Question 1

A(n)_____ is a theory about how key variables relate to each other.

Accepted Answer

A) assumption 
B) prediction 
C) normative statement 
D) hypothesis 
E) positive statement 
A) assumption 
B) prediction 
C) normative statement 
D) hypothesis 
E) positive statement

Question 2

Unlike a service,a good _____

Accepted Answer

A) is desirable. 
B) uses resources to satisfy wants. 
C) is physical and tangible. 
D) is abundant and free. 
E) is a resource. 
A) is desirable. 
B) uses resources to satisfy wants. 
C) is physical and tangible. 
D) is abundant and free. 
E) is a resource.

Question 3

Economics is the only social science and the only business discipline for which the Nobel Prize is awarded.

Accepted Answer

A) True 
 B)False

Question 4

Economic theories are _____

Accepted Answer

A) useful because they are as precise as theories in the physical sciences. 
B) useless because they are based on abstractions. 
C) useful because they allow us to make predictions. 
D) complex to understand because they do not make assumptions. 
E) useful in predicting events only if their assumptions are realistic. 
A) useful because they are as precise as theories in the physical sciences. 
B) useless because they are based on abstractions. 
C) useful because they allow us to make predictions. 
D) complex to understand because they do not make assumptions. 
E) useful in predicting events only if their assumptions are realistic.

Question 5

Exhibit 1.2
  
-Refer to the circular-flow model in Exhibit 1.2.Households supply ________ to firms through resource markets.

Accepted Answer

A) goods and services 
B) products 
C) labor, capital, natural resources, and entrepreneurial ability 
D) resources 
E) wages, interest, rent, and profit 
A) goods and services 
B) products 
C) labor, capital, natural resources, and entrepreneurial ability 
D) resources 
E) wages, interest, rent, and profit

Question 6

Michigan has an abundant supply of fresh water.However,an economist would consider it a scarce resource because _____

Accepted Answer

A) water is necessary for human survival. 
B) pollution will eventually destroy all life in the Great Lakes. 
C) water is limited in supply relative to people's unlimited wants. 
D) water commands a very high price. 
E) the cost of supplying water is prohibitively high. 
A) water is necessary for human survival. 
B) pollution will eventually destroy all life in the Great Lakes. 
C) water is limited in supply relative to people's unlimited wants. 
D) water commands a very high price. 
E) the cost of supplying water is prohibitively high.

Question 7

Economic choice results from scarcity.

Accepted Answer

A) True 
 B)False

Question 8

Economics is best described as the _____

Accepted Answer

A) study of choice when scarcity exists. 
B) study of the development of human society. 
C) study of the composition and structure of matter. 
D) branch of science that uses the principles of sociology. 
E) branch of science that is based on value judgments. 
A) study of choice when scarcity exists. 
B) study of the development of human society. 
C) study of the composition and structure of matter. 
D) branch of science that uses the principles of sociology. 
E) branch of science that is based on value judgments.

Question 9

As a scientist,an economist's main professional objective is to become wealthy.

Accepted Answer

A) True 
 B)False

Question 10

Sara is considering the purchase of a new car.Rational self-interest demands that she do exhaustive research to acquire every bit of information possible about her potential options.

Accepted Answer

A) True 
 B)False

Question 11

Microeconomics is the study of _____

Accepted Answer

A) the effect of an increase in money supply on interest rates. 
B) the effect of an increase in interest rates on the level of investment in an economy. 
C) the government's role as a distributor in an economy. 
D) the economic behavior of individual decision makers. 
E) the government's role as a producer in an economy. 
A) the effect of an increase in money supply on interest rates. 
B) the effect of an increase in interest rates on the level of investment in an economy. 
C) the government's role as a distributor in an economy. 
D) the economic behavior of individual decision makers. 
E) the government's role as a producer in an economy.

Question 12

One might commit the fallacy of composition by concluding that _____

Accepted Answer

A) statements that are true during prosperity are not necessarily true during depression. 
B) what is good for the individual is necessarily good for the group. 
C) an event that precedes another is necessarily the cause of the latter. 
D) intentions need not coincide with actions. 
E) the composition of a complex product is not revealed by its exterior appearance. 
A) statements that are true during prosperity are not necessarily true during depression. 
B) what is good for the individual is necessarily good for the group. 
C) an event that precedes another is necessarily the cause of the latter. 
D) intentions need not coincide with actions. 
E) the composition of a complex product is not revealed by its exterior appearance.

