Question 1

Which of the following is an example of a normative statement?

Accepted Answer

A) The moon is made of green cheese. 
B) Women should earn the same income as men. 
C) When the price of a good rises, people will buy more of it. 
D) The more time you spend studying, the higher your economics test scores will be. 
E) The more time you spend studying for chemistry, the higher your economics test score will be. 
A) The moon is made of green cheese. 
B) Women should earn the same income as men. 
C) When the price of a good rises, people will buy more of it. 
D) The more time you spend studying, the higher your economics test scores will be. 
E) The more time you spend studying for chemistry, the higher your economics test score will be.

Question 2

In economics, "capital" refers to

Accepted Answer

A) money 
B) stocks, bonds, and other financial assets 
C) the seat of government 
D) machines, buildings, tools, and knowledge 
E) net worth (assets minus liabilities) 
A) money 
B) stocks, bonds, and other financial assets 
C) the seat of government 
D) machines, buildings, tools, and knowledge 
E) net worth (assets minus liabilities)

Question 3

Your friend notices that U.S. auto production and U.S. population growth have moved together over several decades. He reasons that one way to slow population growth is for the government to order the auto makers to cut back on production. You gently point out to him that he

Accepted Answer

A) is correct only when the economy is in a recession 
B) has mistakenly inferred causation from observed correlation 
C) has ignored secondary effects 
D) has committed the fallacy of composition 
E) is correct only when the United States enjoys economic growth 
A) is correct only when the economy is in a recession 
B) has mistakenly inferred causation from observed correlation 
C) has ignored secondary effects 
D) has committed the fallacy of composition 
E) is correct only when the United States enjoys economic growth

Question 4

According to a 2008 survey by PayScale.com, the increase in median pay for economics majors with 10-20 years of experience compared to economics majors with 0-5 years of experience is:

Accepted Answer

A) 150% 
B) 100% 
C) 80% 
D) 60% 
E) 25% 
A) 150% 
B) 100% 
C) 80% 
D) 60% 
E) 25%

Question 5

Japan has more vending machines per capita than any other country in the world. One explanation for this phenomenon is that

Accepted Answer

A) vending machines are expensive in Japan 
B) the Japanese sales clerks' union requires that vending machines be used wherever possible 
C) labor is scarce in Japan, and vending machines help conserve on labor 
D) labor is abundant in Japan, and vending machines help conserve on labor 
E) vending machines were invented in Japan 
A) vending machines are expensive in Japan 
B) the Japanese sales clerks' union requires that vending machines be used wherever possible 
C) labor is scarce in Japan, and vending machines help conserve on labor 
D) labor is abundant in Japan, and vending machines help conserve on labor 
E) vending machines were invented in Japan

Question 6

Someone who commits the fallacy of composition is likely to assume that

Accepted Answer

A) the simplest model is the best predictor 
B) event B, which follows event A, was caused by event A 
C) event B, which follows event A, was not necessarily caused by event A 
D) what is true for the individual is also true for the group 
E) what is true for the individual is not necessarily true for the group 
A) the simplest model is the best predictor 
B) event B, which follows event A, was caused by event A 
C) event B, which follows event A, was not necessarily caused by event A 
D) what is true for the individual is also true for the group 
E) what is true for the individual is not necessarily true for the group

Question 7

Theory in economics

Accepted Answer

A) involves some simplification of reality 
B) bears no relation to reality 
C) approaches reality in all its complexity 
D) involves so much distortion of reality that it is worthless 
E) focuses on the unique aspects of each situation 
A) involves some simplification of reality 
B) bears no relation to reality 
C) approaches reality in all its complexity 
D) involves so much distortion of reality that it is worthless 
E) focuses on the unique aspects of each situation

Question 8

An entrepreneur is a(n)

