Question 1

The circular flow model shows what households buy and sell in the resource market.

Accepted Answer

A) True 
 B)False  False

Question 2

Identify the following as topics for microeconomics or topics for macroeconomics, and explain your answers.
 a. How will the population growth rate affect the economy's growth rate?
 b. Should Jimmy O'Bryant, owner of O'Bryant's Heating and Cooling, charge his customers higher rates for Lennox air conditioners, in response to higher wholesale costs for these units?
 c. Should Russ Smith reduce the number of hours he works because his wife's income increased?
 d. Can Mandy Oliver's employer cut sick leave costs by opening an on-site day care center?
 e. Will cutting income tax rates stimulate consumer spending?
 f. Will welfare reform cut the unemployment rate?
 g. Will Ginny Goldsmith choose to major in information systems or accounting?
 h. Will the economic crisis in Thailand affect workers in America?

Accepted Answer

The macro topics are A, E, F, and H because they deal with issues that affect the whole economy. B, C, D, and G are micro topics because they concern one household or one firm.

Question 3

Which of the following signals a normative economic statement?

Accepted Answer

A)  is 
B)  has been shown to be 
C)  should be 
D)  can be 
E)  is more than 
A)  is 
B)  has been shown to be 
C)  should be 
D)  can be 
E)  is more than C

Question 4

The statement that a monopoly raises the price of its product is an example of positive economics.

Accepted Answer

A) True 
 B)False

Question 5

The circular flow model of the economy shows

Accepted Answer

A)  the flow of money, goods, and services between households and firms 
B)  why specific flows occur 
C)  the relationship between money and goods within households 
D)  the relationship between resources and the prices of resources 
E)  the flow of resources from households to firms 
A)  the flow of money, goods, and services between households and firms 
B)  why specific flows occur 
C)  the relationship between money and goods within households 
D)  the relationship between resources and the prices of resources 
E)  the flow of resources from households to firms

Question 6

Because consumers want more Baby Bigfeet dolls, more Baby Bigfeet dolls will be produced and brought to the market. This is an example of

Accepted Answer

A)  consumer sovereignty 
B)  resources not being scarce 
C)  ceteris paribus 
D)  a natural resource 
E)  macroeconomic activity 
A)  consumer sovereignty 
B)  resources not being scarce 
C)  ceteris paribus 
D)  a natural resource 
E)  macroeconomic activity

Question 7

Resources are scarce

Accepted Answer

A)  because there is always a greater demand for them than there is a supply of them 
B)  only if the resources are nonrenewable 
C)  only if the resources are renewable 
D)  because all resources are nonrenewable 
E)  because all resources are renewable 
A)  because there is always a greater demand for them than there is a supply of them 
B)  only if the resources are nonrenewable 
C)  only if the resources are renewable 
D)  because all resources are nonrenewable 
E)  because all resources are renewable

Question 8

If a resource is nonrenewable and we use 2 percent of its supply per year,

Accepted Answer

A)  then the resource is being depleted 
B)  its supply will be constant regardless of use because of conservation efforts 
C)  it will become renewable as its supply approaches zero 
D)  it could never be depleted because 2 percent of a diminishing supply is an increasing amount 
E)  it will decrease at a diminishing rate so that its supply will approach its initial quantity 
A)  then the resource is being depleted 
B)  its supply will be constant regardless of use because of conservation efforts 
C)  it will become renewable as its supply approaches zero 
D)  it could never be depleted because 2 percent of a diminishing supply is an increasing amount 
E)  it will decrease at a diminishing rate so that its supply will approach its initial quantity

Question 9

What can we conclude about our future after reading Chapter 1?

Accepted Answer

A)  We will use up more resources faster and scarcity will become increasingly more severe. 
B)  We will eventually run out of "things we want" causing scarcity to moderate. 
C)  We will eventually run out of "things we want" causing scarcity to disappear. 
D)  Resources will remain scarce and our wants unlimited so that scarcity will remain a fact of life. 
E)  Technology will fully substitute for scarce resources so that even though our wants are unlimited, we will eventually eliminate scarcity. 
A)  We will use up more resources faster and scarcity will become increasingly more severe. 
B)  We will eventually run out of "things we want" causing scarcity to moderate. 
C)  We will eventually run out of "things we want" causing scarcity to disappear. 
D)  Resources will remain scarce and our wants unlimited so that scarcity will remain a fact of life. 
E)  Technology will fully substitute for scarce resources so that even though our wants are unlimited, we will eventually eliminate scarcity.

