Deck 1: The Role and Method of Economics

Question 1

What do all economic problems arise from?

A)scarcity
B)too little currency available in circulation
C)high unemployment rates
D)competition

Answer 1

scarcity

Question 2

Why is there scarcity?

A)because average costs may exceed average benefits
B)because human wants are limited
C)because theory dictates it
D)because our unlimited wants exceed our limited resources

Answer 2

because our unlimited wants exceed our limited resources

Question 3

What does economics primarily study?

A)how to interpret corporate balance sheets and income statements
B)how choices are made because of scarcity
C)how to make money in the stock market
D)how to operate a business

Answer 3

how choices are made because of scarcity

Question 4

What problem is caused when not all human wants can be satisfied with current resources and technology?

A)scarcity
B)normative economics
C)the fallacy of composition
D)ceteris paribus

Question 5

Which of the following statements about scarcity is the most accurate?

A)It occurs only in centrally planned economies.
B)It will likely be eliminated by technological progress.
C)It occurs if there are insufficient resources to provide for human wants.
D)It exists only in poor nations.

Question 6

What is economics primarily the study of?

A)how firms compete for profits in the marketplace
B)how limited resources are allocated to satisfy unlimited wants
C)how we deal with unemployed resources
D)how prices are set in the marketplace

Question 7

What does economics primarily explore?

A)how the government allocates its budget among competing political interests
B)how stock and bond prices fluctuate when there are changes in demand or supply
C)how goods and services are produced and distributed in a world with limited resources
D)how businesses market products under competitive conditions

Question 8

Why does the problem of scarcity exist?

A)because resources are limited relative to wants
B)because governments fail to intervene in the market place
C)because resources are unlimited relative to wants
D)because the world has many poor people

Question 9

What do economists mean when they say goods are scarce?

A)Government programs are needed to lift families out of poverty.
B)At the current price, consumers are willing to buy more of a good than suppliers are willing to produce.
C)Consumers do not have enough money to purchase the goods.
D)The desire for goods and services exceeds our ability to produce them with limited resources.

Question 10

What causes scarcity?

A)the allocation of goods by prices
B)specialization and division of labour
C)unlimited wants and limited resources
D)the market mechanism

Question 11

According to most economists,what is the fundamental economic problem?

A)unemployment
B)government intervention into markets
C)poverty
D)scarcity

Question 12

Which of the following statements best describes scarcity?

A)There will always be families living below the poverty line.
B)Human wants are limited.
C)Limited resources cannot satisfy all of our unlimited human wants.
D)Resources are unlimited.

Question 13

What is the central concern of economics?

A)how to regulate the supply of money
B)how to reduce the wants of individuals, businesses, and government
C)how to find more resources to satisfy everyone's wants
D)how to make the best use of scarce resources to satisfy our unlimited wants

Question 14

What is economics most concerned with?

A)how to reduce inflation
B)how to profit from trading in the stock market
C)studying how we allocate scarce resources to satisfy unlimited wants
D)government taxation and spending

Question 15

What do economists mean when they state that a good is scarce?

A)People will want to buy more of the good regardless of price.
B)It is impossible to expand the availability of the good.
C)Our wants exceed our limited resources.
D)There is a shortage of the good at a sale price.

Question 16

What is economics the study of?

A)how people deal with limited human wants
B)how people cope with fluctuations in stock prices
C)how people deal with greed
D)how people cope with limited resources

Question 17

Which of the following statements about scarcity is the most accurate?

A)It is a problem that solely exits in the developing world.
B)It is only a problem in centrally planned economies.
C)It is a problem that necessitates making choices and trade-offs.
D)It is only a problem in modern industrialized economies.

Question 18

As defined by an economist,what does the word scarcity mean?

A)Consumers are too poor to purchase the available goods and services.
B)Demand exceeds supply at the current market price.
C)The desire for goods exceeds our ability to produce them with limited available resources.
D)Supply exceeds demand at the current market price.

Question 19

Which of the following statements best describes the problem of scarcity?

A)Scarcity means that shortages occur at the existing market price.
B)It is impossible to satisfy unlimited human wants with limited resources.
C)When there is scarcity, individuals do not face trade-offs.
D)As a result of scarcity, individuals do not have the ability to make choices.