Accepted Answer

A) individual who has much education 
B) organizer who seeks profitable opportunities and is willing to accept risks 
C) business organization that uses inputs to produce output 
D) administrator who runs an enterprise without accepting any risk of financial loss 
E) depot or storehouse for commercial products 
A) individual who has much education 
B) organizer who seeks profitable opportunities and is willing to accept risks 
C) business organization that uses inputs to produce output 
D) administrator who runs an enterprise without accepting any risk of financial loss 
E) depot or storehouse for commercial products

Question 9

Resources are divided into the following broad categories:

Accepted Answer

A) people, money, and machines 
B) saving, spending, investment, and capital 
C) human, technological, and government 
D) natural resources, labor, capital, and entrepreneurial ability 
E) free, scarce, abundant, and unlimited 
A) people, money, and machines 
B) saving, spending, investment, and capital 
C) human, technological, and government 
D) natural resources, labor, capital, and entrepreneurial ability 
E) free, scarce, abundant, and unlimited

Question 10

To say that people make marginal decisions means that

Accepted Answer

A) they usually wait until the last minute before making a decision to buy 
B) they weigh the additional costs and additional benefits of various activities before they make a decision 
C) most people just barely get by on the incomes they earn and live from day to day on the very edge of subsistence 
D) given a choice, most people would prefer to make their own decisions concerning the things that affect their lives 
E) they consider the total cost and benefit of various activities before they make a purchase 
A) they usually wait until the last minute before making a decision to buy 
B) they weigh the additional costs and additional benefits of various activities before they make a decision 
C) most people just barely get by on the incomes they earn and live from day to day on the very edge of subsistence 
D) given a choice, most people would prefer to make their own decisions concerning the things that affect their lives 
E) they consider the total cost and benefit of various activities before they make a purchase

Question 11

You currently subscribe to two magazines and are trying to decide whether you should subscribe to a third. What should determine your decision, if you are rational?

Accepted Answer

A) the total cost of the magazines compared to the total satisfaction you would receive 
B) the total amount of satisfaction you would get from the magazines 
C) the enjoyment you would get from the third magazine 
D) the cost of the third magazine, including the time it takes to read it 
E) the cost of the third magazine compared to the additional enjoyment you would get from it 
A) the total cost of the magazines compared to the total satisfaction you would receive 
B) the total amount of satisfaction you would get from the magazines 
C) the enjoyment you would get from the third magazine 
D) the cost of the third magazine, including the time it takes to read it 
E) the cost of the third magazine compared to the additional enjoyment you would get from it

Question 12

The assumption that individuals act rationally implies that

Accepted Answer

A) people think only of themselves and disregard the well-being of others 
B) people undertake all those activities that yield benefits to themselves 
C) people only consider the costs of an activity to decide whether it is worthwhile 
D) the greater the cost of a charitable deed to a benefactor, the more likely he or she is to perform that deed 
E) people implicitly calculate the costs and benefits of an activity to decide if it is worthwhile 
A) people think only of themselves and disregard the well-being of others 
B) people undertake all those activities that yield benefits to themselves 
C) people only consider the costs of an activity to decide whether it is worthwhile 
D) the greater the cost of a charitable deed to a benefactor, the more likely he or she is to perform that deed 
E) people implicitly calculate the costs and benefits of an activity to decide if it is worthwhile

Question 13

Macroeconomics is the study of

Accepted Answer

A) the behavior of large firms in the marketplace 
B) the economic behavior of individual decision makers 
C) the behavior of the economy as a whole 
D) how to use the fewest natural resources to produce goods and services 
E) government's role as a stabilizing influence on the economy 
A) the behavior of large firms in the marketplace 
B) the economic behavior of individual decision makers 
C) the behavior of the economy as a whole 
D) how to use the fewest natural resources to produce goods and services 
E) government's role as a stabilizing influence on the economy

Question 14

Goods and services are scarce because

Accepted Answer

A) people are greedy 
B) they are produced using scarce resources 
C) firms keep production low in order to earn higher profits 
D) they are produced by firms that seeks profits 
E) government wants to maintain its power over the economy 
A) people are greedy 
B) they are produced using scarce resources 
C) firms keep production low in order to earn higher profits 
D) they are produced by firms that seeks profits 
E) government wants to maintain its power over the economy

