Question 1

Most of the disagreement among economists involves normative debates.

Accepted Answer

A) True 
 B)False

Question 2

Sources of confusion in economic analysis include _____

Accepted Answer

A) fallacy of composition. 
B) rational self-interest. 
C) fallacy of segmentation. 
D) mistake of ignoring primary effects. 
E) making positive economic statements. 
A) fallacy of composition. 
B) rational self-interest. 
C) fallacy of segmentation. 
D) mistake of ignoring primary effects. 
E) making positive economic statements.

Question 3

Economic fluctuations are also known as _____

Accepted Answer

A) the output decisions of individual firms. 
B) the effect of a tariff on the demand for a good. 
C) the factors that influence the spending decisions of particular households. 
D) business cycles. 
E) economic systems. 
A) the output decisions of individual firms. 
B) the effect of a tariff on the demand for a good. 
C) the factors that influence the spending decisions of particular households. 
D) business cycles. 
E) economic systems.

Question 4

An economic model that sometimes makes incorrect predictions can be used by economic decision makers _____

Accepted Answer

A) under no circumstances. 
B) only if it assumes a positive correlation between the variables being analyzed. 
C) if it is mathematical. 
D) if it is simple enough for a child to understand. 
E) until a better model is developed. 
A) under no circumstances. 
B) only if it assumes a positive correlation between the variables being analyzed. 
C) if it is mathematical. 
D) if it is simple enough for a child to understand. 
E) until a better model is developed.

Question 5

Your friend notices that U.S.auto production and U.S.population growth have moved together over several decades.He reasons that one way to slow population growth is for the government to order the auto makers to cut back on production.You gently point out to him that he _____

Accepted Answer

A) would be correct only when the economy was in a recession. 
B) has committed the fallacy that association is causation. 
C) has ignored the secondary effects. 
D) has committed the fallacy of composition. 
E) would be correct only if the United States enjoyed a high rate of economic growth. 
A) would be correct only when the economy was in a recession. 
B) has committed the fallacy that association is causation. 
C) has ignored the secondary effects. 
D) has committed the fallacy of composition. 
E) would be correct only if the United States enjoyed a high rate of economic growth.

Question 6

Economic theories _____

Accepted Answer

A) express normative values. 
B) invent imaginative and interesting stories. 
C) use the fallacy of composition to validate hypotheses. 
D) predict cause and effect in the real world. 
E) use only perfect and complete information to formulate and test hypotheses. 
A) express normative values. 
B) invent imaginative and interesting stories. 
C) use the fallacy of composition to validate hypotheses. 
D) predict cause and effect in the real world. 
E) use only perfect and complete information to formulate and test hypotheses.

Question 7

The primary behavioral assumption is _____

Accepted Answer

A) opportunity cost. 
B) demand. 
C) supply. 
D) scarcity. 
E) rational self-interest. 
A) opportunity cost. 
B) demand. 
C) supply. 
D) scarcity. 
E) rational self-interest.

Question 8

To say that people make decisions at the margin means that _____

Accepted Answer

A) they usually wait until the last minute before making any decision. 
B) they weigh the additional costs and the additional benefits of various activities before they make a decision. 
C) most people just barely get by on the incomes they earn and live in poverty. 
D) if given a choice, most people would prefer to make their own decisions concerning the things that affect their lives. 
E) they consider the total cost and the total benefit of various activities before they make a purchase. 
A) they usually wait until the last minute before making any decision. 
B) they weigh the additional costs and the additional benefits of various activities before they make a decision. 
C) most people just barely get by on the incomes they earn and live in poverty. 
D) if given a choice, most people would prefer to make their own decisions concerning the things that affect their lives. 
E) they consider the total cost and the total benefit of various activities before they make a purchase.

Question 9

A good economic theory _____

Accepted Answer

A) is based on value judgments. 
B) contains as much detail as possible. 
C) cannot be proven false. 
D) can be used to make predictions. 
E) can only be presented in mathematical terms. 
A) is based on value judgments. 
B) contains as much detail as possible. 
C) cannot be proven false. 
D) can be used to make predictions. 
E) can only be presented in mathematical terms.

Question 10

Economists believe that people respond in a predictable way to changes in costs and benefits.This is known as _____

Accepted Answer

A) opportunity cost. 
B) scarcity. 
C) innovation. 
D) marginal analysis. 
E) other things equal. 
A) opportunity cost. 
B) scarcity. 
C) innovation. 
D) marginal analysis. 
E) other things equal.

Question 11

The fact that people have unlimited wants means that _____

Accepted Answer

A) they always want more of at least one good. 
B) people always purchase the goods that cost the least. 
C) there is always an excess supply of necessary goods in the market. 
D) selfish people are not concerned about others. 
E) people do not behave rationally while making a choice. 
A) they always want more of at least one good. 
B) people always purchase the goods that cost the least. 
C) there is always an excess supply of necessary goods in the market. 
D) selfish people are not concerned about others. 
E) people do not behave rationally while making a choice.

