Question 1

The difference between a positive economic statement and a normative statement is that

Accepted Answer

A) a positive statement must be true; a normative statement is often not true 
B) a normative statement must be true; a positive statement is often not true 
C) a positive statement can be verified; a normative statement cannot 
D) a normative statements can be verified; a positive statement cannot 
E) a positive economic statement is a moral judgment; a normative economic statement is not a moral judgment 
A) a positive statement must be true; a normative statement is often not true 
B) a normative statement must be true; a positive statement is often not true 
C) a positive statement can be verified; a normative statement cannot 
D) a normative statements can be verified; a positive statement cannot 
E) a positive economic statement is a moral judgment; a normative economic statement is not a moral judgment

Question 2

When constructing an economic model, economists

Accepted Answer

A) rely mostly on their own value judgments and ignore the far more complex world of facts 
B) always try to duplicate reality by including all available information 
C) use assumptions that are true for the individual but never true for the whole economy 
D) must rely on simplifying assumptions that abstract from the complexity of the real world 
E) are primarily concerned with making realistic assumptions 
A) rely mostly on their own value judgments and ignore the far more complex world of facts 
B) always try to duplicate reality by including all available information 
C) use assumptions that are true for the individual but never true for the whole economy 
D) must rely on simplifying assumptions that abstract from the complexity of the real world 
E) are primarily concerned with making realistic assumptions

Question 3

Which of the following statements about economic methodology is correct?

Accepted Answer

A) An economic law is a cause-and-effect relationship that has been verified by a controlled experiment. 
B) The test of a theory's validity is its usefulness in explaining reality. 
C) An economic law is a statement about group behavior that is based on the observed behavior of a single individual. 
D) An economic law, because it is based on probabilities, can only be expected to be true about half the time. 
E) Assumptions are ignored in the development of hypotheses. 
A) An economic law is a cause-and-effect relationship that has been verified by a controlled experiment. 
B) The test of a theory's validity is its usefulness in explaining reality. 
C) An economic law is a statement about group behavior that is based on the observed behavior of a single individual. 
D) An economic law, because it is based on probabilities, can only be expected to be true about half the time. 
E) Assumptions are ignored in the development of hypotheses.

Question 4

A hypothesis is

Accepted Answer

A) an assumption about behavior 
B) a prediction of what will occur given certain assumptions 
C) a prediction of what will occur regardless of assumptions 
D) a forecast of future events 
E) useful only if the assumptions are realistic 
A) an assumption about behavior 
B) a prediction of what will occur given certain assumptions 
C) a prediction of what will occur regardless of assumptions 
D) a forecast of future events 
E) useful only if the assumptions are realistic

Question 5

Which of the following is an example of capital?

Accepted Answer

A) pizza ovens 
B) bulldozers 
C) a college education 
D) carpentry skills 
E) all of the above 
A) pizza ovens 
B) bulldozers 
C) a college education 
D) carpentry skills 
E) all of the above

Question 6

According to a 2008 Payscale.com survey the highest paying college major is:

Accepted Answer

A) Economics 
B) Management 
C) Finance 
D) Computer Engineering 
E) Political Science 
A) Economics 
B) Management 
C) Finance 
D) Computer Engineering 
E) Political Science

Question 7

Economic decision makers will continue to acquire information only as long as the expected additional benefit exceeds the expected additional cost of the information.

Accepted Answer

A) True 
 B)False

Question 8

Scarcity

Accepted Answer

A) exists because people have wants that are unlimited relative to the availability of resources to satisfy those wants 
B) applies when a resource is not freely available 
C) means that each society and each individual must make choices 
D) exists in all societies 
E) all of the above are true 
A) exists because people have wants that are unlimited relative to the availability of resources to satisfy those wants 
B) applies when a resource is not freely available 
C) means that each society and each individual must make choices 
D) exists in all societies 
E) all of the above are true

Question 9

One problem with rent controls is that policy makers often ignore its secondary effects.

Accepted Answer

A) True 
 B)False

Question 10

In a circular-flow model, households supply all of the following except

Accepted Answer

A) labor 
B) goods and services 
C) capital 
D) entrepreneurial ability 
E) natural resources 
A) labor 
B) goods and services 
C) capital 
D) entrepreneurial ability 
E) natural resources

Question 11

Economics is best defined as the study of how

Accepted Answer

A) individuals decide to use scarce resources in an attempt to satisfy their unlimited wants 
B) to make money 
C) the government should deal with unemployment and inflation 
D) to eliminate the problem of scarce resources 
E) to run a business 
A) individuals decide to use scarce resources in an attempt to satisfy their unlimited wants 
B) to make money 
C) the government should deal with unemployment and inflation 
D) to eliminate the problem of scarce resources 
E) to run a business

Question 12

The behavior of the entertainment industry in Detroit is a microeconomic topic.

