Question 1

Economic policy of the government is often based on

Accepted Answer

A)  microeconomic models. 
B)  educated guessing. 
C)  intuitive reasoning. 
D)  hints. 
A)  microeconomic models. 
B)  educated guessing. 
C)  intuitive reasoning. 
D)  hints. A

Question 2

Normative analysis offers decision makers the most valuable information when choosing among alternatives.

Accepted Answer

A) True 
 B)False  False

Question 3

Legislators argue that a minimum wage law is instituted to help poor people.Economists can attack the minimum wage law on two fronts.First,some argue that government should not help the poor.Second,some argue that minimum wage laws actually hurt the poor because it creates unemployment.Which argument is normative and which is positive?

Accepted Answer

An opinion about the role of government is a normative statement.An observation about the impact of a law is a positive statement.

Question 4

The objective of creating a permit trading system for SO2 (sulfur dioxide)is to

Accepted Answer

A)  employ environmental protection agency (EP
A)  workers. 
B)  create a market in which one did not previously exist. 
C)  make annual company tax reporting more difficult. 
D)  increase the incidence of acid rain. 
A)  employ environmental protection agency (EP
A)  workers. 
B)  create a market in which one did not previously exist. 
C)  make annual company tax reporting more difficult. 
D)  increase the incidence of acid rain.

Question 5

Governments use microeconomic models to

Accepted Answer

A)  predict the impact of a policy before adopting it. 
B)  consider the tradeoff between clean air and a high level of GDP. 
C)  determine the tradeoff between equity and efficiency. 
D)  All of the above. 
A)  predict the impact of a policy before adopting it. 
B)  consider the tradeoff between clean air and a high level of GDP. 
C)  determine the tradeoff between equity and efficiency. 
D)  All of the above.

Question 6

A market

Accepted Answer

A)  always involves the personal exchange of goods for money. 
B)  allows interactions between consumers and firms. 
C)  always takes place at a physical location. 
D)  has no influence on prices. 
A)  always involves the personal exchange of goods for money. 
B)  allows interactions between consumers and firms. 
C)  always takes place at a physical location. 
D)  has no influence on prices.

Question 7

Which of the statements below is/are normative?

Accepted Answer

A)  Economists need to include more reality in their models. 
B)  Economists will use a model until it is refuted by someone. 
C)  Microeconomists study economic growth. 
D)  B and C 
A)  Economists need to include more reality in their models. 
B)  Economists will use a model until it is refuted by someone. 
C)  Microeconomists study economic growth. 
D)  B and C

Question 8

One million automobiles have a defect that could cause the car to explode; however,only one of those cars will actually explode.Nobody knows which one car it is.When the car does explode,the victim's family will sue the automaker for $1 million and win.The defect costs $2 per car to repair.What does economics predict about the automaker's decision to repair the defect?

Accepted Answer

Correcting the defect will cos

Question 9

Economic models are most often tested

Accepted Answer

A)  using computer simulations. 
B)  using data from the distant past. 
C)  using data from the real world. 
D)  using logic alone. 
A)  using computer simulations. 
B)  using data from the distant past. 
C)  using data from the real world. 
D)  using logic alone.

Question 10

Economists tend to judge a model based upon

Accepted Answer

A)  the reality of its assumptions. 
B)  the accuracy of its predictions. 
C)  its simplicity. 
D)  its complexity. 
A)  the reality of its assumptions. 
B)  the accuracy of its predictions. 
C)  its simplicity. 
D)  its complexity.

Question 11

The purpose of making assumptions in an economic model is to

Accepted Answer

A)  force the model to yield the correct answer. 
B)  minimize the amount of work an economist must do. 
C)  simplify the model while keeping important details. 
D)  express the relationship mathematically. 
A)  force the model to yield the correct answer. 
B)  minimize the amount of work an economist must do. 
C)  simplify the model while keeping important details. 
D)  express the relationship mathematically.

Question 12

Describe in words the anatomy of an economic model.

Accepted Answer

An economic model is comprised of a set

Question 13

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

Accepted Answer

A)  Since this good is bad for you, you should not consume it. 
B)  If this good is bad for you, you should not consume it. 
C)  If you consume this good, you will get sick. 
D)  None of the above. 
A)  Since this good is bad for you, you should not consume it. 
B)  If this good is bad for you, you should not consume it. 
C)  If you consume this good, you will get sick. 
D)  None of the above.

Question 14

Every economic model should include money as a variable.This statement is

Accepted Answer

A)  true, because every transaction in the economy uses money. 
B)  true, because the federal reserve is very important. 
C)  false, because some transactions in the economy are accomplished without money. 
D)  false, because a model can get unnecessarily complex if it includes money. 
A)  true, because every transaction in the economy uses money. 
B)  true, because the federal reserve is very important. 
C)  false, because some transactions in the economy are accomplished without money. 
D)  false, because a model can get unnecessarily complex if it includes money.