Question 12

Scarcity _____

Accepted Answer

A) applies to a brain surgeon but not to a cab driver. 
B) is not a problem for politicians. 
C) exists only in rich countries. 
D) exists only in poor countries. 
E) exists to a greater or lesser extent for everybody. 
A) applies to a brain surgeon but not to a cab driver. 
B) is not a problem for politicians. 
C) exists only in rich countries. 
D) exists only in poor countries. 
E) exists to a greater or lesser extent for everybody.

Question 13

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

Accepted Answer

A) revenue. 
B) expenditures. 
C) products. 
D) income. 
E) resources. 
A) revenue. 
B) expenditures. 
C) products. 
D) income. 
E) resources.

Question 14

The determination of price and output in specific markets is studied in _____

Accepted Answer

A) econometrics. 
B) normative economics. 
C) positive economics. 
D) microeconomics. 
E) macroeconomics. 
A) econometrics. 
B) normative economics. 
C) positive economics. 
D) microeconomics. 
E) macroeconomics.

Question 15

The fallacy of _____ is the incorrect belief that what is true for the individual must necessarily be true for the group is known as _____

Accepted Answer

A) causation 
B) composition 
C) primary effects 
D) secondary effects 
E) behavioral assumptions 
A) causation 
B) composition 
C) primary effects 
D) secondary effects 
E) behavioral assumptions

Question 16

Because resources are scarce and wants are unlimited,_____

Accepted Answer

A) only the rich get everything they want. 
B) we must choose from among our many wants. 
C) there will be more services produced than goods. 
D) people search for spiritual fulfillment rather than material fulfillment. 
E) poor people never get anything they want. 
A) only the rich get everything they want. 
B) we must choose from among our many wants. 
C) there will be more services produced than goods. 
D) people search for spiritual fulfillment rather than material fulfillment. 
E) poor people never get anything they want.

Question 17

The difference between a good and a service is that _____

Accepted Answer

A) a good helps satisfy unlimited wants, but a service does not. 
B) a service helps satisfy unlimited wants, but a good does not. 
C) a service is available in unlimited quantities, but a good is not. 
D) a good is available in unlimited quantities, but a service is not. 
E) a good is tangible, but a service is not. 
A) a good helps satisfy unlimited wants, but a service does not. 
B) a service helps satisfy unlimited wants, but a good does not. 
C) a service is available in unlimited quantities, but a good is not. 
D) a good is available in unlimited quantities, but a service is not. 
E) a good is tangible, but a service is not.

Question 18

The expression "there's no such thing as a free lunch" means that _____

Accepted Answer

A) services may be free, but goods are never free. 
B) even if a good or service has a price of zero, it has a cost. 
C) charitable organizations should not serve free lunches to the poor. 
D) poor people are really the ones who pay for their allegedly free lunches. 
E) someone has to pay the market price for a good or service. 
A) services may be free, but goods are never free. 
B) even if a good or service has a price of zero, it has a cost. 
C) charitable organizations should not serve free lunches to the poor. 
D) poor people are really the ones who pay for their allegedly free lunches. 
E) someone has to pay the market price for a good or service.

Question 19

The ceteris paribus assumption is a behavioral assumption.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is an accurate list,in order,of the steps of the scientific method?

Accepted Answer

A) Define variables; state assumptions; form a hypothesis; test 
B) State assumptions; define variables; form a hypothesis; test 
C) Identify variables; state assumptions; test; form a hypothesis 
D) Identify variables; form a hypothesis; form behavioral assumptions; test 
E) Define assumptions; form behavioral assumptions; form hypothesis; test 
A) Define variables; state assumptions; form a hypothesis; test 
B) State assumptions; define variables; form a hypothesis; test 
C) Identify variables; state assumptions; test; form a hypothesis 
D) Identify variables; form a hypothesis; form behavioral assumptions; test 
E) Define assumptions; form behavioral assumptions; form hypothesis; test

Exam 1: The Art and Science of Economic Analysis

Most of the disagreement among economists involves normative debates.

Sources of confusion in economic analysis include _____

Economic fluctuations are also known as _____

An economic model that sometimes makes incorrect predictions can be used by economic decision makers _____

Your friend notices that U.S.auto production and U.S.population growth have moved together over several decades.He reasons that one way to slow population growth is for the government to order the auto makers to cut back on production.You gently point out to him that he _____

Economic theories _____

The primary behavioral assumption is _____

To say that people make decisions at the margin means that _____

A good economic theory _____

Economists believe that people respond in a predictable way to changes in costs and benefits.This is known as _____

The fact that people have unlimited wants means that _____

Scarcity _____

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

The determination of price and output in specific markets is studied in _____

The fallacy of _____ is the incorrect belief that what is true for the individual must necessarily be true for the group is known as _____

Because resources are scarce and wants are unlimited,_____

The difference between a good and a service is that _____

The expression "there's no such thing as a free lunch" means that _____

The ceteris paribus assumption is a behavioral assumption.

Which of the following is an accurate list,in order,of the steps of the scientific method?

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

The fallacy of _ is the incorrect belief that what is true for the individual must necessarily be true for the group is known as _