Accepted Answer

A) True 
 B)False

Question 13

The expression "There's no such thing as a free lunch" means

Accepted Answer

A) that even if the lunch is free, we pay for it in extra calories 
B) that resources used up in producing the lunch are not available to satisfy other wants 
C) the same thing as "The best things in life are free" 
D) you can eat only if you work first 
E) neither sea water nor air is free 
A) that even if the lunch is free, we pay for it in extra calories 
B) that resources used up in producing the lunch are not available to satisfy other wants 
C) the same thing as "The best things in life are free" 
D) you can eat only if you work first 
E) neither sea water nor air is free

Question 14

In economics, the term "marginal" usually refers to

Accepted Answer

A) a small change in an economic variable 
B) a low-quality product or resource 
C) an unimportant and irrelevant economic variable 
D) an all-or-nothing economic decision 
E) a footnote or minor point 
A) a small change in an economic variable 
B) a low-quality product or resource 
C) an unimportant and irrelevant economic variable 
D) an all-or-nothing economic decision 
E) a footnote or minor point

Question 15

Behavioral assumptions

Accepted Answer

A) make economic models more complex than if these assumptions were removed 
B) pertain only to consumers 
C) hold all other things constant 
D) are ways to test a hypothesis 
E) describe how individuals are expected to behave 
A) make economic models more complex than if these assumptions were removed 
B) pertain only to consumers 
C) hold all other things constant 
D) are ways to test a hypothesis 
E) describe how individuals are expected to behave

Question 16

Economists often focus on average behavior because it is easier to predict.

Accepted Answer

A) True 
 B)False

Question 17

Economists believe that people respond in a predictable way to changes in costs and benefits. The term that best describes this phenomenon is

Accepted Answer

A) opportunity cost 
B) scarcity 
C) innovation 
D) marginal analysis 
E) other things equal (or ceteris paribus) 
A) opportunity cost 
B) scarcity 
C) innovation 
D) marginal analysis 
E) other things equal (or ceteris paribus)

Question 18

Which of the following is the fundamental resource that is the basis of labor?

Accepted Answer

A) capital 
B) natural resources 
C) time 
D) money 
E) entrepreneurial ability 
A) capital 
B) natural resources 
C) time 
D) money 
E) entrepreneurial ability

Question 19

Which of the following is the best definition of economics?

Accepted Answer

A) An investigation of the quantities and prices of the various goods produced by the nations of the world. 
B) A study of why inflation and unemployment periodically plague the U.S. economy. 
C) An analysis of how individuals and societies deal with the problem of scarcity. 
D) An examination of the role that money plays in the economy. 
E) A study of how goods and services are distributed throughout the world. 
A) An investigation of the quantities and prices of the various goods produced by the nations of the world. 
B) A study of why inflation and unemployment periodically plague the U.S. economy. 
C) An analysis of how individuals and societies deal with the problem of scarcity. 
D) An examination of the role that money plays in the economy. 
E) A study of how goods and services are distributed throughout the world.

Question 20

A rational decision maker will take only those actions for which the expected marginal benefit

Accepted Answer

A) is positive 
B) is at its maximum level 
C) is greater than or equal to the expected marginal cost 
D) is less than the expected marginal cost 
E) exactly equals the expected marginal cost 
A) is positive 
B) is at its maximum level 
C) is greater than or equal to the expected marginal cost 
D) is less than the expected marginal cost 
E) exactly equals the expected marginal cost

Exam 1: The Art and Science of Economic Analysis

The difference between a positive economic statement and a normative statement is that

When constructing an economic model, economists

Which of the following statements about economic methodology is correct?

A hypothesis is

Which of the following is an example of capital?

According to a 2008 Payscale.com survey the highest paying college major is:

Economic decision makers will continue to acquire information only as long as the expected additional benefit exceeds the expected additional cost of the information.

Scarcity

One problem with rent controls is that policy makers often ignore its secondary effects.

In a circular-flow model, households supply all of the following except

Economics is best defined as the study of how

The behavior of the entertainment industry in Detroit is a microeconomic topic.

The expression "There's no such thing as a free lunch" means

In economics, the term "marginal" usually refers to

Behavioral assumptions

Economists often focus on average behavior because it is easier to predict.

Economists believe that people respond in a predictable way to changes in costs and benefits. The term that best describes this phenomenon is

Which of the following is the fundamental resource that is the basis of labor?

Which of the following is the best definition of economics?

A rational decision maker will take only those actions for which the expected marginal benefit

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