Question 1

Which one of the following is a positive economic statement?

Accepted Answer

A)  An increase in the minimum wage will reduce employment for teenagers. 
B)  The minimum wage should be increased. 
C)  Social justice will be served by increasing the minimum wage. 
D)  Thoughtful people oppose an increase in the minimum wage. 
A)  An increase in the minimum wage will reduce employment for teenagers. 
B)  The minimum wage should be increased. 
C)  Social justice will be served by increasing the minimum wage. 
D)  Thoughtful people oppose an increase in the minimum wage.

Question 2

The statement,"Violent crime has decreased in the last five years," is:

Accepted Answer

A)  obviously wrong and, therefore, cannot be a positive statement. 
B)  normative since it can be answered by simply looking at the facts. 
C)  positive because it is testable. 
D)  not very interesting because all normative issues are of little importance. 
A)  obviously wrong and, therefore, cannot be a positive statement. 
B)  normative since it can be answered by simply looking at the facts. 
C)  positive because it is testable. 
D)  not very interesting because all normative issues are of little importance.

Question 3

Economists believe that scarcity forces everyone to:

Accepted Answer

A)  satisfy all their wants. 
B)  abandon consumer sovereignty. 
C)  lie about their wants. 
D)  create unlimited resources. 
E)  make choices. 
A)  satisfy all their wants. 
B)  abandon consumer sovereignty. 
C)  lie about their wants. 
D)  create unlimited resources. 
E)  make choices.

Question 4

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 5

The perpetual state of insufficiency of resources to satisfy people's unlimited wants is:

Accepted Answer

A)  apparent only in poor countries. 
B)  completely unrealistic. 
C)  present in modern economies, but not in the past. 
D)  the definition of scarcity. 
A)  apparent only in poor countries. 
B)  completely unrealistic. 
C)  present in modern economies, but not in the past. 
D)  the definition of scarcity.

Question 6

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 7

A good economic model should capture as many details about real-world behavior as possible.

Accepted Answer

A) True 
 B)False

Question 8

Policies to create jobs in the nation are the concern of:

Accepted Answer

A)  macroeconomics. 
B)  microeconomics. 
C)  both microeconomics and macroeconomics. 
D)  neither microeconomics nor macroeconomics. 
A)  macroeconomics. 
B)  microeconomics. 
C)  both microeconomics and macroeconomics. 
D)  neither microeconomics nor macroeconomics.

Question 9

Scarcity is a(n):

Accepted Answer

A)  problem only in industrialized economies. 
B)  condition measured by the quantity of goods available. 
C)  subjective concept that human wants can never be satisfied. 
D)  problem only in poor economies. 
A)  problem only in industrialized economies. 
B)  condition measured by the quantity of goods available. 
C)  subjective concept that human wants can never be satisfied. 
D)  problem only in poor economies.

Question 10

When economists say goods are scarce,they mean:

Accepted Answer

A)  consumers are too poor to afford the goods and services available. 
B)  consumers are unwilling to buy goods unless they have very low prices. 
C)  goods are generally freely available from nature in most countries. 
D)  the desire for goods and services exceeds our ability to produce them with the limited resources available. 
A)  consumers are too poor to afford the goods and services available. 
B)  consumers are unwilling to buy goods unless they have very low prices. 
C)  goods are generally freely available from nature in most countries. 
D)  the desire for goods and services exceeds our ability to produce them with the limited resources available.

Question 11

What is the difference between positive and normative economics? How can knowledge of positive economics be useful in normative economics?

Accepted Answer

Positive economics deals with "what is"

Question 12

Which of the following is a statement of positive economics?

Accepted Answer

A)  Government control of rent is a fair way to help poor people afford housing. 
B)  Government control of rent keeps landlords from charging too much rent. 
C)  Government control of rent decreases the number of new apartments constructed. 
D)  Government control of rent is an injustice. 
A)  Government control of rent is a fair way to help poor people afford housing. 
B)  Government control of rent keeps landlords from charging too much rent. 
C)  Government control of rent decreases the number of new apartments constructed. 
D)  Government control of rent is an injustice.

Question 13

Economics is the study of decisions made necessary by the problem of unlimited wants and limited means to satisfy them.

Accepted Answer

A) True 
 B)False

Question 14

"An increase in the federal minimum wage will provide a living wage for the working poor" is:

Accepted Answer

A)  a statement of positive economics. 
B)  a fallacy of composition. 
C)  a tautology. 
D)  a statement of normative economics. 
A)  a statement of positive economics. 
B)  a fallacy of composition. 
C)  a tautology. 
D)  a statement of normative economics.

