Question 1

People are forced to make choices because of:

Accepted Answer

A)  unlimited wants and unlimited resources. 
B)  limited wants and unlimited resources. 
C)  unlimited wants and limited resources. 
D)  limited wants and limited resources. 
A)  unlimited wants and unlimited resources. 
B)  limited wants and unlimited resources. 
C)  unlimited wants and limited resources. 
D)  limited wants and limited resources.

Question 2

Which of the following statements is an example of confusing association and causation?

Accepted Answer

A)  Senator Jones believes that more tax revenue should be distributed to the poor. 
B)  A map includes roads, but not every restaurant, telephone pole, and 
C)  Interest rates rise when it rains, all other factors constant. 
D)  When the price of Coca-Cola increases, consumers buy more Pepsi, all other factors constant. 
A)  Senator Jones believes that more tax revenue should be distributed to the poor. 
B)  A map includes roads, but not every restaurant, telephone pole, and 
C)  Interest rates rise when it rains, all other factors constant. 
D)  When the price of Coca-Cola increases, consumers buy more Pepsi, all other factors constant.

Question 3

When economists say scarcity, they mean:

Accepted Answer

A)  there are only a limited number of consumers who would be interested in purchasing goods. 
B)  human wants exceed the available supply of time, goods and resources. 
C)  most people in poorer countries do not have enough goods. 
D)  goods are so expensive that only the rich can afford it. 
A)  there are only a limited number of consumers who would be interested in purchasing goods. 
B)  human wants exceed the available supply of time, goods and resources. 
C)  most people in poorer countries do not have enough goods. 
D)  goods are so expensive that only the rich can afford it.

Question 4

To be valid, an economic model must:

Accepted Answer

A)  include every activity which occurs in the real world. 
B)  not be based on an abstraction of the real world. 
C)  be able to predict events occurring in the real world. 
D)  exclude any link to the real world. 
A)  include every activity which occurs in the real world. 
B)  not be based on an abstraction of the real world. 
C)  be able to predict events occurring in the real world. 
D)  exclude any link to the real world.

Question 5

Which of the following is included in the study of macroeconomics?

Accepted Answer

A)  wage rate of Ford's assembly-line workers 
B)  prices of automobiles 
C)  unemployment in the nation 
D)  price of silver and gold 
A)  wage rate of Ford's assembly-line workers 
B)  prices of automobiles 
C)  unemployment in the nation 
D)  price of silver and gold

Question 6

"The government should provide health care for all citizens." This statement is an illustration of:

Accepted Answer

A)  positive economic analysis. 
B)  correlation analysis. 
C)  fallacy of association analysis. 
D)  normative economic analysis. 
A)  positive economic analysis. 
B)  correlation analysis. 
C)  fallacy of association analysis. 
D)  normative economic analysis.

Question 7

An economic model is useful only if it:

Accepted Answer

A)  contains no positive statements. 
B)  captures all the complexities of reality. 
C)  yields accurate predictions. 
D)  has both macro- and microeconomic applications. 
A)  contains no positive statements. 
B)  captures all the complexities of reality. 
C)  yields accurate predictions. 
D)  has both macro- and microeconomic applications.

Question 8

Scarcity:

Accepted Answer

A)  exists because resources are unlimited while human wants are limited. 
B)  means we are unable to have as many goods and services or as much time for activities as we would like to have. 
C)  will likely be eliminated as technology continues to expand. 
D)  is not an issue addressed in economics. 
A)  exists because resources are unlimited while human wants are limited. 
B)  means we are unable to have as many goods and services or as much time for activities as we would like to have. 
C)  will likely be eliminated as technology continues to expand. 
D)  is not an issue addressed in economics.

Question 9

Suppose two variables are inversely related. If one variable rises, then the other variable:

Accepted Answer

A)  also rises. 
B)  falls. 
C)  remains unchanged. 
D)  reacts unpredictably. 
A)  also rises. 
B)  falls. 
C)  remains unchanged. 
D)  reacts unpredictably.

Question 10

Exhibit 1A-5 Straight line  
In Exhibit 1A-5, as X increases along the horizontal axis, from point C to point D on the line, the Y values

Accepted Answer

A)  increase so the relationship between X and Y is direct. 
B)  decrease so the relationship between X and Y is inverse. 
C)  remain unchanged so the relationship between X and Y is independent. 
D)  change so the relationship between X and Y is variable. 
A)  increase so the relationship between X and Y is direct. 
B)  decrease so the relationship between X and Y is inverse. 
C)  remain unchanged so the relationship between X and Y is independent. 
D)  change so the relationship between X and Y is variable.

Question 11

Which of the following is the best example of a nonrenewable resource?

