Question 1

Microeconomics is the branch of economics in which you study inflation and unemployment in the economy.

Accepted Answer

A) True 
 B)False

Question 2

Exhibit 1A-3  Straight line   In Exhibit 1A-3, the slope for straight line AB is:

Accepted Answer

A)  3. 
B)  1. 
C)  − 1. 
D)  − 5. 
A)  3. 
B)  1. 
C)  − 1. 
D)  − 5.

Question 3

Complete the following analogy: A criminal is to a police artist's sketch as the economy is to:

Accepted Answer

A)  money. 
B)  an economic model. 
C)  a resource. 
D)  Ceteris paribus. 
E)  scarcity. 
A)  money. 
B)  an economic model. 
C)  a resource. 
D)  Ceteris paribus. 
E)  scarcity.

Question 4

The Ceteris paribus assumption is important when building economic models.

Accepted Answer

A) True 
 B)False

Question 5

The person who assumes the risks and uncertainties of starting a new business is considered to be:

Accepted Answer

A)  the manager. 
B)  the out-resourcer. 
C)  a sales representative. 
D)  an entrepreneur. 
A)  the manager. 
B)  the out-resourcer. 
C)  a sales representative. 
D)  an entrepreneur.

Question 6

Exhibit 1A-6  Straight line   In Exhibit 1A-6, the slope of straight line A-D is:

Accepted Answer

A)  positive. 
B)  zero. 
C)  negative. 
D)  variable. 
A)  positive. 
B)  zero. 
C)  negative. 
D)  variable.

Question 7

A direct relationship is expressed graphically as a:

Accepted Answer

A)  positively sloped line or curve. 
B)  negatively sloped line or curve. 
C)  horizontal line. 
D)  vertical line. 
A)  positively sloped line or curve. 
B)  negatively sloped line or curve. 
C)  horizontal line. 
D)  vertical line.

Question 8

Which of the following is most likely to represent causality rather than association?

Accepted Answer

A)  In years that fashion dictates wider lapels on men's jackets, the stock market grows by at least 5 percent. 
B)  Interest rates are higher in years ending with a 1 or a 6. 
C)  Unemployment falls when the AFC champion wins the Super Bowl. 
D)  Quantity demanded goes up when price falls because lower prices increase consumer purchasing power, ceteris paribus. 
A)  In years that fashion dictates wider lapels on men's jackets, the stock market grows by at least 5 percent. 
B)  Interest rates are higher in years ending with a 1 or a 6. 
C)  Unemployment falls when the AFC champion wins the Super Bowl. 
D)  Quantity demanded goes up when price falls because lower prices increase consumer purchasing power, ceteris paribus.

Question 9

Positive economics is a mode of inquiry that attempts to explain the observable, and is limited to verifiable statements, while normative economics suggests a course of action that we should take based on a particular set of values and preferences.

Accepted Answer

A) True 
 B)False

Question 10

An economist at the University of Alaska at Anchorage has been asked to explain why the price of Alaskan crude oil has fallen recently. In order to develop a model, the professor should take which steps?

Accepted Answer

A)  Identify the problem, develop a model based on simplifying assumptions and test the model to formulate a conclusion. 
B)  Gather data on crude oil prices and seemingly unrelated variables in order to look for associations, then formulate a hypothesis based on those unexpected associations. 
C)  Ask people in Alaska why they are not purchasing oil. 
D)  None of the above. The oil industry is controlled by a cartel; therefore price changes in the industry cannot be explained using economic theories. 
A)  Identify the problem, develop a model based on simplifying assumptions and test the model to formulate a conclusion. 
B)  Gather data on crude oil prices and seemingly unrelated variables in order to look for associations, then formulate a hypothesis based on those unexpected associations. 
C)  Ask people in Alaska why they are not purchasing oil. 
D)  None of the above. The oil industry is controlled by a cartel; therefore price changes in the industry cannot be explained using economic theories.

Question 11

A model is defined as a:

Accepted Answer

A)  description of all variables affecting a situation. 
B)  positive analysis of all variables affecting an event. 
C)  simplified description of reality to understand and predict an economic event. 
D)  prediction based on historical evidence. 
A)  description of all variables affecting a situation. 
B)  positive analysis of all variables affecting an event. 
C)  simplified description of reality to understand and predict an economic event. 
D)  prediction based on historical evidence.