Question 15

"As soon as a mayor announced his/her 'get tough on crime' policy on New Year's day,criminals got scared and the crime rate went down." Suppose that the lower crime rate was actually caused by freezing cold temperatures in January: it was just too cold for anybody to be out robbing other people.Which fundamental hazard of the economic way of thinking did the mayor make?

Accepted Answer

A)  believing that what's good for one person is good for the whole group (the fallacy of composition) 
B)  failing to take into account the benefits of crime (the payoff fallacy) 
C)  believing that association is the same as causation 
D)  failing to understand the difference between positive and normative economics. 
A)  believing that what's good for one person is good for the whole group (the fallacy of composition) 
B)  failing to take into account the benefits of crime (the payoff fallacy) 
C)  believing that association is the same as causation 
D)  failing to understand the difference between positive and normative economics.

Question 16

The term Ceteris paribus means that:

Accepted Answer

A)  everything is changing. 
B)  all other things remain unchanged. 
C)  no one knows which variables will change and which will remain constant. 
D)  the basic principle of economics do not apply to the case being considered. 
A)  everything is changing. 
B)  all other things remain unchanged. 
C)  no one knows which variables will change and which will remain constant. 
D)  the basic principle of economics do not apply to the case being considered.

Question 17

Which of the following is a statement of positive economics?

Accepted Answer

A)  Too much government spending is the biggest problem facing the U.S. economy. 
B)  Creating jobs is the most serious problem facing the U.S. economy. 
C)  Raising taxes provides additional revenue that should be used to finance health care. 
D)  If taxes are over 50 percent of national income, job creation falls. 
A)  Too much government spending is the biggest problem facing the U.S. economy. 
B)  Creating jobs is the most serious problem facing the U.S. economy. 
C)  Raising taxes provides additional revenue that should be used to finance health care. 
D)  If taxes are over 50 percent of national income, job creation falls.

Question 18

When economists use the term Ceteris paribus,they are indicating that:

Accepted Answer

A)  the relationship between two economic variables cannot be determined. 
B)  the analysis is true for the individual but not for the economy as a whole. 
C)  all other variables except the ones specified are assumed to be constant. 
D)  their conclusions are based on normative economics rather than positive economic analysis. 
A)  the relationship between two economic variables cannot be determined. 
B)  the analysis is true for the individual but not for the economy as a whole. 
C)  all other variables except the ones specified are assumed to be constant. 
D)  their conclusions are based on normative economics rather than positive economic analysis.

Question 19

A positive statement is:

Accepted Answer

A)  something good or desirable. 
B)  a call for improvement. 
C)  a statement of opinion. 
D)  a statement testable by facts. 
E)  a suggestion for policy. 
A)  something good or desirable. 
B)  a call for improvement. 
C)  a statement of opinion. 
D)  a statement testable by facts. 
E)  a suggestion for policy.

Question 20

An economic model is:

Accepted Answer

A)  a plastic scaled version of the economy. 
B)  a complete depiction of reality. 
C)  an abstraction from reality. 
D)  applicable to consumer behavior but not to producer behavior. 
E)  not an accepted tool of the economics profession. 
A)  a plastic scaled version of the economy. 
B)  a complete depiction of reality. 
C)  an abstraction from reality. 
D)  applicable to consumer behavior but not to producer behavior. 
E)  not an accepted tool of the economics profession.

Exam 1: Introducing the Economic Way of Thinking

Which one of the following is a positive economic statement?

The statement,"Violent crime has decreased in the last five years," is:

Economists believe that scarcity forces everyone to:

A normative economic statement:

The perpetual state of insufficiency of resources to satisfy people's unlimited wants is:

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

A good economic model should capture as many details about real-world behavior as possible.

Policies to create jobs in the nation are the concern of:

Scarcity is a(n):

When economists say goods are scarce,they mean:

What is the difference between positive and normative economics? How can knowledge of positive economics be useful in normative economics?

Which of the following is a statement of positive economics?

Economics is the study of decisions made necessary by the problem of unlimited wants and limited means to satisfy them.

"An increase in the federal minimum wage will provide a living wage for the working poor" is:

The term Ceteris paribus means that:

Which of the following is a statement of positive economics?

When economists use the term Ceteris paribus,they are indicating that:

A positive statement is:

An economic model is:

A: Appendix: Applying Graphs to Economics

Production Possibilities,Opportunity Cost,and Economic Growth

Part 1: Market Demand and Supply

Part 2: 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

A: Appendix: The Self-Correcting Aggregate Demand and Supply Model

Fiscal Policy

The Public Sector

Federal Deficits,Surpluses,and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

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

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

Filters