Question 15

A market

Accepted Answer

A) is often a physical place 
B) facilitates exchanges between buyers and sellers 
C) typically involves monetary transactions 
D) might not have well-defined geographical limits 
E) all of the above 
A) is often a physical place 
B) facilitates exchanges between buyers and sellers 
C) typically involves monetary transactions 
D) might not have well-defined geographical limits 
E) all of the above

Question 16

Profit is the payment received by resource owners for the use of their capital.

Accepted Answer

A) True 
 B)False

Question 17

In an economic model of consumer behavior, rational self-interest would likely be

Accepted Answer

A) a key variable 
B) the hypothesis of the model 
C) a behavioral assumption 
D) a prediction of the model 
E) a method of testing the model 
A) a key variable 
B) the hypothesis of the model 
C) a behavioral assumption 
D) a prediction of the model 
E) a method of testing the model

Question 18

Economists classify all of the following as capital, except one. Which one is not capital?

Accepted Answer

A) a $20 bill in a firm's petty cash drawer 
B) the building where our economics class meets 
C) a plumber's wrench 
D) a railroad car 
E) a factory 
A) a $20 bill in a firm's petty cash drawer 
B) the building where our economics class meets 
C) a plumber's wrench 
D) a railroad car 
E) a factory

Question 19

The problem of scarce resources

Accepted Answer

A) means that in some cities there are not enough jobs 
B) could be solved if the unemployment rate fell 
C) is that there are not enough resources to satisfy people's unlimited wants 
D) is that resources are used inefficiently 
E) can be solved by lowering taxes 
A) means that in some cities there are not enough jobs 
B) could be solved if the unemployment rate fell 
C) is that there are not enough resources to satisfy people's unlimited wants 
D) is that resources are used inefficiently 
E) can be solved by lowering taxes

Question 20

The labor market is an example of a

Accepted Answer

A) government market 
B) classified market 
C) communication market 
D) resource market 
E) product market 
A) government market 
B) classified market 
C) communication market 
D) resource market 
E) product market

Exam 1: The Art and Science of Economic Analysis

Which of the following is an example of a normative statement?

In economics, "capital" refers to

Your friend notices that U.S. auto production and U.S. population growth have moved together over several decades. He reasons that one way to slow population growth is for the government to order the auto makers to cut back on production. You gently point out to him that he

According to a 2008 survey by PayScale.com, the increase in median pay for economics majors with 10-20 years of experience compared to economics majors with 0-5 years of experience is:

Japan has more vending machines per capita than any other country in the world. One explanation for this phenomenon is that

Someone who commits the fallacy of composition is likely to assume that

Theory in economics

An entrepreneur is a(n)

Resources are divided into the following broad categories:

To say that people make marginal decisions means that

You currently subscribe to two magazines and are trying to decide whether you should subscribe to a third. What should determine your decision, if you are rational?

The assumption that individuals act rationally implies that

Macroeconomics is the study of

Goods and services are scarce because

A market

Profit is the payment received by resource owners for the use of their capital.

In an economic model of consumer behavior, rational self-interest would likely be

Economists classify all of the following as capital, except one. Which one is not capital?

The problem of scarce resources

The labor market is an example of a

Economic Tools and Economics Systems

Economic Decision Makers

Demand Supply and Markets

Introduction to Macroeconomics

Tracking the Us Economy

Unemployment and Inflation

Productivity and Growth

Aggregate Expenditure

Aggregate Expenditure and Aggregate Demand

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

The Algebra of Income and Expenditure

Monetary Theory and Policy

Macro Policy Debate: Active or Passive

The Algebra of Demand-Side Equilibrium

International Trade

International Finance

Economic Development

National Income Accounts

Understanding Graphs

Variable Net Exports

Variable Net Exports Revisited

Filters