Question 1

An economic theory _____

Accepted Answer

A) distorts reality in all its complexity. 
B) is based on normative statements. 
C) focuses on the unique aspects of each situation. 
D) is a simplification of reality. 
E) bears no relation to reality. 
A) distorts reality in all its complexity. 
B) is based on normative statements. 
C) focuses on the unique aspects of each situation. 
D) is a simplification of reality. 
E) bears no relation to reality.

Question 2

"There should be less discrimination against the elderly." This is an example of a _____

Accepted Answer

A) normative statement. 
B) positive statement. 
C) forecast. 
D) theory. 
E) prediction. 
A) normative statement. 
B) positive statement. 
C) forecast. 
D) theory. 
E) prediction.

Question 3

As goods and services are scarce,_____

Accepted Answer

A) the opportunity cost is zero. 
B) people must choose among alternatives. 
C) all human wants can be satisfied. 
D) resource prices are fixed. 
E) commodities are free. 
A) the opportunity cost is zero. 
B) people must choose among alternatives. 
C) all human wants can be satisfied. 
D) resource prices are fixed. 
E) commodities are free.

Question 4

Considering both product markets and resource markets,most economic decision makers participate in the economy as both buyers and sellers.

Accepted Answer

A) True 
 B)False

Question 5

You currently subscribe to two magazines and are trying to decide whether you should subscribe to a third.What should determine your decision?

Accepted Answer

A) The total cost of the magazines 
B) The total amount of enjoyment 
C) The enjoyment you would get from the third magazine 
D) The cost of the third magazine including the time it takes to read it 
E) The cost of the third magazine compared to the additional enjoyment you would get from it 
A) The total cost of the magazines 
B) The total amount of enjoyment 
C) The enjoyment you would get from the third magazine 
D) The cost of the third magazine including the time it takes to read it 
E) The cost of the third magazine compared to the additional enjoyment you would get from it

Question 6

The assumption of rational self-interest is an example of a(n)_____

Accepted Answer

A) other-things-constant assumption. 
B) behavioral assumption. 
C) certainty. 
D) variable. 
E) incorrect decision. 
A) other-things-constant assumption. 
B) behavioral assumption. 
C) certainty. 
D) variable. 
E) incorrect decision.

Question 7

Given that consumers need time and information to make good choices,which of the following is correct?

Accepted Answer

A) Advertising is always harmful to consumers. 
B) Time and information are scarce and therefore valuable. 
C) Brand names offer no informational content. 
D) Acquiring more information is always rational. 
E) Marginal analysis does not apply to the acquisition of information. 
A) Advertising is always harmful to consumers. 
B) Time and information are scarce and therefore valuable. 
C) Brand names offer no informational content. 
D) Acquiring more information is always rational. 
E) Marginal analysis does not apply to the acquisition of information.

Question 8

Economists employ the scientific method to help explain economic behavior.In part,this means that _____

Accepted Answer

A) there is a single economic theory accepted by all economists. 
B) economic hypotheses are tested to determine their validity. 
C) all economic laws have been proven true by laboratory tests. 
D) personal values never enter into economic policy recommendations. 
E) assumptions are not necessary in economics. 
A) there is a single economic theory accepted by all economists. 
B) economic hypotheses are tested to determine their validity. 
C) all economic laws have been proven true by laboratory tests. 
D) personal values never enter into economic policy recommendations. 
E) assumptions are not necessary in economics.

Question 9

The labor market is an example of _____

Accepted Answer

A) the derivatives market. 
B) a market in which the natural forces of demand and supply do not operate. 
C) a market in which there is no scarcity. 
D) a resource market. 
E) a product market. 
A) the derivatives market. 
B) a market in which the natural forces of demand and supply do not operate. 
C) a market in which there is no scarcity. 
D) a resource market. 
E) a product market.

Question 10

Economics:

Accepted Answer

A) studies human behavior when scarcity exists and choices must be made. 
B) does not provide a reasonable explanation of how people make decisions. 
C) does not accurately explain any human behavior since it is based on the assumption of rationality. 
D) is better at showing the way things ought to be than other social sciences. 
E) is the only social science that can explain the existence and behavior of public institutions. 
A) studies human behavior when scarcity exists and choices must be made. 
B) does not provide a reasonable explanation of how people make decisions. 
C) does not accurately explain any human behavior since it is based on the assumption of rationality. 
D) is better at showing the way things ought to be than other social sciences. 
E) is the only social science that can explain the existence and behavior of public institutions.

