Question 1

Where do economic agents such as individuals, firms and nations, interact with each other?

Accepted Answer

A)  in public locations monitored by the government 
B)  in any arena that brings together buyers and sellers 
C)  in any physical location people where people can physically get together for selling goods, such as shopping malls 
D)  in any location where transactions can be monitored by consumer groups and taxed by the government 
A)  in public locations monitored by the government 
B)  in any arena that brings together buyers and sellers 
C)  in any physical location people where people can physically get together for selling goods, such as shopping malls 
D)  in any location where transactions can be monitored by consumer groups and taxed by the government

Question 2

Economics promotes which of the following as the way to make the best decision?

Accepted Answer

A)  Continue an enjoyable activity as long as you do not have to pay for it. 
B)  Continue an enjoyable activity until it is no longer enjoyable. 
C)  Continue an enjoyable activity until you cannot afford to pursue it. 
D)  Continue an enjoyable activity up to the point where its marginal benefit equals its marginal cost. 
A)  Continue an enjoyable activity as long as you do not have to pay for it. 
B)  Continue an enjoyable activity until it is no longer enjoyable. 
C)  Continue an enjoyable activity until you cannot afford to pursue it. 
D)  Continue an enjoyable activity up to the point where its marginal benefit equals its marginal cost.

Question 3

Which of the following is not an example of an efficiency-equity trade-off faced by economic agents?

Accepted Answer

A)  According to an article by in the American Journal of Public Health by Edward Kaplan and Michael Merson of Yale University School of Medicine, the federal government's current method of allocating HIV-prevention resources is not cost-effective. Instead of allocating resources to states in proportion to reported AIDS cases, resources should flow first to those activities that prevent more infections per dollar and then to less and less effective combinations of programs and populations until funds are exhausted, even if it means that some populations would be left without any prevention services. 
B)  Concerned about the falling birth rate, the French government has pledged more money for families with three children, in an effort to encourage working women to have more babies. 
C)  The growing demand for corn by ethanol producers has led to a surge in the price of tortillas, a staple in the Mexican diet. To quell public outcry over rising tortilla prices, the Mexican government released government corn stocks at prices well below the market, and pressured states to impose price ceilings on tortillas. 
D)  Some U.S. colleges cut back on merit scholarships since these programs siphon money from need-based programs, thus harming lower-income students with greater financial need. 
A)  According to an article by in the American Journal of Public Health by Edward Kaplan and Michael Merson of Yale University School of Medicine, the federal government's current method of allocating HIV-prevention resources is not cost-effective. Instead of allocating resources to states in proportion to reported AIDS cases, resources should flow first to those activities that prevent more infections per dollar and then to less and less effective combinations of programs and populations until funds are exhausted, even if it means that some populations would be left without any prevention services. 
B)  Concerned about the falling birth rate, the French government has pledged more money for families with three children, in an effort to encourage working women to have more babies. 
C)  The growing demand for corn by ethanol producers has led to a surge in the price of tortillas, a staple in the Mexican diet. To quell public outcry over rising tortilla prices, the Mexican government released government corn stocks at prices well below the market, and pressured states to impose price ceilings on tortillas. 
D)  Some U.S. colleges cut back on merit scholarships since these programs siphon money from need-based programs, thus harming lower-income students with greater financial need.

Question 4

A firm's technology may depend on which of the following factors?

Accepted Answer

A)  the skill of its managers 
B)  the training of its workers 
C)  the speed and efficiency of its equipment 
D)  all of the above 
A)  the skill of its managers 
B)  the training of its workers 
C)  the speed and efficiency of its equipment 
D)  all of the above

Question 5

List the five main factors of production.

Accepted Answer

The five main factors of produ

Question 6

When Dr. Goldfinger decides on the companies in which he will invest, a ________ issue is being addressed.

Accepted Answer

A)  microeconomic 
B)  macroeconomic 
C)  positive economic 
D)  normative economic 
A)  microeconomic 
B)  macroeconomic 
C)  positive economic 
D)  normative economic

Question 7

Figure 1-4  
-Refer to Figure 1-4. Which of the following statements is false?

