Question 1

To say that people make marginal decisions means that

Accepted Answer

A)  they usually wait until the last minute before making a decision to buy 
B)  they weigh the additional costs and additional benefits of various activities before they make a decision 
C)  most people just barely get by on the incomes they earn and live from day to day on the very edge of subsistence 
D)  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 benefit of various activities before they make a purchase 
A)  they usually wait until the last minute before making a decision to buy 
B)  they weigh the additional costs and additional benefits of various activities before they make a decision 
C)  most people just barely get by on the incomes they earn and live from day to day on the very edge of subsistence 
D)  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 benefit of various activities before they make a purchase B

Question 2

Rational economic decision makers will make a change only if

Accepted Answer

A)  the change is free of risk 
B)  there are no costs involved 
C)  their expectations are correct 
D)  there is no uncertainty about the results of the change 
E)  the expected marginal benefit exceeds expected marginal cost 
A)  the change is free of risk 
B)  there are no costs involved 
C)  their expectations are correct 
D)  there is no uncertainty about the results of the change 
E)  the expected marginal benefit exceeds expected marginal cost E

Question 3

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 how individuals are expected to behave 
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 how individuals are expected to behave E

Question 4

A good economic theory

Accepted Answer

A)  has realistic assumptions 
B)  contains as much detail as possible 
C)  cannot be proven false 
D)  predicts well 
E)  can only be presented in mathematical terms 
A)  has realistic assumptions 
B)  contains as much detail as possible 
C)  cannot be proven false 
D)  predicts well 
E)  can only be presented in mathematical terms

Question 5

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 6

A marginal adjustment only refers to a minor change.

Accepted Answer

A) True 
 B)False

Question 7

Economics is the study of

Accepted Answer

A)  how to get rich by playing the stock market 
B)  the best ways to reduce people's wants, given the scarcity of resources 
C)  how rational government officials determine what goods should be produced 
D)  money and why it is good 
E)  how people use limited resources to try to satisfy unlimited wants 
A)  how to get rich by playing the stock market 
B)  the best ways to reduce people's wants, given the scarcity of resources 
C)  how rational government officials determine what goods should be produced 
D)  money and why it is good 
E)  how people use limited resources to try to satisfy unlimited wants

Question 8

"Natural resources" refers to

Accepted Answer

A)  bodies of water 
B)  trees 
C)  oil reserves 
D)  minerals 
E)  All of the answers are correct. 
A)  bodies of water 
B)  trees 
C)  oil reserves 
D)  minerals 
E)  All of the answers are correct.

Question 9

Which of the following is the best definition of economics?

Accepted Answer

A)  An investigation of the quantities and prices of the various goods produced by the nations of the world. 
B)  A study of why inflation and unemployment periodically plague the U.S. economy. 
C)  An analysis of how individuals and societies deal with the problem of scarcity. 
D)  An examination of the role that money plays in the economy. 
E)  A study of how goods and services are distributed throughout the world. 
A)  An investigation of the quantities and prices of the various goods produced by the nations of the world. 
B)  A study of why inflation and unemployment periodically plague the U.S. economy. 
C)  An analysis of how individuals and societies deal with the problem of scarcity. 
D)  An examination of the role that money plays in the economy. 
E)  A study of how goods and services are distributed throughout the world.

Question 10

When economic choice involves an adjustment to an existing situation, marginal analysis

Accepted Answer

A)  has no practical applications or real-world uses 
B)  eliminates incorrect decisions and bad choices 
C)  involves comparing the additional costs and additional benefits of an activity before deciding 
D)  involves examining only the total costs and total benefits of an activity before deciding 
E)  none of the above 
A)  has no practical applications or real-world uses 
B)  eliminates incorrect decisions and bad choices 
C)  involves comparing the additional costs and additional benefits of an activity before deciding 
D)  involves examining only the total costs and total benefits of an activity before deciding 
E)  none of the above

Question 11

Which of the following is a service?

