Question 1

Which question is an example of a macroeconomic question?

Accepted Answer

A)  What is the level of industrial concentration in the U.S. automobile industry? 
B)  What economic incentives can be used to reduce the cost of health care in the nation? 
C)  What policies would be recommended for stimulating national economic growth? 
D)  What market conditions are expected for milk in the nation this year? 
A)  What is the level of industrial concentration in the U.S. automobile industry? 
B)  What economic incentives can be used to reduce the cost of health care in the nation? 
C)  What policies would be recommended for stimulating national economic growth? 
D)  What market conditions are expected for milk in the nation this year?

Question 2

The comment that "taxes must be reduced for the good of the economy" is an example of a normative economic statement.

Accepted Answer

A) True 
 B)False

Question 3

Which one of the following is a normative economic statement?

Accepted Answer

A)  The unemployment rate fell for the fourth straight month, reflecting the effects from stronger economic growth in the second quarter. 
B)  The worsening balance of trade must be corrected if this nation is to remain competitive in the world economy. 
C)  Consumer prices are rising at a faster rate than in past months, indicating a renewal of inflationary pressures on the economy. 
D)  To help balance the Federal budget, Congress increased the tax on gasoline to its highest level in the past 10 years. 
A)  The unemployment rate fell for the fourth straight month, reflecting the effects from stronger economic growth in the second quarter. 
B)  The worsening balance of trade must be corrected if this nation is to remain competitive in the world economy. 
C)  Consumer prices are rising at a faster rate than in past months, indicating a renewal of inflationary pressures on the economy. 
D)  To help balance the Federal budget, Congress increased the tax on gasoline to its highest level in the past 10 years.

Question 4

A production possibilities curve shows

Accepted Answer

A)  that resources are unlimited. 
B)  that people prefer one of the goods more than the other. 
C)  the maximum amounts of two goods that can be produced, assuming the full use of available resources. 
D)  combinations of capital and labor necessary to produce specific levels of output. 
A)  that resources are unlimited. 
B)  that people prefer one of the goods more than the other. 
C)  the maximum amounts of two goods that can be produced, assuming the full use of available resources. 
D)  combinations of capital and labor necessary to produce specific levels of output.

Question 5

The question below is based on the following four sets of data-pairs: (1) A and B, (2) C and D, (3) E and F, and (4) G and H. In each set, the independent variable is in the left column and the dependent variable is in the right column.   The linear equation for the relationship in data set 3 above is

Accepted Answer

A)  F = 12E. 
B)  F = 12 - 2E. 
C)  E = 12F. 
D)  E = 12 −2 F. 
A)  F = 12E. 
B)  F = 12 - 2E. 
C)  E = 12F. 
D)  E = 12 −2 F.

Question 6

Which of the following is not correct? A typical production possibilities curve

Accepted Answer

A)  indicates how much of two products society can produce. 
B)  reveals how much each additional unit of one product will cost in terms of the other product. 
C)  specifies how much of each product a society will want to produce. 
D)  indicates that to produce more of one product, a society must forgo larger and larger amounts of the other product. 
A)  indicates how much of two products society can produce. 
B)  reveals how much each additional unit of one product will cost in terms of the other product. 
C)  specifies how much of each product a society will want to produce. 
D)  indicates that to produce more of one product, a society must forgo larger and larger amounts of the other product.

Question 7

A normative statement is one that

Accepted Answer

A)  is based on the law of averages. 
B)  applies only to microeconomics. 
C)  applies only to macroeconomics. 
D)  is based on value judgments. 
A)  is based on the law of averages. 
B)  applies only to microeconomics. 
C)  applies only to macroeconomics. 
D)  is based on value judgments.

Question 8

Because of increasing opportunity costs, the production possibilities curve

Accepted Answer

A)  is bowed out from (or concave to) the origin. 
B)  can be either downward- or upward-sloping. 
C)  at first rises, then falls eventually. 
D)  is a straight downward-sloping line. 
A)  is bowed out from (or concave to) the origin. 
B)  can be either downward- or upward-sloping. 
C)  at first rises, then falls eventually. 
D)  is a straight downward-sloping line.

Question 9

The concept of opportunity cost

Accepted Answer

A)  is irrelevant in socialistic economies because of central planning. 
B)  suggests that the use of resources in any particular line of production means that alternative outputs must be forgone. 
C)  is irrelevant if the production possibilities curve is shifting to the right. 
D)  suggests that insatiable wants can be fulfilled. 
A)  is irrelevant in socialistic economies because of central planning. 
B)  suggests that the use of resources in any particular line of production means that alternative outputs must be forgone. 
C)  is irrelevant if the production possibilities curve is shifting to the right. 
D)  suggests that insatiable wants can be fulfilled.

Question 10

The question below is based on the following four sets of data-pairs: (1) A and B, (2) C and D, (3) E and F, and (4) G and H. In each set, the independent variable is in the left column and the dependent variable is in the right column.   Which of the four sets of data pairs show an inverse relationship between the independent and dependent variable?