Accepted Answer

A)  The slope of the tangent at E is positive. 
B)  The slope of the tangent at F is negative. 
C)  The slope of the tangent at E and the slope of the tangent at F are equal. 
D)  Neither the slope of the tangent at E nor the slope of the tangent at F are equal to zero. 
A)  The slope of the tangent at E is positive. 
B)  The slope of the tangent at F is negative. 
C)  The slope of the tangent at E and the slope of the tangent at F are equal. 
D)  Neither the slope of the tangent at E nor the slope of the tangent at F are equal to zero.

Question 8

Economists assume that rational people

Accepted Answer

A)  never use all available information as they act to achieve their goals. 
B)  undertake activities that benefit others and hurt themselves. 
C)  only weigh the benefits and costs of the most desirable alternative actions. 
D)  respond to economic incentives. 
A)  never use all available information as they act to achieve their goals. 
B)  undertake activities that benefit others and hurt themselves. 
C)  only weigh the benefits and costs of the most desirable alternative actions. 
D)  respond to economic incentives.

Question 9

Which of the following is motivated by an equity concern?

Accepted Answer

A)  Some U.S. colleges have cut back on merit scholarships since these programs siphon money from need-based programs, thus harming lower-income students with greater financial need. 
B)  Following the removal of subsidies in urban water use, household demand for water decreased quite significantly in Bogor, Indonesia. 
C)  In November 2003, the Federal Communications Commission implemented the "local number portability" rule which gives cell phone customers the option of keeping their number when they switch carriers within the same geographic region. 
D)  The United States protects intellectual property rights, allowing inventors to prevent others from using their inventions without payment. 
A)  Some U.S. colleges have cut back on merit scholarships since these programs siphon money from need-based programs, thus harming lower-income students with greater financial need. 
B)  Following the removal of subsidies in urban water use, household demand for water decreased quite significantly in Bogor, Indonesia. 
C)  In November 2003, the Federal Communications Commission implemented the "local number portability" rule which gives cell phone customers the option of keeping their number when they switch carriers within the same geographic region. 
D)  The United States protects intellectual property rights, allowing inventors to prevent others from using their inventions without payment.

Question 10

Article Summary
In an August 2013 speech from the Lincoln Memorial, President Obama was expected to emphasize that increased economic equality is needed to improve racial equality. Economic gaps based on race have endured for 50 years, with the differences in unemployment rates between blacks and whites remaining virtually unchanged and the gap in wealth actually increasing. "If you look at 50 years after the 1960s civil rights movement, the most stubborn and persistent challenge when it comes to the nation's racial challenge remains in the areas of economics and wealth," said Marc Morial, president of the National Urban League.
Source: Zachary A. Goldfarb, "For Obama, 50 years after historic march, economic equality the path to racial justice," Washington Post, August 17, 2013.
-Refer to the Article Summary. The article mentions increased economic equality is needed in terms of wealth, and for some people this means a more equitable distribution of wealth. What is meant by a more equitable distribution of wealth?

Accepted Answer

A)  a more allocatively efficient distribution of wealth 
B)  a more productively efficient distribution of wealth 
C)  a more fair distribution of wealth 
D)  wealth distributed based on income levels 
A)  a more allocatively efficient distribution of wealth 
B)  a more productively efficient distribution of wealth 
C)  a more fair distribution of wealth 
D)  wealth distributed based on income levels

Question 11

The basic economic problem of scarcity

Accepted Answer

A)  has always existed and will continue to exist. 
B)  will eventually disappear as technology continues to advance. 
C)  is a problem only in developing economies. 
D)  does not apply to the wealthy in society. 
A)  has always existed and will continue to exist. 
B)  will eventually disappear as technology continues to advance. 
C)  is a problem only in developing economies. 
D)  does not apply to the wealthy in society.

Question 12

The decision about what goods and services will be produced made in a market economy is made by

Accepted Answer

A)  lawmakers in the government voting on what will be produced. 
B)  workers deciding to produce only what the boss says must be produced. 
C)  producers deciding what society wants most. 
D)  consumers and firms choosing which goods and services to buy or produce. 
E)  consumers dictating to firms what they need most. 
A)  lawmakers in the government voting on what will be produced. 
B)  workers deciding to produce only what the boss says must be produced. 
C)  producers deciding what society wants most. 
D)  consumers and firms choosing which goods and services to buy or produce. 
E)  consumers dictating to firms what they need most.

Question 13

Which of the following is a positive economic statement?

