Question 1

Which of the following is a normative statement?

Accepted Answer

A) The U.S. rate of unemployment was lower in 2004 than it was in 1994. 
B) Savings accounts earn interest, whereas checking accounts do not. 
C) Congress must recognize that the growing national debt is the most serious problem that the country faces. 
D) The unemployment rate increases when the percentage of the labor force without jobs increases. 
E) The unemployment rate among teenagers is higher than the rate among adults. 
A) The U.S. rate of unemployment was lower in 2004 than it was in 1994. 
B) Savings accounts earn interest, whereas checking accounts do not. 
C) Congress must recognize that the growing national debt is the most serious problem that the country faces. 
D) The unemployment rate increases when the percentage of the labor force without jobs increases. 
E) The unemployment rate among teenagers is higher than the rate among adults.

Question 2

Economists believe that

Accepted Answer

A) people who choose to promote the interests of others cannot be acting rationally in their own self-interest 
B) people show concern only for those whom they know personally 
C) charitable donations would disappear if tax deductions for charitable giving were eliminated 
D) the notion of self-interest rules out concern for others 
E) concern for the welfare of others is consistent with the concept of self-interest 
A) people who choose to promote the interests of others cannot be acting rationally in their own self-interest 
B) people show concern only for those whom they know personally 
C) charitable donations would disappear if tax deductions for charitable giving were eliminated 
D) the notion of self-interest rules out concern for others 
E) concern for the welfare of others is consistent with the concept of self-interest

Question 3

A good economic theory

Accepted Answer

A) has realistic assumptions 
B) contains as much detail as possible 
C) cannot be proven false 
D) predicts well 
E) can only be presented in mathematical terms 
A) has realistic assumptions 
B) contains as much detail as possible 
C) cannot be proven false 
D) predicts well 
E) can only be presented in mathematical terms

Question 4

Economics is the study of

Accepted Answer

A) how to get rich by playing the stock market 
B) the best ways to reduce people's wants, given the scarcity of resources 
C) how rational government officials determine what goods should be produced 
D) money and why it is good 
E) how people use limited resources to try to satisfy unlimited wants 
A) how to get rich by playing the stock market 
B) the best ways to reduce people's wants, given the scarcity of resources 
C) how rational government officials determine what goods should be produced 
D) money and why it is good 
E) how people use limited resources to try to satisfy unlimited wants

Question 5

"There should be less discrimination against women" is an example of a positive statement.

Accepted Answer

A) True 
 B)False

Question 6

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 very expensive in Japan 
B) the customs of the Japanese marketplace encourage businesses to install vending machines 
C) vending machines were invented in Japan 
D) time is less valuable in Japan than it is elsewhere 
E) most products commonly purchased by Japanese consumers are small enough to be sold in vending machines 
A) vending machines are very expensive in Japan 
B) the customs of the Japanese marketplace encourage businesses to install vending machines 
C) vending machines were invented in Japan 
D) time is less valuable in Japan than it is elsewhere 
E) most products commonly purchased by Japanese consumers are small enough to be sold in vending machines

Question 7

When economists say that people act as rational decision makers, that means

Accepted Answer

A) they gather all relevant information before making their purchases 
B) once a pattern of behavior has been established, people tend to become set in their ways 
C) people respond in predictable ways to changes in costs and benefits 
D) people rarely make errors when they are permitted to make transactions 
E) once made, decisions are never reversed 
A) they gather all relevant information before making their purchases 
B) once a pattern of behavior has been established, people tend to become set in their ways 
C) people respond in predictable ways to changes in costs and benefits 
D) people rarely make errors when they are permitted to make transactions 
E) once made, decisions are never reversed

Question 8

The fact that people have unlimited wants means that

Accepted Answer

A) they always want more of at least one good 
B) each person has an unlimited desire for every good 
C) labor unions demand wage increases 
D) selfish people are not concerned about others 
E) people buy goods without regard to what they can afford 
A) they always want more of at least one good 
B) each person has an unlimited desire for every good 
C) labor unions demand wage increases 
D) selfish people are not concerned about others 
E) people buy goods without regard to what they can afford

Question 9

A normative economic statement

Accepted Answer

A) is a hypothesis used to test economic theory 
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 
E) enables economists to test hypotheses 
A) is a hypothesis used to test economic theory 
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 
E) enables economists to test hypotheses

Question 10

To tell a compelling story, an economist relies on

Accepted Answer

A) case studies 
B) anecdotes 
C) irrelevant data 
D) anecdotes and irrelevant data 
E) case studies and anecdotes 
A) case studies 
B) anecdotes 
C) irrelevant data 
D) anecdotes and irrelevant data 
E) case studies and anecdotes

Question 11

Some individuals or families can become completely saturated with a service such as television. This suggests that

Accepted Answer

A) wants are limited 
B) desires for a single commodity can be satisfied but then the focus will switch to other goods and services 
C) a highly productive economy may someday be able to satisfy all human desires 
D) resources are not truly fixed in supply as we generally assume 
E) scarcity does not exist 
A) wants are limited 
B) desires for a single commodity can be satisfied but then the focus will switch to other goods and services 
C) a highly productive economy may someday be able to satisfy all human desires 
D) resources are not truly fixed in supply as we generally assume 
E) scarcity does not exist

Question 12

A rational decision maker compares the expected marginal cost to the expected marginal benefit of any activity.