Accepted Answer

A)  forests 
B)  oil 
C)  solar power 
D)  clean air 
A)  forests 
B)  oil 
C)  solar power 
D)  clean air

Question 12

An inverse relationship exists when:

Accepted Answer

A)  there is no association between two variables. 
B)  one variable increases and there is no change in the other variable. 
C)  one variable increases and the other variable increases. 
D)  one variable increases and the other variable decreases. 
A)  there is no association between two variables. 
B)  one variable increases and there is no change in the other variable. 
C)  one variable increases and the other variable increases. 
D)  one variable increases and the other variable decreases.

Question 13

Economics is the study of how people:

Accepted Answer

A)  vote for political leaders. 
B)  make choices to produce and consume goods and services. 
C)  establish social institutions that maximize well-being. 
D)  develop value systems. 
A)  vote for political leaders. 
B)  make choices to produce and consume goods and services. 
C)  establish social institutions that maximize well-being. 
D)  develop value systems.

Question 14

Which of the following is an example of a positive economic statement?

Accepted Answer

A)  The economy's real output increased at about 3 percent last year and the unemployment rate decreased. 
B)  A central bank should not print too much money because inflation could result. 
C)  Congress should stabilize the social security system by raising taxes now. 
D)  The surplus of farm products should be distributed to the needy. 
A)  The economy's real output increased at about 3 percent last year and the unemployment rate decreased. 
B)  A central bank should not print too much money because inflation could result. 
C)  Congress should stabilize the social security system by raising taxes now. 
D)  The surplus of farm products should be distributed to the needy.

Question 15

Which of the following pairs is the most likely to exhibit an inverse relationship?

Accepted Answer

A)  The amount of time you study and your grade point average. 
B)  People's annual income and their expenditure on personal computers. 
C)  Baseball players' salaries and their batting averages. 
D)  The price of a concert and the number of tickets people want to purchase . 
A)  The amount of time you study and your grade point average. 
B)  People's annual income and their expenditure on personal computers. 
C)  Baseball players' salaries and their batting averages. 
D)  The price of a concert and the number of tickets people want to purchase .

Question 16

The Secretary of Labor states that wage rates in the country have risen by 2 percent this past year. The head of a local labor union states that wage gains have not kept pace with the 3 percent rate of inflation. The Secretary's statement is a (n) ____ economic statement, and the labor head's statement is a (n) ____ economic statement.

Accepted Answer

A)  normative; normative 
B)  normative; positive 
C)  positive; normative 
D)  positive; positive 
A)  normative; normative 
B)  normative; positive 
C)  positive; normative 
D)  positive; positive

Question 17

A factor of production is the same as:

Accepted Answer

A)  the amount of a good produced. 
B)  the price of a good. 
C)  an opportunity cost. 
D)  a resource. 
A)  the amount of a good produced. 
B)  the price of a good. 
C)  an opportunity cost. 
D)  a resource.

Question 18

Wealthy families wanting finer homes and nicer vacations exemplify

Accepted Answer

A)  capital. 
B)  production. 
C)  resources. 
D)  scarcity. 
A)  capital. 
B)  production. 
C)  resources. 
D)  scarcity.

Question 19

Graphically express a direct and an inverse or negative relationship. What could cause a shift in a line or curve expressing a relationship between two variables?

Accepted Answer

A direct relationship will slope upward;

Question 20

Distinguish a direct and an inverse relationship. Provide an example of each type of relationship.

Accepted Answer

A direct relationship between two variab

Exam 1: Introducing the Economic Way of Thinking

People are forced to make choices because of:

Which of the following statements is an example of confusing association and causation?

When economists say scarcity, they mean:

To be valid, an economic model must:

Which of the following is included in the study of macroeconomics?

"The government should provide health care for all citizens." This statement is an illustration of:

An economic model is useful only if it:

Scarcity:

Suppose two variables are inversely related. If one variable rises, then the other variable:

Exhibit 1A-5 Straight line In Exhibit 1A-5, as X increases along the horizontal axis, from point C to point D on the line, the Y values

Which of the following is the best example of a nonrenewable resource?

An inverse relationship exists when:

Economics is the study of how people:

Which of the following is an example of a positive economic statement?

Which of the following pairs is the most likely to exhibit an inverse relationship?

A factor of production is the same as:

Wealthy families wanting finer homes and nicer vacations exemplify

Graphically express a direct and an inverse or negative relationship. What could cause a shift in a line or curve expressing a relationship between two variables?

Distinguish a direct and an inverse relationship. Provide an example of each type of relationship.

Production Possibilities Opportunity Cost and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

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

Monetary Policy

International Trade and Finance

Economies in Transition

Growth and the Less Developed Countries

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