Question 1

The role of an assumption in an economic theory is to

Accepted Answer

A)  add realism. 
B)  prove the theory. 
C)  cover special cases. 
D)  simplify the complex reality. 
A)  add realism. 
B)  prove the theory. 
C)  cover special cases. 
D)  simplify the complex reality.

Question 2

(Consider This) The assertion by economists that "there is no free lunch"

Accepted Answer

A)  is contradicted by the presence of free goods offered by firms. 
B)  applies to goods that have prices, not to goods given away free by firms. 
C)  remains true even for goods given away free by firms. 
D)  applies to agricultural goods but not to manufactured goods. 
A)  is contradicted by the presence of free goods offered by firms. 
B)  applies to goods that have prices, not to goods given away free by firms. 
C)  remains true even for goods given away free by firms. 
D)  applies to agricultural goods but not to manufactured goods.

Question 3

A nation can increase its production possibilities by

Accepted Answer

A)  shifting resources to produce more consumer goods and less investment goods. 
B)  shifting resources from private goods to public goods. 
C)  improving labor productivity. 
D)  eliminating unemployment. 
A)  shifting resources to produce more consumer goods and less investment goods. 
B)  shifting resources from private goods to public goods. 
C)  improving labor productivity. 
D)  eliminating unemployment.

Question 4

If two variables are directly related, the relationship will have a graph that

Accepted Answer

A)  is a straight line. 
B)  may either be upward-sloping or downward-sloping. 
C)  is an upward-sloping line. 
D)  is horizontal. 
A)  is a straight line. 
B)  may either be upward-sloping or downward-sloping. 
C)  is an upward-sloping line. 
D)  is horizontal.

Question 5

A nation can produce two products: steel and wheat. The table below is the nation's production possibilities schedule.   A change from combination C to B means that

Accepted Answer

A)  1 unit of steel is given up to get 75 units of wheat. 
B)  2 units of steel are given up to get 75 units of wheat. 
C)  1 unit of steel is given up to get 15 more units of wheat. 
D)  2 units of steel are given up to get 15 more units of wheat. 
A)  1 unit of steel is given up to get 75 units of wheat. 
B)  2 units of steel are given up to get 75 units of wheat. 
C)  1 unit of steel is given up to get 15 more units of wheat. 
D)  2 units of steel are given up to get 15 more units of wheat.

Question 6

In the graph for the linear equation S = 15 - 5T, with T on the horizontal axis, the vertical intercept of the graph is -5.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following suggests a direct relationship between x and y?

Accepted Answer

A)  a change in y = -2 coupled with a change in x = -4 
B)  a change in y = 2 coupled with a change in x = 0 
C)  a change in y = 
D)  a change in y = 6 coupled with a change in x = 
A)  a change in y = -2 coupled with a change in x = -4 
B)  a change in y = 2 coupled with a change in x = 0 
C)  a change in y = 
D)  a change in y = 6 coupled with a change in x =

Question 8

A positive statement is concerned primarily with

Accepted Answer

A)  some goal that is desirable to society. 
B)  what should be. 
C)  what is. 
D)  the formulation of economic policy. 
A)  some goal that is desirable to society. 
B)  what should be. 
C)  what is. 
D)  the formulation of economic policy.

Question 9

An economic model is a purposeful simplification of reality, whose function includes

Accepted Answer

A)  understanding the full complexity of the real world. 
B)  predicting the behavior of each and every individual or organization. 
C)  analyzing the behavior of a typical or average consumer or firm. 
D)  forecasting random economic events with a high level of accuracy. 
A)  understanding the full complexity of the real world. 
B)  predicting the behavior of each and every individual or organization. 
C)  analyzing the behavior of a typical or average consumer or firm. 
D)  forecasting random economic events with a high level of accuracy.

Question 10

The production possibilities curve

Accepted Answer

A)  shows all of those levels of production that are consistent with a stable price level. 
B)  indicates that any combination of goods lying outside the curve is economically inefficient. 
C)  is a frontier between all combinations of two goods that can be produced and those combinations that cannot be produced. 
D)  shows all of those combinations of two goods that are most preferred by society. 
A)  shows all of those levels of production that are consistent with a stable price level. 
B)  indicates that any combination of goods lying outside the curve is economically inefficient. 
C)  is a frontier between all combinations of two goods that can be produced and those combinations that cannot be produced. 
D)  shows all of those combinations of two goods that are most preferred by society.

Question 11

Answer the question on the basis of the following five data sets, wherein it is assumed that the variable shown on the left is the independent variable and the one on the right is the dependent variable. Assume in graphing these data that the independent variable is shown on the horizontal axis and the dependent variable on the vertical axis.   Refer to the data sets. The vertical intercept is negative for

Accepted Answer

A)  none of the data sets. 
B)  data sets 1 and 3 only. 
C)  data sets 2 and 4 only. 
D)  data sets 1 and 5 only. 
A)  none of the data sets. 
B)  data sets 1 and 3 only. 
C)  data sets 2 and 4 only. 
D)  data sets 1 and 5 only.