Accepted Answer

A)  anything that is scarce and that satisfies unlimited human wants 
B)  a thing for which people pay money 
C)  an intangible activity that satisfies human wants 
D)  any output produced by a service-sector industry, such as fast food 
E)  something less desirable than a good 
A)  anything that is scarce and that satisfies unlimited human wants 
B)  a thing for which people pay money 
C)  an intangible activity that satisfies human wants 
D)  any output produced by a service-sector industry, such as fast food 
E)  something less desirable than a good

Question 12

Which of the following is an example of capital?

Accepted Answer

A)  pizza ovens 
B)  bulldozers 
C)  a college education 
D)  carpentry skills 
E)  all of the above 
A)  pizza ovens 
B)  bulldozers 
C)  a college education 
D)  carpentry skills 
E)  all of the above

Question 13

Which of the following is an example of a normative statement?

Accepted Answer

A)  The moon is made of green cheese. 
B)  Women should earn the same income as men. 
C)  When the price of a good rises, people will buy more of it. 
D)  The more time you spend studying, the higher your economics test scores will be. 
E)  The more time you spend studying for chemistry, the higher your economics test score will be. 
A)  The moon is made of green cheese. 
B)  Women should earn the same income as men. 
C)  When the price of a good rises, people will buy more of it. 
D)  The more time you spend studying, the higher your economics test scores will be. 
E)  The more time you spend studying for chemistry, the higher your economics test score will be.

Question 14

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 15

Environmentalists continually argue for the use of alternatives to fossil fuels for generating energy. For example, harnessing wind by creating wind farms has been one alternative proposed and implemented. When it is found that these wind farms lead to the slicing and dicing of migratory birds and the decimation of local bat populations, we could say that environmentalists have committed the

Accepted Answer

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

Question 16

The difference between a good and a service is that

Accepted Answer

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

Question 17

Resources are divided into the following broad categories:

Accepted Answer

A)  people, money, and machines 
B)  saving, spending, investment, and capital 
C)  human, technological, and government 
D)  natural resources, labor, capital, and entrepreneurial ability 
E)  free, scarce, abundant, and unlimited 
A)  people, money, and machines 
B)  saving, spending, investment, and capital 
C)  human, technological, and government 
D)  natural resources, labor, capital, and entrepreneurial ability 
E)  free, scarce, abundant, and unlimited

Question 18

A rational individual would make charitable contributions only if such contributions receive favorable tax treatment.

Accepted Answer

A) True 
 B)False

Question 19

Economics studies how decision makers use scarce resources to satisfy unlimited wants.

Accepted Answer

A) True 
 B)False

Question 20

Economics employs a scientific methodology. In part, this means that

Accepted Answer

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

Exam 1: The Art and Science of Economic Analysis

To say that people make marginal decisions means that

Rational economic decision makers will make a change only if

Behavioral assumptions

A good economic theory

Unlike a "service," a "good"

A marginal adjustment only refers to a minor change.

Economics is the study of

"Natural resources" refers to

Which of the following is the best definition of economics?

When economic choice involves an adjustment to an existing situation, marginal analysis

Which of the following is a service?

Which of the following is an example of capital?

Which of the following is an example of a normative statement?

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

The difference between a good and a service is that

Resources are divided into the following broad categories:

A rational individual would make charitable contributions only if such contributions receive favorable tax treatment.

Economics studies how decision makers use scarce resources to satisfy unlimited wants.

Economics employs a scientific methodology. In part, this means that

Appendix: Understanding Graphs

Economic Tools and Economics Systems

Economic Decision Makers

Demand, Supply, and Markets

Elasticity of Demand and Supply

Consumer Choice and Demand

Production and Cost in the Firm

A: Perfect Competition

B: Perfect Competition

A: Monopoly

B: Monopoly

Monopolistic Competition and Oligopoly

Resource Markets

Labor Markets and Labor Unions

Capital, Interest, and Corporate Finance

Transaction Costs, Imperfect Information, and Behavioral Economics

Economic Regulation and Antitrust Policy

Public Goods and Public Choice

Externalities and the Environment

Income Distribution and Poverty

International Trade

International Finance

Economic Development

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