Question 13

Table 1.1
​
 $$\begin{array} { | l | l | } 
\hline \text { Hours } & \text { Revenue } ( \$ ) \
\hline 1 & \$ 10 \
\hline 2 & \$ 20 \
\hline 3 & \$ 30 \
\hline 4 & \$ 40 \
\hline 5 & \$ 50 \
\hline
\end{array}$$ Sergio tutors students for $10 an hour.
-Refer to Table 1.1.Sergio hires an assistant for $5 per hour.What is his marginal cost if he tutors 5 hours a week and also pays his assistant?

Accepted Answer

A) $25 
B) $20 
C) $15 
D) $10 
E) $5 
A) $25 
B) $20 
C) $15 
D) $10 
E) $5

Question 14

Economists often focus on average behavior because it is easier to predict.

Accepted Answer

A) True 
 B)False

Question 15

Someone who commits the fallacy of composition is likely to assume that _____

Accepted Answer

A) the simplest model is the best predictor. 
B) event B, which followed event A, was caused by event A. 
C) event B, which followed event A, was not necessarily caused by event A. 
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) the simplest model is the best predictor. 
B) event B, which followed event A, was caused by event A. 
C) event B, which followed event A, was not necessarily caused by event A. 
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

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

Accepted Answer

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

Question 17

The assumption of rational self-interest does not rule out the possibility of concern for other individuals.

Accepted Answer

A) True 
 B)False

Question 18

When constructing an economic model,economists _____

Accepted Answer

A) rely mostly on their own value judgments and ignore the far more complex world of facts. 
B) always try to duplicate reality by including all available information. 
C) use assumptions that are true for the individual but never true for the whole economy. 
D) must rely on assumptions for the sake of simplification. 
E) are primarily concerned with making realistic assumptions. 
A) rely mostly on their own value judgments and ignore the far more complex world of facts. 
B) always try to duplicate reality by including all available information. 
C) use assumptions that are true for the individual but never true for the whole economy. 
D) must rely on assumptions for the sake of simplification. 
E) are primarily concerned with making realistic assumptions.

Question 19

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

Accepted Answer

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

Question 20

A marginal adjustment refers only to a minor change.

Accepted Answer

A) True 
 B)False

Exam 1: The Art and Science of Economic Analysis

A(n)_____ is a theory about how key variables relate to each other.

Unlike a service,a good _____

Economics is the only social science and the only business discipline for which the Nobel Prize is awarded.

Economic theories are _____

Exhibit 1.2 -Refer to the circular-flow model in Exhibit 1.2.Households supply ________ to firms through resource markets.

Michigan has an abundant supply of fresh water.However,an economist would consider it a scarce resource because _____

Economic choice results from scarcity.

Economics is best described as the _____

As a scientist,an economist's main professional objective is to become wealthy.

Sara is considering the purchase of a new car.Rational self-interest demands that she do exhaustive research to acquire every bit of information possible about her potential options.

Microeconomics is the study of _____

One might commit the fallacy of composition by concluding that _____

Table 1.1 ​ Hours Revenue (\ ) 1 \ 10 2 \ 20 3 \ 30 4 \ 40 5 \ 50 Sergio tutors students for $10 an hour. -Refer to Table 1.1.Sergio hires an assistant for $5 per hour.What is his marginal cost if he tutors 5 hours a week and also pays his assistant?

Economists often focus on average behavior because it is easier to predict.

Someone who commits the fallacy of composition is likely to assume that _____

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

The assumption of rational self-interest does not rule out the possibility of concern for other individuals.

When constructing an economic model,economists _____

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

A marginal adjustment refers only to a minor change.

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

Table 1.1 Hours Revenue (\ ) 1 \ 10 2 \ 20 3 \ 30 4 \ 40 5 \ 50 Sergio tutors students for $10 an hour. -Refer to Table 1.1.Sergio hires an assistant for $5 per hour.What is his marginal cost if he tutors 5 hours a week and also pays his assistant?