Accepted Answer

A)  The standard of living in the United States is too low. 
B)  If the price of beef falls, a larger quantity of it will be bought. 
C)  The government should implement a national consumption tax. 
D)  The U.S. government should increase regulations on the banking industry. 
A)  The standard of living in the United States is too low. 
B)  If the price of beef falls, a larger quantity of it will be bought. 
C)  The government should implement a national consumption tax. 
D)  The U.S. government should increase regulations on the banking industry.

Question 14

________ is a problem that occurs when one concludes that a change in variable X caused a change in variable Y when in actual fact, it is a change in variable Y that caused a change in variable X.

Accepted Answer

A)  The omitted variable 
B)  The positive-to-negative relationship 
C)  Reverse causality 
D)  Nonlinear slope 
A)  The omitted variable 
B)  The positive-to-negative relationship 
C)  Reverse causality 
D)  Nonlinear slope

Question 15

What is an economic variable? Give an example of an economic variable.

Accepted Answer

An economic variable is someth

Question 16

The economic analysis of minimum wage involves both normative and positive analysis. Consider the following consequences of a minimum wage: a. The minimum wage law causes unemployment.
B. A minimum wage law benefits some groups and hurts others.
C. In some cities such as San Francisco and New York, it would be impossible for low-skilled workers to live in the city without minimum wage laws.
D. The gains to winners of a minimum wage law should be valued more highly than the losses to losers because the latter primarily comprises businesses.
Which of the consequences above are positive statements and which are normative statements?

Accepted Answer

A)  a, b, and c are positive statements; d is a normative statement. 
B)  a and b are positive statements; c and d are normative statements. 
C)  Only a is a positive statement; b, c and d are normative statements. 
D)  a and c are positive statements; b and d are normative statements. 
A)  a, b, and c are positive statements; d is a normative statement. 
B)  a and b are positive statements; c and d are normative statements. 
C)  Only a is a positive statement; b, c and d are normative statements. 
D)  a and c are positive statements; b and d are normative statements.

Question 17

Which of the following statements about positive economic analysis is true ?

Accepted Answer

A)  Positive analysis uses an economic model to estimate the costs and benefits of different course of actions. 
B)  There is much less disagreement among economists over normative economic analysis than over positive economic analysis. 
C)  There is much more disagreement among economists over positive economic analysis than over normative economic analysis. 
D)  Unlike positive economic analysis, normative economic analysis can be tested. 
A)  Positive analysis uses an economic model to estimate the costs and benefits of different course of actions. 
B)  There is much less disagreement among economists over normative economic analysis than over positive economic analysis. 
C)  There is much more disagreement among economists over positive economic analysis than over normative economic analysis. 
D)  Unlike positive economic analysis, normative economic analysis can be tested.

Question 18

Define microeconomics.

Accepted Answer

Microeconomics is the study of

Question 19

Optimal decisions are made at the point where marginal cost equals zero.

Accepted Answer

A) True 
 B)False

Question 20

Consider the following economic agents: a. the government
B. consumers
C. producers
Who, in a market economy, decides what goods and services will be produced with the scarce resources available in that economy?

Accepted Answer

A)  the government 
B)  producers 
C)  consumers 
D)  consumers and producers 
E)  the government, consumers and producers 
A)  the government 
B)  producers 
C)  consumers 
D)  consumers and producers 
E)  the government, consumers and producers

Exam 1: Economics: Foundations and Models

Where do economic agents such as individuals, firms and nations, interact with each other?

Economics promotes which of the following as the way to make the best decision?

Which of the following is not an example of an efficiency-equity trade-off faced by economic agents?

A firm's technology may depend on which of the following factors?

List the five main factors of production.

When Dr. Goldfinger decides on the companies in which he will invest, a ________ issue is being addressed.

Figure 1-4 -Refer to Figure 1-4. Which of the following statements is false?

Economists assume that rational people

Which of the following is motivated by an equity concern?

The basic economic problem of scarcity

The decision about what goods and services will be produced made in a market economy is made by

Which of the following is a positive economic statement?

________ is a problem that occurs when one concludes that a change in variable X caused a change in variable Y when in actual fact, it is a change in variable Y that caused a change in variable X.

What is an economic variable? Give an example of an economic variable.

Which of the following statements about positive economic analysis is true ?

Define microeconomics.

Optimal decisions are made at the point where marginal cost equals zero.

Consider the following economic agents: a. the government B. consumers C. producers Who, in a market economy, decides what goods and services will be produced with the scarce resources available in that economy?

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

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