Accepted Answer

A)  1 and 3 
B)  2 and 3 
C)  3 and 4 
D)  2 and 4 
A)  1 and 3 
B)  2 and 3 
C)  3 and 4 
D)  2 and 4

Question 11

(Last Word) The fallacy of composition states that

Accepted Answer

A)  because economic systems are composed of so many diverse economic units, economic laws are necessarily inexact. 
B)  the anticipation of a particular event can affect the composition of that event when it occurs. 
C)  what is true for the individual must necessarily be true for the group. 
D)  because event A precedes event B, A is necessarily the cause of B. 
A)  because economic systems are composed of so many diverse economic units, economic laws are necessarily inexact. 
B)  the anticipation of a particular event can affect the composition of that event when it occurs. 
C)  what is true for the individual must necessarily be true for the group. 
D)  because event A precedes event B, A is necessarily the cause of B.

Question 12

Any combination of goods lying outside of the budget line

Accepted Answer

A)  implies that the consumer is not spending all of the consumer's income. 
B)  yields less utility than any point on the budget line. 
C)  yields less utility than any point inside the budget line. 
D)  is unattainable, given the consumer's income. 
A)  implies that the consumer is not spending all of the consumer's income. 
B)  yields less utility than any point on the budget line. 
C)  yields less utility than any point inside the budget line. 
D)  is unattainable, given the consumer's income.

Question 13

The economizing problem is one of deciding how to make the best use of

Accepted Answer

A)  virtually unlimited resources to satisfy virtually unlimited wants. 
B)  limited resources to satisfy virtually unlimited wants. 
C)  unlimited resources to satisfy limited wants. 
D)  limited resources to satisfy limited wants. 
A)  virtually unlimited resources to satisfy virtually unlimited wants. 
B)  limited resources to satisfy virtually unlimited wants. 
C)  unlimited resources to satisfy limited wants. 
D)  limited resources to satisfy limited wants.

Question 14

The law of increasing opportunity costs is reflected in a production possibilities curve that is

Accepted Answer

A)  an upsloping straight line. 
B)  a downsloping straight line. 
C)  bowed out from the origin. 
D)  bowed in toward the origin. 
A)  an upsloping straight line. 
B)  a downsloping straight line. 
C)  bowed out from the origin. 
D)  bowed in toward the origin.

Question 15

Macroeconomics can best be described as the

Accepted Answer

A)  analysis of how a consumer tries to spend income. 
B)  study of the large aggregates of the economy or the economy as a whole. 
C)  analysis of how firms attempt to maximize their profits. 
D)  study of how supply and demand determine prices in individual markets. 
A)  analysis of how a consumer tries to spend income. 
B)  study of the large aggregates of the economy or the economy as a whole. 
C)  analysis of how firms attempt to maximize their profits. 
D)  study of how supply and demand determine prices in individual markets.

Question 16

The study of global businesses such as Apple Inc is one major focus of macroeconomic analysis.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following will shift the production possibilities curve to the right?

Accepted Answer

A)  an increase in the unemployment rate from 6 to 8 percent 
B)  a decline in the efficiency with which the present labor force is allocated 
C)  a decrease in the unemployment rate from 8 to 6 percent 
D)  a technological advance that allows farmers to produce more output from given inputs 
A)  an increase in the unemployment rate from 6 to 8 percent 
B)  a decline in the efficiency with which the present labor force is allocated 
C)  a decrease in the unemployment rate from 8 to 6 percent 
D)  a technological advance that allows farmers to produce more output from given inputs

Question 18

If we say that two variables are inversely related, this means that

Accepted Answer

A)  the two graph as an upsloping line. 
B)  an increase in one variable is associated with a decrease in the other. 
C)  an increase in one variable is associated with an increase in the other. 
D)  the resulting relationship can be portrayed by a straight line parallel to the horizontal axis. 
A)  the two graph as an upsloping line. 
B)  an increase in one variable is associated with a decrease in the other. 
C)  an increase in one variable is associated with an increase in the other. 
D)  the resulting relationship can be portrayed by a straight line parallel to the horizontal axis.

Question 19

Which pitfall to sound economic reasoning is illustrated when a person comments that "capitalists focus only on profits and don't care about their workers"?

Accepted Answer

A)  abstraction 
B)  biases 
C)  the fallacy of composition 
D)  confusing correlation and causation 
A)  abstraction 
B)  biases 
C)  the fallacy of composition 
D)  confusing correlation and causation

Question 20

Which of the following do economists consider to be capital?

Accepted Answer

A)  a pair of stockings 
B)  a construction crane 
C)  a savings account 
D)  a share of IBM stock 
A)  a pair of stockings 
B)  a construction crane 
C)  a savings account 
D)  a share of IBM stock

Exam 1: Limits, Alternatives, and Choices

Which question is an example of a macroeconomic question?

The comment that "taxes must be reduced for the good of the economy" is an example of a normative economic statement.

Which one of the following is a normative economic statement?

A production possibilities curve shows

Which of the following is not correct? A typical production possibilities curve

A normative statement is one that

Because of increasing opportunity costs, the production possibilities curve

The concept of opportunity cost

(Last Word) The fallacy of composition states that

Any combination of goods lying outside of the budget line

The economizing problem is one of deciding how to make the best use of

The law of increasing opportunity costs is reflected in a production possibilities curve that is

Macroeconomics can best be described as the

The study of global businesses such as Apple Inc is one major focus of macroeconomic analysis.

Which of the following will shift the production possibilities curve to the right?

If we say that two variables are inversely related, this means that

Which pitfall to sound economic reasoning is illustrated when a person comments that "capitalists focus only on profits and don't care about their workers"?

Which of the following do economists consider to be capital?

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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