Question 12

The statement in a newspaper that "consumer prices rose last month by 1 percent, and if this trend continues, the annual rate of inflation will be 12 percent for the year" is an example of

Accepted Answer

A)  a normative economic statement. 
B)  a positive economic statement. 
C)  microeconomic analysis. 
D)  rational self-interest. 
A)  a normative economic statement. 
B)  a positive economic statement. 
C)  microeconomic analysis. 
D)  rational self-interest.

Question 13

Answer the question on the basis of the data given in the following production possibilities table.   Refer to the table. As compared to production alternative D, the choice of alternative C would

Accepted Answer

A)  tend to generate a more rapid growth rate. 
B)  be unattainable. 
C)  entail unemployment. 
D)  tend to generate a slower growth rate. 
A)  tend to generate a more rapid growth rate. 
B)  be unattainable. 
C)  entail unemployment. 
D)  tend to generate a slower growth rate.

Question 14

When economists talk about the capital resources in the economy, they are referring to the amount of money circulating in the economy.

Accepted Answer

A) True 
 B)False

Question 15

Macroeconomics explains the behavior of individual households and business firms; microeconomics is concerned with the behavior of aggregates or the economy as a whole.

Accepted Answer

A) True 
 B)False

Question 16

The economizing problem is

Accepted Answer

A)  the need to make choices because economic wants exceed economic means. 
B)  how to distribute resources equally among all members of society. 
C)  that people's means often exceed their wants. 
D)  that people do not know how to rationally allocate resources. 
A)  the need to make choices because economic wants exceed economic means. 
B)  how to distribute resources equally among all members of society. 
C)  that people's means often exceed their wants. 
D)  that people do not know how to rationally allocate resources.

Question 17

If the opportunity cost of producing extra units of one good (expressed in terms of the amount of another good given up) remains constant, then the shape of the production possibilities curve is

Accepted Answer

A)  a straight horizontal line. 
B)  a straight downward-sloping line. 
C)  an upward-sloping line. 
D)  a vertical line. 
A)  a straight horizontal line. 
B)  a straight downward-sloping line. 
C)  an upward-sloping line. 
D)  a vertical line.

Question 18

The marginal benefit curve is

Accepted Answer

A)  upsloping because of increasing marginal opportunity costs. 
B)  upsloping because successive units of a specific product yield less and less extra benefit. 
C)  downsloping because of increasing marginal opportunity costs. 
D)  downsloping because successive units of a specific product yield less and less extra benefit. 
A)  upsloping because of increasing marginal opportunity costs. 
B)  upsloping because successive units of a specific product yield less and less extra benefit. 
C)  downsloping because of increasing marginal opportunity costs. 
D)  downsloping because successive units of a specific product yield less and less extra benefit.

Question 19

The process by which economists test hypotheses against facts to develop theories, principles, and models is called

Accepted Answer

A)  the economic perspective. 
B)  the scientific method. 
C)  policy economics. 
D)  microeconomics. 
A)  the economic perspective. 
B)  the scientific method. 
C)  policy economics. 
D)  microeconomics.

Question 20

Economics is a social science that studies how individuals, institutions, and society may

Accepted Answer

A)  expand the amount of resources available to them. 
B)  attain a minimum level of production. 
C)  best use resources to maximize satisfaction of economic wants. 
D)  reduce the amount of goods and services they need. 
A)  expand the amount of resources available to them. 
B)  attain a minimum level of production. 
C)  best use resources to maximize satisfaction of economic wants. 
D)  reduce the amount of goods and services they need.

Exam 1: Limits, Alternatives, and Choices

The role of an assumption in an economic theory is to

(Consider This) The assertion by economists that "there is no free lunch"

A nation can increase its production possibilities by

If two variables are directly related, the relationship will have a graph that

A nation can produce two products: steel and wheat. The table below is the nation's production possibilities schedule. A change from combination C to B means that

In the graph for the linear equation S = 15 - 5T, with T on the horizontal axis, the vertical intercept of the graph is -5.

Which of the following suggests a direct relationship between x and y?

A positive statement is concerned primarily with

An economic model is a purposeful simplification of reality, whose function includes

The production possibilities curve

The statement in a newspaper that "consumer prices rose last month by 1 percent, and if this trend continues, the annual rate of inflation will be 12 percent for the year" is an example of

Answer the question on the basis of the data given in the following production possibilities table. Refer to the table. As compared to production alternative D, the choice of alternative C would

When economists talk about the capital resources in the economy, they are referring to the amount of money circulating in the economy.

Macroeconomics explains the behavior of individual households and business firms; microeconomics is concerned with the behavior of aggregates or the economy as a whole.

The economizing problem is

If the opportunity cost of producing extra units of one good (expressed in terms of the amount of another good given up) remains constant, then the shape of the production possibilities curve is

The marginal benefit curve is

The process by which economists test hypotheses against facts to develop theories, principles, and models is called

Economics is a social science that studies how individuals, institutions, and society may

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, Rd, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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