Question 20

What does scarcity result from?

A)government decision making
B)positive economics
C)wants that exceed the resources necessary to provide them
D)inappropriate normative judgments

Question 21

Which of the following statements best describes the study of scarcity?

A)using limited resources in order to best satisfy our unlimited desires
B)using limited resources in order to promote full employment and price stability
C)using unlimited resources in order to promote full employment and price stability
D)using unlimited resources in order to best satisfy our unlimited desires

Question 22

What is the term for the branch of economics that studies the decisions made by individual firms and consumers?

A)microeconomics
B)normative economics
C)macroeconomics
D)positive economics

Question 23

Which of the following most accurately describes a "scarce" good?

A)a good for which available resources are insufficient to satisfy unlimited human desires for it
B)a good that is always in demand at any price
C)a good for which there is a shortage at the current market price
D)a good for which it is impossible to increase production any further given the available resources and technology

Question 24

What is the solution to solving the fundamental economic problem?

A)to allocate limited resources among competing uses
B)to guarantee everyone on the planet a minimum level of food, shelter, and clean water
C)to eliminate poverty in the developing world
D)to increase the amount of leisure time available to people

Question 25

Which of the following statements about economics is the most accurate?

A)It concerns itself only with monetary decisions.
B)It says very little about "everyday life."
C)It is a narrowly focused discipline.
D)It is a broad-ranging, problem-solving discipline.

Question 26

What two main branches of study can economics be divided into?

A)capitalism and communism
B)microeconomics and macroeconomics
C)demand and supply
D)capitalism and socialism

Question 27

What type of science do most people consider economics to be?

A)a social science
B)an accounting science
C)a physical science
D)an earth science

Question 28

Which of following statements about economics is the most accurate?

A)It explores how choices are made between conflicting wants and desires in a world of scarcity.
B)It relies entirely upon normative analysis.
C)It typically uses controlled experiments to learn about consumer and firm behaviour.
D)It uses models that cannot be tested empirically due to the complex nature of the economy.

Question 29

Who makes economic decisions?

A)They are only made by government leaders.
B)They are made in both the private and public sectors.
C)They are only made where monetary exchanges take place.
D)They are only made at the management level of corporations.

Question 30

Which topic does macroeconomics usually NOT include?

A)the rate of unemployment
B)the rate of inflation
C)the profit maximizing decisions of an individual manufacturer
D)economic growth

Question 31

Which of the following lies primarily within the realm of microeconomics?

A)an economic model forecasting the impact of a tax increase on consumer spending and national output
B)a model forecasting the impact of a change in interest rates on the level of investment in the economy
C)an empirical analysis of the relationship between the growth of the money supply and the rate of inflation
D)a study of supply and demand conditions in the market for orange juice

Question 32

Which of the following statements most likely lies within the realm of macroeconomics?

A)Due to process innovations in computer chip manufacturing, the market supply of computers increased.
B)Due to an economic recession, manufacturing firms began implementing layoffs of their workforces.
C)An increase in the price of automobiles will lead to a decrease in the quantity of automobiles demanded.
D)Anticipating that the benefits would outweigh costs involved, an undergraduate student purchases the course textbook.

Question 33

What is the primary concern of economics?

A)studying limited desires in the face of unlimited resources
B)studying problems such as poverty and unemployment
C)studying production and distribution of goods in a world of unlimited resources
D)studying production and distribution of goods in a world of limited resources

Question 34

Which of the following would be studied in a microeconomics course?

A)how the economy's total output is measured
B)the amount of unemployment in Canada
C)the production decisions made by individual firms
D)the effect of a recession on the economy

Question 35

What question is economics fundamentally concerned with?

A)How can limited wants be used to satisfy limited resources?
B)How are limited resources allocated to satisfy unlimited wants?
C)How are scarce resources allocated to satisfy limited wants?
D)How are limited resources allocated to satisfy scarce wants?

Question 36

What is the basic difference between macroeconomics and microeconomics?

A)Microeconomics explores the causes of inflation, while macroeconomics focuses on the causes of unemployment.
B)Microeconomics concentrates on the behaviour of individual consumers, while macroeconomics focuses on the behaviour of firms.
C)Microeconomics concentrates on the behaviour of individual consumers and firms, while macroeconomics focuses on the performance of the entire economy.
D)Microeconomics concentrates on individual markets, while macroeconomics focuses primarily on international trade.

