Question 1

An entrepreneur:

Accepted Answer

A)  always makes a profit. 
B)  generally avoids risky situations. 
C)  claims the profit after other resource suppliers are compensated. 
D)  is a parasite that benefits by not paying other resources for their services. 
E)  is the manager who runs an enterprise and keeps the customers happy. 
A)  always makes a profit. 
B)  generally avoids risky situations. 
C)  claims the profit after other resource suppliers are compensated. 
D)  is a parasite that benefits by not paying other resources for their services. 
E)  is the manager who runs an enterprise and keeps the customers happy.

Question 2

You want to sell your old iPad because you no longer use it, and your cousin wants to give you $200 for it. If you decide to sell your iPad to her, you'll have to pay the shipping fee to get the iPad to her. As a rational decision maker, you will sell your old iPad to your cousin when the shipping fee is:

Accepted Answer

A)  $350. 
B)  $250. 
C)  $301. 
D)  $299. 
E)  $199. 
A)  $350. 
B)  $250. 
C)  $301. 
D)  $299. 
E)  $199.

Question 3

"An increase in the price of a product causes consumers to purchase more of that product" is an example of a positive economic statement.

Accepted Answer

A) True 
 B)False

Question 4

Alan is a retired economist who enjoys building toy trains for his grandkids. He uses a workbench and tools from his garage, lumber he bought from the lumber store for $10, and varnish and paint he had left over from another project last year. Since a retired economist is always an economist, which of the following statements does he make about building toy trains?

Accepted Answer

A)    I'm not paying for any resources, so the toy trains I'm building are a good example of free goods. 
B)  I only paid $10 for the lumber, so the toy trains I'm building are a good example of free goods. 
C)  I'm using scarce resources to build the toy trains. 
D)  The resources I'm using to build the toy trains are not scarce. 
E)  If I had used lumber that I cut from the tree in my backyard instead of buying it from the store, then the toy trains I'm building would be a good example of free goods. 
A)    I'm not paying for any resources, so the toy trains I'm building are a good example of free goods. 
B)  I only paid $10 for the lumber, so the toy trains I'm building are a good example of free goods. 
C)  I'm using scarce resources to build the toy trains. 
D)  The resources I'm using to build the toy trains are not scarce. 
E)  If I had used lumber that I cut from the tree in my backyard instead of buying it from the store, then the toy trains I'm building would be a good example of free goods.

Question 5

Profit is the payment made for land resources.

Accepted Answer

A) True 
 B)False

Question 6

Because people's wants are unlimited but resources are scarce, _____:

Accepted Answer

A)  only the rich get everything they want. 
B)  choices must be made. 
C)  there will be more services produced than goods . 
D)  people search for spiritual fulfillment rather than material fulfillment. 
E)  poor people never get anything they want. 
A)  only the rich get everything they want. 
B)  choices must be made. 
C)  there will be more services produced than goods . 
D)  people search for spiritual fulfillment rather than material fulfillment. 
E)  poor people never get anything they want.

Question 7

The simple circular-flow model for households and firms is an economic model that focuses on the interaction between households and firms. Which of the following statements regarding the model is correct?

Accepted Answer

A)  The model is missing the interaction between firms and the resource market. Therefore, it cannot predict well. 
B)  The model is missing the interaction between households and the product market. Therefore, it cannot predict well. 
C)  The model has too many simplifying assumptions, and it cannot be used to make predictions about the real world. 
D)  The model is a simplification of the real world, and it can be used to make predictions about the real world. 
E)  The model is missing the interaction between firms and the product market. Therefore, it cannot predict well. 
A)  The model is missing the interaction between firms and the resource market. Therefore, it cannot predict well. 
B)  The model is missing the interaction between households and the product market. Therefore, it cannot predict well. 
C)  The model has too many simplifying assumptions, and it cannot be used to make predictions about the real world. 
D)  The model is a simplification of the real world, and it can be used to make predictions about the real world. 
E)  The model is missing the interaction between firms and the product market. Therefore, it cannot predict well.