Question 12

A downward-sloping straight line exhibits a direct relationship between two variables.

Accepted Answer

A) True 
 B)False

Question 13

Scarcity means we are unable to have as much as we would like to have.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is closest to the definition of capital?

Accepted Answer

A)  c and e. 
B)  c and d. 
C)  Tools, equipment, means of transportation 
D)  Factories and machinery. 
E)  Borrowed money. 
A)  c and e. 
B)  c and d. 
C)  Tools, equipment, means of transportation 
D)  Factories and machinery. 
E)  Borrowed money.

Question 15

The study of microeconomics and macroeconomics differ in that:

Accepted Answer

A)  microeconomics is concerned with the domestic economy and macroeconomics is concerned only with the international economy. 
B)  microeconomics examines the individual markets of the economy while macroeconomics studies the whole economy. 
C)  microeconomics studies the actions of households and macroeconomics studies the actions of business firms. 
D)  microeconomics examines the whole economy while macroeconomics studies the individual units of the economy. 
A)  microeconomics is concerned with the domestic economy and macroeconomics is concerned only with the international economy. 
B)  microeconomics examines the individual markets of the economy while macroeconomics studies the whole economy. 
C)  microeconomics studies the actions of households and macroeconomics studies the actions of business firms. 
D)  microeconomics examines the whole economy while macroeconomics studies the individual units of the economy.

Question 16

A positive economic statement simply describes what is.

Accepted Answer

A) True 
 B)False

Question 17

Exhibit 1A-5  Straight line   Straight line CD in Exhibit 1A-5 shows that:

Accepted Answer

A)  increasing values for X increases the value of Y. 
B)  decreasing values for X decreases the value of Y. 
C)  there is an inverse relationship between X and Y. 
D)  all of the above. 
A)  increasing values for X increases the value of Y. 
B)  decreasing values for X decreases the value of Y. 
C)  there is an inverse relationship between X and Y. 
D)  all of the above.

Question 18

A normative economic statement:

Accepted Answer

A)  is a model used to collect data. 
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. 
A)  is a model used to collect data. 
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.

Question 19

Because of scarcity,

Accepted Answer

A)  ​it is impossible to satisfy every desire and choices must be made. 
B)  ​the available supply of time, goods, and resources is greater than human wants. 
C)  ​every desire is fulfilled. 
D)  ​there are no limits on the economy's ability to satisfy unlimited wants. 
A)  ​it is impossible to satisfy every desire and choices must be made. 
B)  ​the available supply of time, goods, and resources is greater than human wants. 
C)  ​every desire is fulfilled. 
D)  ​there are no limits on the economy's ability to satisfy unlimited wants.

Question 20

An upward-sloping straight line exhibits a direct relationship between two variables.

Accepted Answer

A) True 
 B)False

Exam 1: Introducing the Economic Way of Thinking

Microeconomics is the branch of economics in which you study inflation and unemployment in the economy.

Exhibit 1A-3 Straight line In Exhibit 1A-3, the slope for straight line AB is:

Complete the following analogy: A criminal is to a police artist's sketch as the economy is to:

The Ceteris paribus assumption is important when building economic models.

The person who assumes the risks and uncertainties of starting a new business is considered to be:

Exhibit 1A-6 Straight line In Exhibit 1A-6, the slope of straight line A-D is:

A direct relationship is expressed graphically as a:

Which of the following is most likely to represent causality rather than association?

Positive economics is a mode of inquiry that attempts to explain the observable, and is limited to verifiable statements, while normative economics suggests a course of action that we should take based on a particular set of values and preferences.

An economist at the University of Alaska at Anchorage has been asked to explain why the price of Alaskan crude oil has fallen recently. In order to develop a model, the professor should take which steps?

A model is defined as a:

A downward-sloping straight line exhibits a direct relationship between two variables.

Scarcity means we are unable to have as much as we would like to have.

Which of the following is closest to the definition of capital?

The study of microeconomics and macroeconomics differ in that:

A positive economic statement simply describes what is.

Exhibit 1A-5 Straight line Straight line CD in Exhibit 1A-5 shows that:

A normative economic statement:

Because of scarcity,

An upward-sloping straight line exhibits a direct relationship between two variables.

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets and Income Distribution

Gross Domestic Product

Business Cycles and Unemployment

Inflation

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits, Surpluses, and the National Debt

Money and the Federal Reserve System

Money Creation

Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

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