Question 1

An economic model will produce poor predictions if it includes assumptions.

Accepted Answer

A) True 
 B)False  False

Question 2

Which of the following is not a part of the scientific method in economics?

Accepted Answer

A) normative statements 
B) comparing predictions to evidence 
C) formulating a hypothesis 
D) testing a hypothesis 
E) behavioral assumptions 
A) normative statements 
B) comparing predictions to evidence 
C) formulating a hypothesis 
D) testing a hypothesis 
E) behavioral assumptions D

Question 3

An entrepreneur _____

Accepted Answer

A) always makes a profit. 
B) is appointed by the board of directors to manage the operations of a firm. 
C) is a profit-seeking decision maker. 
D) is a parasite that benefits by not paying other resources for their services. 
E) is the manager who runs an enterprise and keeps the customers happy. 
A) always makes a profit. 
B) is appointed by the board of directors to manage the operations of a firm. 
C) is a profit-seeking decision maker. 
D) is a parasite that benefits by not paying other resources for their services. 
E) is the manager who runs an enterprise and keeps the customers happy. C

Question 4

Exhibit 1.1
  
-Refer to the circular-flow model in Exhibit 1.1.Box B represents _____

Accepted Answer

A) firms. 
B) resource markets. 
C) households. 
D) product markets. 
E) expenditures. 
A) firms. 
B) resource markets. 
C) households. 
D) product markets. 
E) expenditures.

Question 5

Entrepreneurial ability is rewarded by _____

Accepted Answer

A) profit. 
B) wages. 
C) rent. 
D) dividends. 
E) interest. 
A) profit. 
B) wages. 
C) rent. 
D) dividends. 
E) interest.

Question 6

Goods and services are limited in supply because _____

Accepted Answer

A) people are greedy. 
B) they are produced using scarce resources. 
C) people have limited wants. 
D) they are produced by firms that seek profits. 
E) the government wants to maintain its power over the economy. 
A) people are greedy. 
B) they are produced using scarce resources. 
C) people have limited wants. 
D) they are produced by firms that seek profits. 
E) the government wants to maintain its power over the economy.

Question 7

The problem of scarce resources _____

Accepted Answer

A) can be solved in a market economy, but not in a command economy. 
B) can be solved if all resources are jointly owned by the public and private sectors. 
C) implies that the resources are not freely available. 
D) arises because all natural resources are owned by the government in every country. 
E) can be solved by lowering taxes in an economy. 
A) can be solved in a market economy, but not in a command economy. 
B) can be solved if all resources are jointly owned by the public and private sectors. 
C) implies that the resources are not freely available. 
D) arises because all natural resources are owned by the government in every country. 
E) can be solved by lowering taxes in an economy.

Question 8

Environmentalists have continually argued for the use of alternatives to fossil fuels to generate energy and that wind farms are a good alternative.As windmills can harm migratory birds,we could say that environmentalists have committed the _____

Accepted Answer

A) fallacy of composition. 
B) fallacy that association is causation. 
C) fallacy of segmentation. 
D) mistake of ignoring secondary effects. 
E) mistake of ignoring the obvious. 
A) fallacy of composition. 
B) fallacy that association is causation. 
C) fallacy of segmentation. 
D) mistake of ignoring secondary effects. 
E) mistake of ignoring the obvious.

Question 9

A good or service is considered scarce if _____

Accepted Answer

A) any quantity of it can be consumed at a zero price. 
B) the amount people desire exceeds the amount available at a zero price. 
C) the amount people desire equals the amount available at any price. 
D) the amount people desire is less than the amount available at any price. 
E) the amount people desire is less than the amount available at a zero price. 
A) any quantity of it can be consumed at a zero price. 
B) the amount people desire exceeds the amount available at a zero price. 
C) the amount people desire equals the amount available at any price. 
D) the amount people desire is less than the amount available at any price. 
E) the amount people desire is less than the amount available at a zero price.

Question 10

A normative economic statement _____

Accepted Answer

A) is a hypothesis used to test economic theory. 
B) is a statement of fact. 
C) is a statement of what ought to be, not what is. 
D) indicates what will occur if certain assumptions are true. 
E) enables economists to test hypotheses. 
A) is a hypothesis used to test economic theory. 
B) is a statement of fact. 
C) is a statement of what ought to be, not what is. 
D) indicates what will occur if certain assumptions are true. 
E) enables economists to test hypotheses.

Question 11

Rational choice takes time and requires information,but time and information are themselves ____.