Accepted Answer

A) True 
 B)False

Question 13

An example of a positive economic statement is, "An increase in the price of a product causes consumers to purchase more of that product."

Accepted Answer

A) True 
 B)False

Question 14

Which of the four types of decision makers in the U.S. economy plays the largest role?

Accepted Answer

A) U.S. firms and government because they produce the products that households consume 
B) U.S. households because they supply goods to the product markets and are demanders in resource markets 
C) foreign households, firms, and governments because they greatly outnumber those of the United States 
D) U.S. firms and government because they create employment for domestic households and produce goods and services 
E) U.S. households, as buyers in product markets and sellers in resource markets 
A) U.S. firms and government because they produce the products that households consume 
B) U.S. households because they supply goods to the product markets and are demanders in resource markets 
C) foreign households, firms, and governments because they greatly outnumber those of the United States 
D) U.S. firms and government because they create employment for domestic households and produce goods and services 
E) U.S. households, as buyers in product markets and sellers in resource markets

Question 15

Someone who committed the association-is-causation fallacy might conclude that

Accepted Answer

A) event B, which follows event A, was caused by the event A 
B) event B, which follows event A, was not necessarily caused by event A 
C) the simplest model is the best predictor 
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) event B, which follows event A, was caused by the event A 
B) event B, which follows event A, was not necessarily caused by event A 
C) the simplest model is the best predictor 
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 16

Which of the following is a service?

Accepted Answer

A) anything that is scarce and that satisfies unlimited human wants 
B) a thing for which people pay money 
C) an intangible activity that satisfies human wants 
D) any output produced by a service-sector industry, such as fast food 
E) something less desirable than a good 
A) anything that is scarce and that satisfies unlimited human wants 
B) a thing for which people pay money 
C) an intangible activity that satisfies human wants 
D) any output produced by a service-sector industry, such as fast food 
E) something less desirable than a good

Question 17

One might commit the fallacy of composition by concluding that

Accepted Answer

A) statements that are true during prosperity are necessarily true during depression 
B) what is good for the individual is necessarily good for the group 
C) an event that precedes another is necessarily the cause of the latter 
D) intentions need not coincide with actions 
E) the composition of a complex product is not revealed by its exterior appearance 
A) statements that are true during prosperity are necessarily true during depression 
B) what is good for the individual is necessarily good for the group 
C) an event that precedes another is necessarily the cause of the latter 
D) intentions need not coincide with actions 
E) the composition of a complex product is not revealed by its exterior appearance

Question 18

Economists tell stories -- like the vending machine story --

Accepted Answer

A) in order to breathe life into economic theory and personalize abstract ideas 
B) because economics is an art, not a science 
C) as a way of rigorously testing economic theory 
D) because doing so is a required part of the scientific method 
E) to show how their theory can predict at least one real-world situation 
A) in order to breathe life into economic theory and personalize abstract ideas 
B) because economics is an art, not a science 
C) as a way of rigorously testing economic theory 
D) because doing so is a required part of the scientific method 
E) to show how their theory can predict at least one real-world situation

Question 19

Economic theory

Accepted Answer

A) expresses normative values 
B) invents imaginative and interesting stories 
C) predicts the behavior of a specific economic decision maker after an economic change 
D) predicts the average behavior of a group of similar economic decision makers after an economic change 
E) uses only perfect and complete information 
A) expresses normative values 
B) invents imaginative and interesting stories 
C) predicts the behavior of a specific economic decision maker after an economic change 
D) predicts the average behavior of a group of similar economic decision makers after an economic change 
E) uses only perfect and complete information

Question 20

Profit is the payment made for land resources.

Accepted Answer

A) True 
 B)False

Exam 1: The Art and Science of Economic Analysis

Which of the following is a normative statement?

Economists believe that

A good economic theory

Economics is the study of

"There should be less discrimination against women" is an example of a positive statement.

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

When economists say that people act as rational decision makers, that means

The fact that people have unlimited wants means that

A normative economic statement

To tell a compelling story, an economist relies on

Some individuals or families can become completely saturated with a service such as television. This suggests that

A rational decision maker compares the expected marginal cost to the expected marginal benefit of any activity.

An example of a positive economic statement is, "An increase in the price of a product causes consumers to purchase more of that product."

Which of the four types of decision makers in the U.S. economy plays the largest role?

Someone who committed the association-is-causation fallacy might conclude that

Which of the following is a service?

One might commit the fallacy of composition by concluding that

Economists tell stories -- like the vending machine story --

Economic theory

Profit is the payment made for land resources.

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