Question 15

Einstein was quoted saying "Everything should be made as simple as possible,but not simpler." When it comes to economic models this means that

Accepted Answer

A)  models shouldn't be too complex. 
B)  models shouldn't be too simple. 
C)  models should have a level of abstraction appropriate to the topic investigated. 
D)  all of the above 
A)  models shouldn't be too complex. 
B)  models shouldn't be too simple. 
C)  models should have a level of abstraction appropriate to the topic investigated. 
D)  all of the above

Question 16

Economic modeling requires

Accepted Answer

A)  mathematics. 
B)  logic. 
C)  calculus. 
D)  trigonometry. 
A)  mathematics. 
B)  logic. 
C)  calculus. 
D)  trigonometry.

Question 17

If an important assumption is omitted from an economic model

Accepted Answer

A)  the model's predictions will be accurate 50% of the time. 
B)  the model's predictions will be inaccurate. 
C)  the model will not predict anything. 
D)  the model will be rejected by other economists. 
A)  the model's predictions will be accurate 50% of the time. 
B)  the model's predictions will be inaccurate. 
C)  the model will not predict anything. 
D)  the model will be rejected by other economists.

Question 18

What links the decisions of consumers and firms in a market?

Accepted Answer

A)  the government 
B)  prices 
C)  coordination officials 
D)  microeconomics 
A)  the government 
B)  prices 
C)  coordination officials 
D)  microeconomics

Question 19

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

Accepted Answer

A)  A higher price for a good causes people to want to buy less of that good. 
B)  A lower price for a good causes people to want to buy more of that good. 
C)  To make the good available to more people, a lower price should be set. 
D)  If you consume this good, you will be better off. 
A)  A higher price for a good causes people to want to buy less of that good. 
B)  A lower price for a good causes people to want to buy more of that good. 
C)  To make the good available to more people, a lower price should be set. 
D)  If you consume this good, you will be better off.

Question 20

Economists will use a model such as the law of demand

Accepted Answer

A)  forever, ignoring all criticism. 
B)  until it is refuted by someone. 
C)  until the model produces the same results with added complexity. 
D)  until every microeconomic courses uses the model. 
A)  forever, ignoring all criticism. 
B)  until it is refuted by someone. 
C)  until the model produces the same results with added complexity. 
D)  until every microeconomic courses uses the model.

Economic policy of the government is often based on

Normative analysis offers decision makers the most valuable information when choosing among alternatives.

The objective of creating a permit trading system for SO₂ (sulfur dioxide)is to

Governments use microeconomic models to

A market

Which of the statements below is/are normative?

Economic models are most often tested

Economists tend to judge a model based upon

The purpose of making assumptions in an economic model is to

Describe in words the anatomy of an economic model.

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

Every economic model should include money as a variable.This statement is

Einstein was quoted saying "Everything should be made as simple as possible,but not simpler." When it comes to economic models this means that

Economic modeling requires

If an important assumption is omitted from an economic model

What links the decisions of consumers and firms in a market?

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

Economists will use a model such as the law of demand

Supply and Demand

Applying the Supply and Demand Model

Consumer Choice

Applying Consumer Theory

Firms and Production

Costs

Competitive Firms and Markets

Applying the Competitive Model

General Equilibrium and Economic Welfare

Monopoly

Pricing and Advertising

Oligopoly and Monopolistic Competition

Game Theory

Factor Markets

Interest Rates, Investments, and Capital Markets

Uncertainty

Externalities, Open-Access, and Public Goods

Asymmetric Information

Contracts and Moral Hazards

Filters

Exam 1: Introduction

Economic policy of the government is often based on

Normative analysis offers decision makers the most valuable information when choosing among alternatives.

The objective of creating a permit trading system for SO2 (sulfur dioxide)is to

Governments use microeconomic models to

A market

Which of the statements below is/are normative?

Economic models are most often tested

Economists tend to judge a model based upon

The purpose of making assumptions in an economic model is to

Describe in words the anatomy of an economic model.

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

Every economic model should include money as a variable.This statement is

Einstein was quoted saying "Everything should be made as simple as possible,but not simpler." When it comes to economic models this means that

Economic modeling requires

If an important assumption is omitted from an economic model

What links the decisions of consumers and firms in a market?

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

Economists will use a model such as the law of demand

Supply and Demand

Applying the Supply and Demand Model

Consumer Choice

Applying Consumer Theory

Firms and Production

Costs

Competitive Firms and Markets

Applying the Competitive Model

General Equilibrium and Economic Welfare

Monopoly

Pricing and Advertising

Oligopoly and Monopolistic Competition

Game Theory

Factor Markets

Interest Rates, Investments, and Capital Markets

Uncertainty

Externalities, Open-Access, and Public Goods

Asymmetric Information

Contracts and Moral Hazards

Filters

The objective of creating a permit trading system for SO₂ (sulfur dioxide)is to