Question 8

Which of the following is not an example of the fallacy of composition?

Accepted Answer

A)  If I can get to work fastest by taking the interstate, so can everyone else. 
B)  If I can only get away from it all by going to Fairbanks, everyone who needs to get away should go to Fairbanks. 
C)  Every time I play with my dog, it rains, so playing with my dog brings rain. 
D)  If the best TV reception can be gotten with a Couch Potato antenna, then everyone should have a Couch Potato antenna. 
E)  If I can get a better view by standing up at the baseball game, then everyone can get a better view by standing up. 
A)  If I can get to work fastest by taking the interstate, so can everyone else. 
B)  If I can only get away from it all by going to Fairbanks, everyone who needs to get away should go to Fairbanks. 
C)  Every time I play with my dog, it rains, so playing with my dog brings rain. 
D)  If the best TV reception can be gotten with a Couch Potato antenna, then everyone should have a Couch Potato antenna. 
E)  If I can get a better view by standing up at the baseball game, then everyone can get a better view by standing up.

Question 9

Natural resources are:

Accepted Answer

A)  not considered scarce because no one pays for them. 
B)  only desired for use in producing other goods. 
C)  included in the category of resources called gifts of nature. 
D)  available in unlimited quantities. 
E)  not considered scarce because they are not produced by society. 
A)  not considered scarce because no one pays for them. 
B)  only desired for use in producing other goods. 
C)  included in the category of resources called gifts of nature. 
D)  available in unlimited quantities. 
E)  not considered scarce because they are not produced by society.

Question 10

Economists classify all of the following as physical capital, except one. Which one is not capital?

Accepted Answer

A)  A $20 bill in a firm's petty cash drawer 
B)  The building where an economics class meets 
C)  A plumber's wrench 
D)  A railroad car 
E)  A factory 
A)  A $20 bill in a firm's petty cash drawer 
B)  The building where an economics class meets 
C)  A plumber's wrench 
D)  A railroad car 
E)  A factory

Question 11

Most real economic choices involve small (or marginal) changes rather than all-or-nothing decisions.

Accepted Answer

A) True 
 B)False

Question 12

An economic model:

Accepted Answer

A)  omits critical elements. 
B)  must be presented in mathematical terms. 
C)  simplifies reality in order to focus on its essential elements. 
D)  can never be proven wrong if its assumptions are realistic. 
E)  produces poor predictions if it includes an unrealistic assumption. 
A)  omits critical elements. 
B)  must be presented in mathematical terms. 
C)  simplifies reality in order to focus on its essential elements. 
D)  can never be proven wrong if its assumptions are realistic. 
E)  produces poor predictions if it includes an unrealistic assumption.

Question 13

Your friend notices that U.S. auto production and U.S. population growth have moved together over several decades. He reasons that one way to slow population growth is for the government to order the auto makers to cut back on production. You gently point out to him that he:

Accepted Answer

A)  would be correct only when the economy was in a recession. 
B)  has committed the fallacy that association is causation. 
C)  has ignored the secondary effects. 
D)  has committed the fallacy of composition. 
E)  would be correct only when the United States enjoyed economic growth. 
A)  would be correct only when the economy was in a recession. 
B)  has committed the fallacy that association is causation. 
C)  has ignored the secondary effects. 
D)  has committed the fallacy of composition. 
E)  would be correct only when the United States enjoyed economic growth.

Question 14

A rational individual would make charitable contributions only if such contributions receive favorable tax treatment.

Accepted Answer

A) True 
 B)False

Question 15

Goods and services are scarce because:

Accepted Answer

A)  people are greedy. 
B)  they are produced using scarce resources. 
C)  firms keep production low in order to earn higher profits. 
D)  they are produced by firms that seek profits. 
E)  the government wants to maintain its power over the economy. 
A)  people are greedy. 
B)  they are produced using scarce resources. 
C)  firms keep production low in order to earn higher profits. 
D)  they are produced by firms that seek profits. 
E)  the government wants to maintain its power over the economy.

