some Tools of Economic Analysis

Economic Decision Makers

Demand, Supply, and Markets

Introduction to Macroeconomics

Tracking the U S Economy

Unemployment and Inflation

Us Productivity and Growth

Aggregate Demand

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

The Policy Debate: Active or Passive

International Trade

International Finance

Economic Development

Filters

Exam 1: The Art and Science of Economic Analysis

A normative economic statement:

In economics, the term marginal usually refers to:

When economists say that people act as rational decision makers, they mean that:

In economics, capital refers to:

The assumption that individuals act rationally implies that:

A rational decision maker compares the expected marginal cost to the expected marginal benefit of any activity.

Rational choice by an individual implies:

Which of the following is a positive statement?

A good economic theory brings clarity to chaos.

Sara is considering the purchase of a new car. Rational self-interest demands that she do an exhaustive research study to acquire every bit of information possible about her potential options.

An economic model will produce poor predictions if it includes assumptions.

Economic decision makers will continue to acquire information only as long as the expected additional benefit exceeds the expected additional cost of the information.

It is always rational to acquire more information before making a decision.

You currently subscribe to two magazines and are trying to decide whether you should subscribe to a third. What should determine your decision if you are economically rational?

Someone who commits the fallacy of composition is likely to assume that:

The assumption of rational self-interest does not rule out the possibility of concern for other individuals.

The fact that people have unlimited wants means that:

Economics is best described as the:

Economics is as much an art as it is a science.

Some Tools of Economic Analysis

Economic Decision Makers

Demand, Supply, and Markets

Introduction to Macroeconomics

Tracking the U S Economy

Unemployment and Inflation

Us Productivity and Growth

Aggregate Demand

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

The Policy Debate: Active or Passive

International Trade

International Finance

Economic Development

Filters