Accepted Answer

A) rational choice 
B) selfish 
C) freely available 
D) scarce 
E) abundant 
A) rational choice 
B) selfish 
C) freely available 
D) scarce 
E) abundant

Question 12

In economics,money is an example of capital.

Accepted Answer

A) True 
 B)False

Question 13

Resources are bought and sold in _____

Accepted Answer

A) product markets. 
B) resource markets. 
C) foreign exchange markets. 
D) the stock market. 
E) the spot market. 
A) product markets. 
B) resource markets. 
C) foreign exchange markets. 
D) the stock market. 
E) the spot market.

Question 14

Exhibit 1.1
  
-Refer to the circular-flow model in Exhibit 1.1.If box D represents firms,then box C represents _____

Accepted Answer

A) firms. 
B) resource markets. 
C) households. 
D) product markets. 
E) expenditures. 
A) firms. 
B) resource markets. 
C) households. 
D) product markets. 
E) expenditures.

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 what motivates decision makers. 
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 what motivates decision makers.

Question 16

The payment in return for the use of capital is _____

Accepted Answer

A) profit. 
B) wages. 
C) rent. 
D) dividends. 
E) interest. 
A) profit. 
B) wages. 
C) rent. 
D) dividends. 
E) interest.

Question 17

Exhibit 1.1
  
-Refer to the circular-flow model in Exhibit 1.1. If B represents resource markets and C represents households,then the flow from B to C is _____

Accepted Answer

A) revenue. 
B) expenditures. 
C) labor, capital, and natural resources. 
D) income. 
E) wages, interest, rent, and profit. 
A) revenue. 
B) expenditures. 
C) labor, capital, and natural resources. 
D) income. 
E) wages, interest, rent, and profit.

Question 18

Economists believe that _____

Accepted Answer

A) people who choose to promote the interests of others cannot be acting rationally. 
B) people show concern only for those whom they know personally. 
C) charitable donations would disappear if tax deductions for charitable giving were eliminated. 
D) the notion of self-interest rules out concern for others. 
E) concern for the welfare of others is consistent with the concept of self-interest. 
A) people who choose to promote the interests of others cannot be acting rationally. 
B) people show concern only for those whom they know personally. 
C) charitable donations would disappear if tax deductions for charitable giving were eliminated. 
D) the notion of self-interest rules out concern for others. 
E) concern for the welfare of others is consistent with the concept of self-interest.

Question 19

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 total 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 total cost.

Question 20

Which of the following would an economist classify as physical capital?

Accepted Answer

A) 100 shares of Microsoft 
B) a $50 bill 
C) a credit card 
D) a lawyer's laptop 
E) a bauxite mine in Jamaica 
A) 100 shares of Microsoft 
B) a $50 bill 
C) a credit card 
D) a lawyer's laptop 
E) a bauxite mine in Jamaica

Exam 1: The Art and Science of Economic Analysis

An economic model will produce poor predictions if it includes assumptions.

Which of the following is not a part of the scientific method in economics?

An entrepreneur _____

Exhibit 1.1 -Refer to the circular-flow model in Exhibit 1.1.Box B represents _____

Entrepreneurial ability is rewarded by _____

Goods and services are limited in supply because _____

The problem of scarce resources _____

Environmentalists have continually argued for the use of alternatives to fossil fuels to generate energy and that wind farms are a good alternative.As windmills can harm migratory birds,we could say that environmentalists have committed the _____

A good or service is considered scarce if _____

A normative economic statement _____

Rational choice takes time and requires information,but time and information are themselves ____.

In economics,money is an example of capital.

Resources are bought and sold in _____

Exhibit 1.1 -Refer to the circular-flow model in Exhibit 1.1.If box D represents firms,then box C represents _____

Behavioral assumptions _____

The payment in return for the use of capital is _____

Exhibit 1.1 -Refer to the circular-flow model in Exhibit 1.1. If B represents resource markets and C represents households,then the flow from B to C is _____

Economists believe that _____

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

Which of the following would an economist classify as physical capital?

Economic Tools and Economic Systems

Economic Decision Makers

Demand, supply, and Markets

Elasticity of Demand and Supply

Consumer Choice and Demand

Production and Cost in the Firm

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Resource Markets

Labor Markets and Labor Unions

Capital, interest, entrepreneurship, and Corporate Finance

Transaction Costs, asymmetric Information, and Behavioral Economics

Economic Regulation and Antitrust Policy

Public Goods and Public Choice

Externalities and the Environment

Poverty and Redistribution

International Trade

International Finance

Economic Development

Filters