Question 16

An economic model is useful if it:

Accepted Answer

A)  includes every detail of reality. 
B)  involves no unproven assumptions. 
C)  is expressed in equations. 
D)  makes accurate predictions. 
E)  is simple enough to be understood by a child. 
A)  includes every detail of reality. 
B)  involves no unproven assumptions. 
C)  is expressed in equations. 
D)  makes accurate predictions. 
E)  is simple enough to be understood by a child.

Question 17

A rational individual gives more to charity when such contributions receive favorable tax treatment.

Accepted Answer

A) True 
 B)False

Question 18

In economics, capital is defined as:

Accepted Answer

A)  natural resources, such as water, oil, and iron ore. 
B)  the natural, unskilled abilities of people. 
C)  human creations used in the production process. 
D)  money and other financial assets. 
E)  the willingness of business owners to take risks. 
A)  natural resources, such as water, oil, and iron ore. 
B)  the natural, unskilled abilities of people. 
C)  human creations used in the production process. 
D)  money and other financial assets. 
E)  the willingness of business owners to take risks.

Question 19

A resource is something that:

Accepted Answer

A)  is used to produce goods and services. 
B)  is provided by nature, not produced by society. 
C)  exists in unlimited quantities. 
D)  must be produced by a firm. 
E)  is always available free of cost. 
A)  is used to produce goods and services. 
B)  is provided by nature, not produced by society. 
C)  exists in unlimited quantities. 
D)  must be produced by a firm. 
E)  is always available free of cost.

Question 20

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 service sector 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 service sector industry, such as fast food 
E)  Something less desirable than a good

An entrepreneur:

"An increase in the price of a product causes consumers to purchase more of that product" is an example of a positive economic statement.

Profit is the payment made for land resources.

Because people's wants are unlimited but resources are scarce, _____:

The simple circular-flow model for households and firms is an economic model that focuses on the interaction between households and firms. Which of the following statements regarding the model is correct?

Which of the following is not an example of the fallacy of composition?

Natural resources are:

Economists classify all of the following as physical capital, except one. Which one is not capital?

Most real economic choices involve small (or marginal) changes rather than all-or-nothing decisions.

An economic model:

Your friend notices that U.S. auto production and U.S. population growth have moved together over several decades. He reasons that one way to slow population growth is for the government to order the auto makers to cut back on production. You gently point out to him that he:

A rational individual would make charitable contributions only if such contributions receive favorable tax treatment.

Goods and services are scarce because:

An economic model is useful if it:

A rational individual gives more to charity when such contributions receive favorable tax treatment.

In economics, capital is defined as:

A resource is something that:

Which of the following is a service?

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

An entrepreneur:

"An increase in the price of a product causes consumers to purchase more of that product" is an example of a positive economic statement.

Profit is the payment made for land resources.

Because people's wants are unlimited but resources are scarce, _____:

The simple circular-flow model for households and firms is an economic model that focuses on the interaction between households and firms. Which of the following statements regarding the model is correct?

Which of the following is not an example of the fallacy of composition?

Natural resources are:

Economists classify all of the following as physical capital, except one. Which one is not capital?

Most real economic choices involve small (or marginal) changes rather than all-or-nothing decisions.

An economic model:

Your friend notices that U.S. auto production and U.S. population growth have moved together over several decades. He reasons that one way to slow population growth is for the government to order the auto makers to cut back on production. You gently point out to him that he:

A rational individual would make charitable contributions only if such contributions receive favorable tax treatment.

Goods and services are scarce because:

An economic model is useful if it:

A rational individual gives more to charity when such contributions receive favorable tax treatment.

In economics, capital is defined as:

A resource is something that:

Which of the following is a service?

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