Question 37

Which of the following statements most likely lies within the realm of microeconomics?

A)An increase in government spending will increase the aggregate demand for goods and services in the economy.
B)An increase in labour costs will increase the cost of producing another airplane.
C)Unemployment rises during a recession and falls during an expansion.
D)A rapid acceleration of the supply of money may create inflation.

Question 38

Which of the following is most likely a topic of discussion in macroeconomics?

A)an increase in the price of food
B)a decrease in the production of DVD players by a consumer electronics company
C)a decrease in the unemployment rate
D)an increase in the wage rate paid to automobile workers

Question 39

Which of the following statements about economics is the most accurate?

A)It is concerned with predicting business conditions in the future, not with the current state of the stock market.
B)It is a natural science like biology and chemistry.
C)It is composed of two main branches known as positive and normative economics.
D)It is a science concerned with reaching generalizations about human behaviour, not unlike sociology or psychology.

Question 40

What is the term for the branch of economics that studies the aggregate decisions of all households and all firms?

A)normative economics
B)microeconomics
C)positive economics
D)macroeconomics

Question 41

How do microeconomics and macroeconomics differ?

A)Microeconomics is concerned with consumer behaviour, while macroeconomics is concerned with firm behaviour.
B)Microeconomics utilizes positive economic analysis, while macroeconomics utilizes normative economic analysis.
C)Microeconomics studies aggregate decision making, while macroeconomics examines individual decision making.
D)Microeconomics studies individual decision making, while macroeconomics examines aggregate decision making.

Question 42

Which topic does microeconomics NOT usually include?

A)the determinants of the demand for DVD players by consumers
B)the impact of large government budget deficits on private investment spending
C)the regulation of monopoly firms
D)the determinants of the supply of wheat by farmers

Question 43

What is the basis of a good economic theory?

A)It explains economic behaviour and predicts well.
B)It rests on assumptions.
C)It always provides a highly detailed analysis of an economic sector.
D)It can best be expressed mathematically.

Question 44

Which of the following statements about microeconomics is the most accurate?

A)It is a "positive" science, whereas macroeconomics is a "normative" science.
B)It provides an overall view of the economy and how it functions.
C)It explores the behaviour of individual consumers and firms when confronted with scarcity.
D)It examines the aggregate behaviour of consumers and firms when confronted with scarcity.

Question 45

How is an economic hypothesis tested?

A)by comparing the hypothesis's prediction to real-world data
B)by using a controlled experiment
C)by assessing the realism of its assumptions
D)by assessing the level of descriptive detail

Question 46

What is the basis of a good economic theory?

A)It relies on simplifying assumptions in order to explain economic behaviour.
B)It does not rely on simplifying assumptions.
C)It includes every detail that affects the economic behaviour of interest.
D)It relies on conducting uncontrolled experiments.

Question 47

Which topic does macroeconomics NOT generally include?

A)government spending and taxation
B)aggregate demand
C)the production decisions of individual firms
D)inflation

Question 48

What is the basic difference between macroeconomics and microeconomics?

A)Microeconomics is concerned with the trees (individual markets), while macroeconomics is concerned with the forest (aggregate markets).
B)Macroeconomics is concerned with positive economics, while microeconomics is concerned with normative economics.
C)Macroeconomics is concerned with policy decisions, while microeconomics applies only to theory.
D)Microeconomics looks at the forest (aggregate markets), while macroeconomics is concerned with the trees (individual markets).

Question 49

What does microeconomics primarily examine?

A)the behaviour of firms and how they interact with each other in the marketplace
B)the overall economy, especially fiscal and monetary policy
C)the behaviour of households but not firms
D)the behaviour of both firms and households and how they interact in the marketplace

Question 50

Which of the following lies primarily within the realm of macroeconomics?

A)a study of the elasticity of demand for gasoline
B)a study of how tax cuts stimulate aggregate production
C)a study of the impact of "mad cow" disease on the price of beef worldwide
D)an analysis of supply and demand conditions in the electricity market

Question 51

Which of the following is most likely a topic of discussion in a microeconomics course?

