Question 1

A conditional statement such as if event A occurs,then event B follows is an example of normative economics.

Accepted Answer

A) True 
 B)False

Question 2

A sub-discipline of economics that looks at the economy as a whole is:

Accepted Answer

A)  macroeconomics. 
B)  microeconomics. 
C)  positive economics. 
D)  normative economics. 
E)  impossible to model. 
A)  macroeconomics. 
B)  microeconomics. 
C)  positive economics. 
D)  normative economics. 
E)  impossible to model.

Question 3

Which of the following would not be classified as a capital resource?

Accepted Answer

A)  The Empire State Building. 
B)  A Caterpillar bulldozer. 
C)  A Macintosh computer. 
D)  100 shares of stock in General Motors. 
A)  The Empire State Building. 
B)  A Caterpillar bulldozer. 
C)  A Macintosh computer. 
D)  100 shares of stock in General Motors.

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is a macroeconomic subject?

Accepted Answer

A)  Shipping rates. 
B)  Price of corporate stock. 
C)  Market price of Japanese cars. 
D)  Unemployment rate in the nation. 
A)  Shipping rates. 
B)  Price of corporate stock. 
C)  Market price of Japanese cars. 
D)  Unemployment rate in the nation.

Question 6

Microeconomics approaches the study of economics from the viewpoint of:

Accepted Answer

A)  inflation, unemployment, and economic growth. 
B)  the federal government. 
C)  individual economic units, such as consumers, firms, and units of government. 
D)  the economy as a whole. 
A)  inflation, unemployment, and economic growth. 
B)  the federal government. 
C)  individual economic units, such as consumers, firms, and units of government. 
D)  the economy as a whole.

Question 7

Financial capital by itself is not a factor of production; instead it is only a paper claim on economic capital.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is the best definition of economics?

Accepted Answer

A)  Economics is the study of how to manage corporations to generate the greatest return on shareholder investment. 
B)  Economics is the study of how to mange city and country government to generate the greatest good to its citizens. 
C)  Economics is the study of how society chooses to allocate its scarce resources. 
D)  Economics is the study of how to track revenues and costs within a business. 
A)  Economics is the study of how to manage corporations to generate the greatest return on shareholder investment. 
B)  Economics is the study of how to mange city and country government to generate the greatest good to its citizens. 
C)  Economics is the study of how society chooses to allocate its scarce resources. 
D)  Economics is the study of how to track revenues and costs within a business.

Question 9

To abstract from reality in an economic model means that:

Accepted Answer

A)  we include only a few of the essential aspects of reality. 
B)  the economic study surveys only a very limited period of time. 
C)  we include only those elements which support our hypothesis. 
D)  the model includes every aspect of the real world. 
E)  the model examines the actions of the consumers in the absence of producers and the government. 
A)  we include only a few of the essential aspects of reality. 
B)  the economic study surveys only a very limited period of time. 
C)  we include only those elements which support our hypothesis. 
D)  the model includes every aspect of the real world. 
E)  the model examines the actions of the consumers in the absence of producers and the government.

Question 10

Labor resources:

Accepted Answer

A)  include only physical activities. 
B)  are only counted as a resource if used in the production of other resources. 
C)  include only skilled labor. 
D)  include both physical and mental activities. 
E)  include human effort involved in the production of goods, but not services. 
A)  include only physical activities. 
B)  are only counted as a resource if used in the production of other resources. 
C)  include only skilled labor. 
D)  include both physical and mental activities. 
E)  include human effort involved in the production of goods, but not services.

Question 11

Campaign speeches normally include normative economic statements.

Accepted Answer

A) True 
 B)False

Question 12

The subject of economics is primarily the study of:

Accepted Answer

A)  the government decision-making process. 
B)  how to operate a business successfully. 
C)  decision-making because of the problem of scarcity. 
D)  how to make money in the stock market. 
A)  the government decision-making process. 
B)  how to operate a business successfully. 
C)  decision-making because of the problem of scarcity. 
D)  how to make money in the stock market.

Question 13

Which of the following represents positive economics?

Accepted Answer

A)  Policy A is fair. 
B)  Outcome B is the best objective to achieve. 
C)  If policy A is followed, then outcome B results. 
D)  All of the above. 
A)  Policy A is fair. 
B)  Outcome B is the best objective to achieve. 
C)  If policy A is followed, then outcome B results. 
D)  All of the above.

Question 14

The statement "It is better to suffer a little more unemployment than a little lower prices" is an example of normative economic analysis.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is the best example of an activity that would be undertaken by an entrepreneur?

Accepted Answer

A)  Buying and selling of stocks and bonds. 
B)  Starting a new business. 
C)  Working on an assembly line. 
D)  Running for political office. 
A)  Buying and selling of stocks and bonds. 
B)  Starting a new business. 
C)  Working on an assembly line. 
D)  Running for political office.

Question 16

Microeconomics deals with the analysis of all the following questions except how:

Accepted Answer

A)  the wages of carpenters are determined. 
B)  high did unemployment rise during the Great Depression. 
C)  does Ford decide how to price its cars. 
D)  does a college student decide how to spend her income. 
E)  do monopolies and competitive markets differ. 
A)  the wages of carpenters are determined. 
B)  high did unemployment rise during the Great Depression. 
C)  does Ford decide how to price its cars. 
D)  does a college student decide how to spend her income. 
E)  do monopolies and competitive markets differ.

Question 17

Which of the following illustrates the concept of scarcity?

Accepted Answer

A)  There is usually more than one use of your "free" time in the evening. 
B)  More clean air is wanted than is available in large polluted metropolitan areas such as Los Angeles. 
C)  There are many competing uses for the annual budget of your city, county, or state. 
D)  All of the answers are correct. 
A)  There is usually more than one use of your "free" time in the evening. 
B)  More clean air is wanted than is available in large polluted metropolitan areas such as Los Angeles. 
C)  There are many competing uses for the annual budget of your city, county, or state. 
D)  All of the answers are correct.

Question 18

Someone notices that sunspot activity is high just prior to recessions and concludes that sunspots cause recessions.This person has:

Accepted Answer

A)  confused association and causation. 
B)  misunderstood the Ceteris paribus assumption. 
C)  used normative economics to answer a positive question. 
D)  built an untestable model. 
A)  confused association and causation. 
B)  misunderstood the Ceteris paribus assumption. 
C)  used normative economics to answer a positive question. 
D)  built an untestable model.

Question 19

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 20

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.

Exam 1: Introducing the Economic Way of Thinking

A conditional statement such as if event A occurs,then event B follows is an example of normative economics.

A sub-discipline of economics that looks at the economy as a whole is:

Which of the following would not be classified as a capital resource?

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

Which of the following is a macroeconomic subject?

Microeconomics approaches the study of economics from the viewpoint of:

Financial capital by itself is not a factor of production; instead it is only a paper claim on economic capital.

Which of the following is the best definition of economics?

To abstract from reality in an economic model means that:

Labor resources:

Campaign speeches normally include normative economic statements.

The subject of economics is primarily the study of:

Which of the following represents positive economics?

The statement "It is better to suffer a little more unemployment than a little lower prices" is an example of normative economic analysis.

Which of the following is the best example of an activity that would be undertaken by an entrepreneur?

Microeconomics deals with the analysis of all the following questions except how:

Which of the following illustrates the concept of scarcity?

Someone notices that sunspot activity is high just prior to recessions and concludes that sunspots cause recessions.This person has:

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

An economic model is useful only if it:

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

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