Question 11

Economic models,such as the circular-flow model _____

Accepted Answer

A) distort reality in order to improve forecasting ability. 
B) predict phenomena without explaining them. 
C) explain phenomena without predicting them. 
D) include every detail and interrelation among variables that are being analyzed. 
E) capture the important elements of the problem under study. 
A) distort reality in order to improve forecasting ability. 
B) predict phenomena without explaining them. 
C) explain phenomena without predicting them. 
D) include every detail and interrelation among variables that are being analyzed. 
E) capture the important elements of the problem under study.

Question 12

Macroeconomics is the study of _____

Accepted Answer

A) the behavior of large firms in a market. 
B) the profit-maximizing behavior of producers. 
C) the behavior of the economy as a whole. 
D) how to use the least amount of natural resources to produce goods and services. 
E) utility-maximization by consumers. 
A) the behavior of large firms in a market. 
B) the profit-maximizing behavior of producers. 
C) the behavior of the economy as a whole. 
D) how to use the least amount of natural resources to produce goods and services. 
E) utility-maximization by consumers.

Question 13

Normative economic statements refer to what should be.

Accepted Answer

A) True 
 B)False

Question 14

One problem with rent control is that policymakers often ignore its secondary effects.

Accepted Answer

A) True 
 B)False

Question 15

Someone who committed the association-is-causation fallacy might conclude that _____

Accepted Answer

A) event B, which followed event A, was caused by event A. 
B) event B, which followed event A, was not necessarily caused by event A. 
C) the simplest model is the best predictor of economic outcomes. 
D) what is true for the individual is also true for the group. 
E) what is true for the individual is not necessarily true for the group. 
A) event B, which followed event A, was caused by event A. 
B) event B, which followed event A, was not necessarily caused by event A. 
C) the simplest model is the best predictor of economic outcomes. 
D) what is true for the individual is also true for the group. 
E) what is true for the individual is not necessarily true for the group.

Question 16

Elijah,a basketball fan,reasons that because his favorite team has three superstars on it,the team must be a great team and will win the championship.Elijah is committing the _____

Accepted Answer

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

Question 17

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

Accepted Answer

A) the association-is-causation fallacy. 
B) the fallacy of composition. 
C) a primary effect. 
D) a secondary effect. 
E) a behavioral assumption. 
A) the association-is-causation fallacy. 
B) the fallacy of composition. 
C) a primary effect. 
D) a secondary effect. 
E) a behavioral assumption.

Question 18

The fallacy of composition is the error of believing that a cause-and-effect relationship exists between two events that are associated in time.

Accepted Answer

A) True 
 B)False

Question 19

College graduates with history or literature as their major tend to earn more than those who choose more quantitative disciplines like economics.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is an example of physical capital?

Accepted Answer

A) the owner of a pizza shop 
B) bulldozers 
C) a college education 
D) carpentry skills 
E) money 
A) the owner of a pizza shop 
B) bulldozers 
C) a college education 
D) carpentry skills 
E) money

Exam 1: The Art and Science of Economic Analysis

An economic theory _____

"There should be less discrimination against the elderly." This is an example of a _____

As goods and services are scarce,_____

Considering both product markets and resource markets,most economic decision makers participate in the economy as both buyers and sellers.

You currently subscribe to two magazines and are trying to decide whether you should subscribe to a third.What should determine your decision?

The assumption of rational self-interest is an example of a(n)_____

Given that consumers need time and information to make good choices,which of the following is correct?

Economists employ the scientific method to help explain economic behavior.In part,this means that _____

The labor market is an example of _____

Economics:

Economic models,such as the circular-flow model _____

Macroeconomics is the study of _____

Normative economic statements refer to what should be.

One problem with rent control is that policymakers often ignore its secondary effects.

Someone who committed the association-is-causation fallacy might conclude that _____

Elijah,a basketball fan,reasons that because his favorite team has three superstars on it,the team must be a great team and will win the championship.Elijah is committing the _____

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

The fallacy of composition is the error of believing that a cause-and-effect relationship exists between two events that are associated in time.

College graduates with history or literature as their major tend to earn more than those who choose more quantitative disciplines like economics.

Which of the following is an example of 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