A)an increase in the rate of inflation
B)an increase in the number of jobless individuals filing employment insurance claims
C)an increase in the price of lumber used to construct houses
D)a decrease in the share of national income paid to the government in taxes

Question 52

Which of the following statements most accurately describes the concept of economic theory?

A)It should be as detailed as possible in order to model the complexity of an economy.
B)It is an abstraction from reality.
C)It is only useful if it rests on realistic assumptions.
D)It is unrealistic and therefore of questionable usefulness in explaining what occurs in a complex economy.

Question 53

What is the term for the branch of economics that studies the economy as a whole?

A)positive economics
B)microeconomics
C)normative economics
D)macroeconomics

Question 54

Which of the following best describes macroeconomics?

A)It is narrower in scope than microeconomics.
B)It is concerned with the expansion of a small sole proprietorship into a large corporation.
C)It is concerned with the expansion and contraction of the overall economy.
D)It analyzes mergers and acquisitions between firms.

Question 55

What area of economic study is most concerned with the determination of prices in the market for automobiles?

A)microeconomics
B)normative economics
C)macroeconomics
D)positive economics

Question 56

What is the term for the branch of economics that focuses on the conduct of affairs within narrowly defined units,such as households or business firms?

A)macroeconomics
B)applied economics
C)socioeconomics
D)microeconomics

Question 57

What does macroeconomics primarily examine?

A)broad issues such as national output, employment, and inflation
B)how prices are determined within individual markets
C)the behaviour of individual households and firms
D)the output levels that maximize the profits of business firms

Question 58

Which area of study is most concerned with measuring the rate of inflation?

A)macroeconomics
B)microeconomics
C)normative economics
D)positive economics

Question 59

What is the term for the branch of economics that focuses on outcomes in highly aggregated markets,such as the markets for labour or consumer products?

A)normative economics
B)macroeconomics
C)Marxian economics
D)positive economics

Question 60

What topic does microeconomics NOT usually include?

A)how firms choose output to maximize profits
B)how consumers maximize utility subject to a budget constraint
C)how wages are determined in the labour market
D)how national income is calculated

Question 61

Why is the ceteris paribus assumption important?

A)It allows one to separate normative economic issues from positive economic ones.
B)It allows one to analyze the relationship between two variables apart from the influence of other variables.
C)It allows one to hold all variables constant so the economy can be carefully observed in a suspended state.
D)It allows one to generalize from the whole to the individual.

Question 62

Why do economists need to develop abstractions?

A)to avoid analyzing real-world economic interactions, which are too complicated to understand
B)to understand and explain economic behaviour
C)to avoid committing the fallacy of composition
D)to distinguish normative economic behaviour from positive economic behaviour

Question 63

An economist might hypothesize that people will buy less gasoline at a price of $1.20 per litre than at $1.00 per litre.In order for the hypothesis to become a theory,it would have to be tested.Which of the following observations would seem to support this hypothesis?

A)Individuals buy less gas because they are purchasing more fuel-efficient vehicles.
B)Gasoline consumption varies with the quantity of cars purchased in each region.
C)Individuals in each region respond to an increase in price by purchasing less gasoline.
D)People in each region buy the same amount of gasoline regardless of the price.

Question 64

How does an economist define a good economic theory?

A)an abstraction from reality useful for explaining but not predicting behaviour (since theories are too simplistic)
B)an opinion that can be tested against economic data
C)an abstraction for the sake of argument
D)a statement or relationship that is used to explain and predict human behaviour

Question 65

What do economists use the term "ceteris paribus" to indicate?

A)Supply and demand are in balance.
B)Their conclusions are based on normative rather than positive economic analysis.
C)Other things are assumed to remain constant.
D)The analysis is true for the individual but not for the economy as a whole.

Question 66

What is the definition of a theory?

A)It is an untestable assertion or statement of untestable fact.
B)It is a normative statement that can be tested empirically through analysis of real-world data.
C)It is a testable statement that can be definitively proven to be true or false using empirical analysis.
D)It is a deliberate simplification of factual relationships that attempts to explain and predict how those relationships work.

Question 67

What does the term "ceteris paribus" mean when used by an economist?