Question 10

Which of the following activities would occur in the product market?

Accepted Answer

A)  Harry mows his grass. 
B)  General Motors hires additional workers to run a third shift at the factory. 
C)  Sam pays a speeding ticket. 
D)  Dolly buys a ticket to the ball game. 
E)  Jane bakes a pie for Thanksgiving dinner. 
A)  Harry mows his grass. 
B)  General Motors hires additional workers to run a third shift at the factory. 
C)  Sam pays a speeding ticket. 
D)  Dolly buys a ticket to the ball game. 
E)  Jane bakes a pie for Thanksgiving dinner.

Question 11

When consumers decide what goods and services the economy produces, they are said to exercise

Accepted Answer

A)  control over production of resources 
B)  control over all economic activity 
C)  the direction of the circular flow 
D)  consumer sovereignty 
E)  control over nonrenewable resources 
A)  control over production of resources 
B)  control over all economic activity 
C)  the direction of the circular flow 
D)  consumer sovereignty 
E)  control over nonrenewable resources

Question 12

Consumer sovereignty implies that

Accepted Answer

A)  producers determine what goods will be produced and consumers are free to choose from among them 
B)  consumers choose the composition of our economy's output 
C)  goods are produced on the basis of need 
D)  the government directs the production of consumer goods in the economy 
E)  a committee of consumers determines the key issues in the economy 
A)  producers determine what goods will be produced and consumers are free to choose from among them 
B)  consumers choose the composition of our economy's output 
C)  goods are produced on the basis of need 
D)  the government directs the production of consumer goods in the economy 
E)  a committee of consumers determines the key issues in the economy

Question 13

"The unemployment rate is five percent" is an example of a normative statement.

Accepted Answer

A) True 
 B)False

Question 14

If John says the price of gasoline is too high and Paul says prices are determined by the action of the marketplace, then John has made a(n):

Accepted Answer

A)  positive economic statement, and Paul has made a normative economic statement 
B)  positive economic statement, and Paul has made a positive economic statement 
C)  normative economic statement, and Paul has made a normative economic statement 
D)  normative economic statement, and Paul has made a positive economic statement 
E)  improper economic statement, and Paul has made a proper economic statement 
A)  positive economic statement, and Paul has made a normative economic statement 
B)  positive economic statement, and Paul has made a positive economic statement 
C)  normative economic statement, and Paul has made a normative economic statement 
D)  normative economic statement, and Paul has made a positive economic statement 
E)  improper economic statement, and Paul has made a proper economic statement

Question 15

Economic models are abstractions from reality.

Accepted Answer

A) True 
 B)False

Question 16

Consumer sovereignty answers which central issue in economics?

Accepted Answer

A)  How will goods be produced? 
B)  Who will produce the goods? 
C)  What goods will be produced? 
D)  For whom will the goods be produced? 
E)  By what method will the goods be produced? 
A)  How will goods be produced? 
B)  Who will produce the goods? 
C)  What goods will be produced? 
D)  For whom will the goods be produced? 
E)  By what method will the goods be produced?

Question 17

If all prices fall and it is observed that Betty purchases more bananas, which of thefollowing statements can be made?

Accepted Answer

A)  Betty purchases more bananas as the price of bananas falls, ceteris paribus. 
B)  Betty purchases more of all goods as their prices fall, ceteris paribus. 
C)  Betty prefers bananas to all other fruits, ceteris paribus. 
D)  There is no ceteris paribus condition in this statement. 
E)  Betty will always buy more bananas when all prices fall, ceteris paribus. 
A)  Betty purchases more bananas as the price of bananas falls, ceteris paribus. 
B)  Betty purchases more of all goods as their prices fall, ceteris paribus. 
C)  Betty prefers bananas to all other fruits, ceteris paribus. 
D)  There is no ceteris paribus condition in this statement. 
E)  Betty will always buy more bananas when all prices fall, ceteris paribus.

Question 18

Normative economics deals with _________ and positive economics deals with _________.

