Question 1

Economic theory simplifies relationships to explain how the relationships interact.

Accepted Answer

A) True 
 B)False  True

Question 2

An externality is defined as

Accepted Answer

A) an opportunity cost that is not considered, which causes inefficiency. 
B) a social cost that affects parties external to a transaction. 
C) a transaction which imposes a loss on one of the parties involved. 
D) a "cost of doing business" that cannot be allocated to any particular good. 
E) the increase in cost associated with increased production. 
A) an opportunity cost that is not considered, which causes inefficiency. 
B) a social cost that affects parties external to a transaction. 
C) a transaction which imposes a loss on one of the parties involved. 
D) a "cost of doing business" that cannot be allocated to any particular good. 
E) the increase in cost associated with increased production. B

Question 3

All two-dimensional graphs must have an origin,a horizontal axis,and a vertical axis.

Accepted Answer

A) True 
 B)False  True

Question 4

Economists use models in order to

Accepted Answer

A) experiment with alternative circumstances. 
B) make educated guesses about real life events. 
C) predict outcomes under various hypothetical conditions. 
D) increase understanding of how a relationship actually works. 
E) All of the above are correct. 
A) experiment with alternative circumstances. 
B) make educated guesses about real life events. 
C) predict outcomes under various hypothetical conditions. 
D) increase understanding of how a relationship actually works. 
E) All of the above are correct.

Question 5

Models are simplifications that are used to observe the workings of a system.

Accepted Answer

A) True 
 B)False

Question 6

What are the tools available to governments to mitigate cycles of boom and bust? Why do these tools fail?

Accepted Answer

Some of the tools available to the gover

Question 7

The achievement of greater efficiency in the United States has been at the expense of growing inequality.

Accepted Answer

A) True 
 B)False

Question 8

If Taiwanese workers can produce all goods at lower wages than American workers,then

Accepted Answer

A) Americans can still gain by trading with Taiwan. 
B) Americans can only lose if they import from Taiwan. 
C) Taiwan can only lose if it trades with America. 
D) there are no gains from trade that are possible in this case. 
E) Americans should be self-sufficient. 
A) Americans can still gain by trading with Taiwan. 
B) Americans can only lose if they import from Taiwan. 
C) Taiwan can only lose if it trades with America. 
D) there are no gains from trade that are possible in this case. 
E) Americans should be self-sufficient.

Question 9

A line that slopes downward from left to right has a positive slope.

Accepted Answer

A) True 
 B)False

Question 10

An economist might be hired to answer which of the following questions?

Accepted Answer

A) What will the price of oil be next year? 
B) Why is the median income of women about half the median income of men? 
C) How much will interest rates change as the federal deficit decreases? 
D) How much will inflation change if import restrictions are imposed? 
E) All of the above are correct. 
A) What will the price of oil be next year? 
B) Why is the median income of women about half the median income of men? 
C) How much will interest rates change as the federal deficit decreases? 
D) How much will inflation change if import restrictions are imposed? 
E) All of the above are correct.

Question 11

The use of chlorofluorocarbons in refrigerators and air conditioners is alleged to cause the destruction of the ozone layer that surrounds the earth.This layer protects humans from ultraviolet radiation,which causes skin cancer.Industry has been prohibited from using these substances in aerosol cans,but the government has been reluctant to ban their use altogether because of the serious economic consequences.Economists analyze such problems and refer to them as

Accepted Answer

A) issues of unfairness. 
B) examples of excess abstraction. 
C) externalities. 
D) comparative advantage issues. 
E) examples of trade-offs between output and equality. 
A) issues of unfairness. 
B) examples of excess abstraction. 
C) externalities. 
D) comparative advantage issues. 
E) examples of trade-offs between output and equality.

Question 12

Value judgments are based on people's tastes,preferences,and ethical opinions.

Accepted Answer

A) True 
 B)False

Question 13

A theory is an untested assertion of alleged fact.

Accepted Answer

A) True 
 B)False

Question 14

Only economists and other "social" scientists have areas of dispute within their disciplines.

Accepted Answer

A) True 
 B)False

Question 15

In economics the true cost of making a choice is the value of what must be given up.

Accepted Answer

A) True 
 B)False

Question 16

Externalities are social costs that affect parties external to a particular economic transaction.

Accepted Answer

A) True 
 B)False

Question 17

Both parties gain in a voluntary exchange.

Accepted Answer

A) True 
 B)False

Question 18

The slope of a downward-sloping straight line can be calculated as the distance from the

Accepted Answer

A) horizontal intercept of the line to the origin divided by the distance from the origin to the vertical intercept of the line. 
B) origin to the horizontal intercept of the line minus the distance from the origin to the vertical intercept of the line. 
C) vertical intercept of the line to the origin divided by the distance from the origin to the horizontal intercept of the line. 
D) vertical intercept of the line to the origin minus the distance from the origin to the horizontal intercept of the line. 
A) horizontal intercept of the line to the origin divided by the distance from the origin to the vertical intercept of the line. 
B) origin to the horizontal intercept of the line minus the distance from the origin to the vertical intercept of the line. 
C) vertical intercept of the line to the origin divided by the distance from the origin to the horizontal intercept of the line. 
D) vertical intercept of the line to the origin minus the distance from the origin to the horizontal intercept of the line.

Question 19

Because there is a trade-off between total output and equality of income distribution,

Accepted Answer

A) greater equality of distribution will generally result in higher levels of output. 
B) greater output is generally associated with more equal distribution. 
C) policies designed to increase output will only succeed if distribution is more equal. 
D) policies intended to expand output must necessarily fail. 
E) policies designed to equalize distribution may adversely affect the size of output. 
A) greater equality of distribution will generally result in higher levels of output. 
B) greater output is generally associated with more equal distribution. 
C) policies designed to increase output will only succeed if distribution is more equal. 
D) policies intended to expand output must necessarily fail. 
E) policies designed to equalize distribution may adversely affect the size of output.

Question 20

Economic theory is necessary and extremely important because of its relationship to economic policy.

Accepted Answer

A) True 
 B)False

Exam 1: What Is Economics

Economic theory simplifies relationships to explain how the relationships interact.

An externality is defined as

All two-dimensional graphs must have an origin,a horizontal axis,and a vertical axis.

Economists use models in order to

Models are simplifications that are used to observe the workings of a system.

What are the tools available to governments to mitigate cycles of boom and bust? Why do these tools fail?

The achievement of greater efficiency in the United States has been at the expense of growing inequality.

If Taiwanese workers can produce all goods at lower wages than American workers,then

A line that slopes downward from left to right has a positive slope.

An economist might be hired to answer which of the following questions?

Value judgments are based on people's tastes,preferences,and ethical opinions.

A theory is an untested assertion of alleged fact.

Only economists and other "social" scientists have areas of dispute within their disciplines.

In economics the true cost of making a choice is the value of what must be given up.

Externalities are social costs that affect parties external to a particular economic transaction.

Both parties gain in a voluntary exchange.

The slope of a downward-sloping straight line can be calculated as the distance from the

Because there is a trade-off between total output and equality of income distribution,

Economic theory is necessary and extremely important because of its relationship to economic policy.

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production,Inputs,and Cost: Building Blocks for Supply Analysis

Output,Price,and Profit: The Importance of Marginal Analysis

Securities: Business Finance,and the Economy: The Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets I: the Price System

The Shortcomings of Free Markets

The Markets Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

International Trade and Comparative Advantage

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