A)Their conclusions are based on normative rather than positive economic analysis.
B)The causal relationship between two economic variables cannot be determined.
C)The analysis is true for the individual but not for the economy as a whole.
D)All other variables except the ones specified are assumed to be constant.

Question 68

What is a hypothesis?

A)It is a normative economic statement.
B)It is a testable proposition.
C)It is a statement that cannot be evaluated using real-world data.
D)It is a model with no connection to the real world.

Question 69

Which of the following statements about testing an economic hypothesis is the most accurate?

A)It can be tested using empirical analysis.
B)It can be tested using normative analysis.
C)It cannot be tested since it is normative in nature.
D)It cannot be tested since it is a positive economic statement.

Question 70

What is the difference between a theory and a hypothesis?

A)A hypothesis is a testable proposition and is tentatively accepted as a theory.
B)A hypothesis abstracts from reality while a theory describes reality.
C)A theory is not an established explanation but a hypothesis is.
D)A theory abstracts from reality while a hypothesis describes reality.

Question 71

Which of the following statements describing the relationship between theory and hypothesis is most accurate?

A)A hypothesis is a theory whose formulation relies on mathematics.
B)A theory may result from a tested and confirmed hypothesis.
C)"Theory" and "hypothesis" are interchangeable terms meaning the same thing.
D)A hypothesis may result from a tested and confirmed theory.

Question 72

An economist at the University of Alberta in Edmonton has been asked to explain why the price of Albertan crude oil has fallen recently.Which steps should the professor take in order to assemble a scholarly answer?

A)Develop a hypothesis, test the proposition by engaging in empirical analysis, and examine the data to see if it fits with the facts.
B)Gather data on crude oil prices and seemingly unrelated variables in order to look for associations, then formulate a hypothesis based on those unexpected associations.
C)The oil industry is controlled by a cartel and the economist should gather data from other similarly structured industries to determine a theory.
D)Use a questionnaire to determine why residents of Alberta are not purchasing oil and create a theory based on this data.

Question 73

On what basis is the best test of an economic theory?

A)on the accuracy of its assumptions
B)on the rigour of its mathematical formulation
C)on the ability of it to explain and predict
D)on the level of real-world detail it captures

Question 74

Which of the following is NOT a reason that economists use theories?

A)to explain and help predict human behaviour
B)to understand economic behaviour
C)to develop a testable hypothesis
D)to abstract from the complexities of the world

Question 75

Which of the following describes the chain of events involved in creating a theory?

A)Gather data, evaluate results, tentatively accept the theory, and support or refute the hypothesis.
B)Select a theory, create a hypothesis, and evaluate the evidence.
C)Formulate a hypothesis, gather data, evaluate the results, support or refute the hypothesis, and tentatively accept theory.
D)Predict behaviour, evaluate the results, and formulate a hypothesis.

Question 76

Why is economics different from a "hard" science like physics?

A)Economists cannot easily control all the variables that might influence human behaviour.
B)Economists have to control fewer variables than what is found in a physics experiment.
C)Economic experiments are easier to conduct than those in physics.
D)Economists abstract from reality in creating their theories.

Question 77

A theory asserts that manufacturers are less willing to sell units of output as the price of goods decreases.However,as the price of computers fell throughout the 1990s,more computers were sold.Which of the following explanations of the apparent conflict between theory and data is most accurate?

A)It is likely that variables other than the price and quantity of computers sold were changing.
B)The theory must be invalid.
C)The theory rests on assumptions that are too simplistic.
D)All variables other than the price and quantity of computers sold were unchanged.

Question 78

What does "ceteris paribus" mean?

A)If events A and B occur together, one must cause the other.
B)Other things are held constant.
C)What is true for the individual must be true for the whole.
D)All relevant details are included.

Question 79

What does the term "ceteris paribus" mean?

A)Everything is variable.
B)What is true for the individual is not necessarily true for the whole.
C)All variables except those specified are constant.
D)No one knows which variables will change and which will remain constant.

Question 80

How is an economic theory tested?

A)by assessing the realism of its assumptions
B)by comparing and contrasting its simplicity with related theories
C)by comparing its predictions with real-world observations
D)by polling economists to see if there is consensus as to the validity of the hypothesis