Accepted Answer

A)  "what should be" topics or issues; "what is" topics or issues 
B)  abstractions of reality; reality 
C)  microeconomics; macroeconomics 
D)  negative economic outcomes; positive economic outcomes 
E)  changing economic conditions; unchanging economic conditions 
A)  "what should be" topics or issues; "what is" topics or issues 
B)  abstractions of reality; reality 
C)  microeconomics; macroeconomics 
D)  negative economic outcomes; positive economic outcomes 
E)  changing economic conditions; unchanging economic conditions

Question 19

We are forced to make choices because

Accepted Answer

A)  economies always operate inefficiently 
B)  resources and desires are both infinite 
C)  normative economics requires us to 
D)  wants are satiable 
E)  desires are insatiable and resources are finite 
A)  economies always operate inefficiently 
B)  resources and desires are both infinite 
C)  normative economics requires us to 
D)  wants are satiable 
E)  desires are insatiable and resources are finite

Question 20

How do you satisfy insatiable wants in today's world?

Accepted Answer

You can't. The best

The circular flow model shows what households buy and sell in the resource market.

Which of the following signals a normative economic statement?

The statement that a monopoly raises the price of its product is an example of positive economics.

The circular flow model of the economy shows

Because consumers want more Baby Bigfeet dolls, more Baby Bigfeet dolls will be produced and brought to the market. This is an example of

Resources are scarce

If a resource is nonrenewable and we use 2 percent of its supply per year,

What can we conclude about our future after reading Chapter 1?

Which of the following activities would occur in the product market?

When consumers decide what goods and services the economy produces, they are said to exercise

Consumer sovereignty implies that

"The unemployment rate is five percent" is an example of a normative statement.

If John says the price of gasoline is too high and Paul says prices are determined by the action of the marketplace, then John has made a(n):

Economic models are abstractions from reality.

Consumer sovereignty answers which central issue in economics?

If all prices fall and it is observed that Betty purchases more bananas, which of thefollowing statements can be made?

Normative economics deals with _ and positive economics deals with _.

We are forced to make choices because

How do you satisfy insatiable wants in today's world?

Production Possibilities and Opportunity Costs

Demand and Supply

Elasticity

Happiness, Utility, and Consumer Choice

Price Ceilings and Price Floors

Entrepreneurship and Business Ownership

Costs of Production

Maximizing Profit

Identifying Markets and Market Structures

Price and Output in Monopoly, Monopolistic Competition, and Perfect Competition

Price and Output Determination Under Oligopoly

Antitrust and Regulation

Externalities, Market Failure, and Public Choice

Wage Rates in Competitive Labor Markets

Wages and Employment: Monopsony and Labor Unions

Interest, Rent, and Profit

Income Distribution and Poverty

International Trade

Exchange Rates, Balance of Payments, and International Debt

The Economic Problems of Less-Developed Economies

Filters

Exam 1: Introduction

The circular flow model shows what households buy and sell in the resource market.

Which of the following signals a normative economic statement?

The statement that a monopoly raises the price of its product is an example of positive economics.

The circular flow model of the economy shows

Because consumers want more Baby Bigfeet dolls, more Baby Bigfeet dolls will be produced and brought to the market. This is an example of

Resources are scarce

If a resource is nonrenewable and we use 2 percent of its supply per year,

What can we conclude about our future after reading Chapter 1?

Which of the following activities would occur in the product market?

When consumers decide what goods and services the economy produces, they are said to exercise

Consumer sovereignty implies that

"The unemployment rate is five percent" is an example of a normative statement.

If John says the price of gasoline is too high and Paul says prices are determined by the action of the marketplace, then John has made a(n):

Economic models are abstractions from reality.

Consumer sovereignty answers which central issue in economics?

If all prices fall and it is observed that Betty purchases more bananas, which of thefollowing statements can be made?

Normative economics deals with _________ and positive economics deals with _________.

We are forced to make choices because

How do you satisfy insatiable wants in today's world?

Production Possibilities and Opportunity Costs

Demand and Supply

Elasticity

Happiness, Utility, and Consumer Choice

Price Ceilings and Price Floors

Entrepreneurship and Business Ownership

Costs of Production

Maximizing Profit

Identifying Markets and Market Structures

Price and Output in Monopoly, Monopolistic Competition, and Perfect Competition

Price and Output Determination Under Oligopoly

Antitrust and Regulation

Externalities, Market Failure, and Public Choice

Wage Rates in Competitive Labor Markets

Wages and Employment: Monopsony and Labor Unions

Interest, Rent, and Profit

Income Distribution and Poverty

International Trade

Exchange Rates, Balance of Payments, and International Debt

The Economic Problems of Less-Developed Economies

Filters

Normative economics deals with _ and positive economics deals with _.