Deck 1: Introduction

Question 1

Microeconomics studies the allocation of

A) decision makers.
B) scarce resources.
C) models.
D) unlimited resources.

Answer 1

B

Question 2

Who or what is responsible for bringing together scarce resources to produce most of the goods and services in the U.S.?

A) the U.S. government
B) the United Nations
C) the Federal Reserve Bank
D) markets and prices

Answer 2

D

Question 3

Microeconomics is often called

A) price theory.
B) decision science.
C) scarcity.
D) resource theory.

Answer 3

A

Question 4

Which choice below illustrates the tradeoff faced by surfboard manufacturers after Clark foam shut down in 2005,eliminating 80% of the world's foam blanks used to shape surfboards? The firms decide to

A) substitute foam blanks for balsa wood blanks as used in the 1940s.
B) advertise their new surfboard wax.
C) offer surf classes.
D) B and C

Question 5

Governments do not respond to prices.

Question 6

What links the decisions of consumers and firms in a market?

A) the government
B) prices
C) coordination officials
D) microeconomics

Question 7

The objective of creating a permit trading system for SO₂ (sulfur dioxide)is to

A) employ environmental protection agency (EPA) workers.
B) create a market in which one did not previously exist.
C) make annual company tax reporting more difficult.
D) increase the incidence of acid rain.

Question 8

A market

A) always involves the personal exchange of goods for money.
B) allows interactions between consumers and firms.
C) always takes place at a physical location.
D) has no influence on prices.

Question 9

The price of a good is

A) always equal to the cost of producing the good.
B) never affected by the number of buyers and sellers.
C) usually determined in a market.
D) None of the above.

Question 10

Under most circumstances,the application of taxes on goods will only affect who gets the goods.

Question 11

Society faces trade-offs because of

A) government regulations.
B) profit motive.
C) faceless bureaucrats.
D) scarcity.

Question 12

Most microeconomic models assume that decision makers wish to

A) make themselves as well off as possible.
B) act selfishly.
C) make others as well off as possible.
D) None of the above.

Question 13

A "twinkie tax" on fatty foods would aim to

A) reduce the consumption of fatty foods.
B) reduce the production of fatty foods.
C) raise tax revenues for other uses.
D) All of the above.

Question 14

The purpose of making assumptions in an economic model is to

A) force the model to yield the correct answer.
B) minimize the amount of work an economist must do.
C) simplify the model while keeping important details.
D) express the relationship mathematically.

Question 15

Which of the following is a fundamental topic addressed by microeconomics?

A) whether to extend unemployment insurance
B) determining how many new iPhones the Apple company should produce
C) the level of inflation in the country
D) the impact of interest rates on savings in the economy

Question 16

In the Soviet Union,which boasted about giving every worker a job,some workers were given the task of digging holes and filling them again.What function of microeconomic analysis did this policy address?

A) What goods/services to produce
B) How to produce the goods and services
C) Who gets the goods and services
D) A and B

Question 17

Economists tend to judge a model based upon

A) the reality of its assumptions.
B) the accuracy of its predictions.
C) its simplicity.
D) its complexity.

Question 18

Einstein was quoted saying "Everything should be made as simple as possible,but not simpler." When it comes to economic models this means that

A) models shouldn't be too complex.
B) models shouldn't be too simple.
C) models should have a level of abstraction appropriate to the topic investigated.
D) all of the above

Question 19

Most modern financial centers use computers to match buyers and sellers.This absence of personal contact contradicts the definition of a market.

Question 20

Explain how a market helps determine which goods and services will be produced,how to produce them,and who gets them.

Question 21

Normative analysis offers decision makers the most valuable information when choosing among alternatives.

Question 22

Microeconomic models are used to

A) make predictions.
B) explain real-life phenomena.
C) evaluate policy alternatives.
D) All of the above.

Question 23

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

A) Prices determine what goods and services are produced in a market economy.
B) The government of the Soviet Union determined the three fundamental questions of microeconomics (i.e., what is produced, how it is produced, who receives the product).
C) The production of goods and services should be determined by market prices.
D) A and B

Question 24

If a model fits reality but doesn't generate testable predictions,it is of little value to economists.

Question 25

Economists make simplifying assumptions to

A) understand extremely complex phenomenon.
B) build a model that is as close to the real world as possible.
C) focus on the variables that are important to an economic theory.
D) A and C

Question 26

Normative statements are easily debated whereas positive statements are simply rhetorical.

Question 27

If an important assumption is omitted from an economic model

A) the model's predictions will be accurate 50% of the time.
B) the model's predictions will be inaccurate.
C) the model will not predict anything.
D) the model will be rejected by other economists.

Question 28

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

A) Since this good is bad for you, you should not consume it.
B) This good has bad health effects.
C) If you consume this good, you will get sick.
D) People usually get sick after consuming this good.

Question 29

Economic modeling requires

A) mathematics.
B) logic.
C) calculus.
D) trigonometry.

Question 30

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

A) A higher price for a good causes people to want to buy less of that good.
B) A lower price for a good causes people to want to buy more of that good.
C) To make the good available to more people, a lower price should be set.
D) If you consume this good, you will be better off.

Question 31

Economic models are most often tested

A) using computer simulations.
B) using data from the distant past.
C) using data from the real world.
D) using logic alone.

Question 32

Economic policy of the government is often based on

A) microeconomic models.
B) educated guessing.
C) intuitive reasoning.
D) hints.

Question 33

Legislators argue that a minimum wage law is instituted to help poor people.Economists can attack the minimum wage law on two fronts.First,some argue that government should not help the poor.Second,some argue that minimum wage laws actually hurt the poor because it creates unemployment.Which argument is normative and which is positive?

Question 34

Which of the following is not considered an ingredient to an economic model?

A) Assumptions
B) Logic
C) Hypotheses
D) Experience

Question 35

Which of the statements below is/are normative?

A) Economists need to include more reality in their models.
B) Economists will use a model until it is refuted by someone.
C) Microeconomists study economic growth.
D) B and C

Question 36

Economists will use a model such as the law of demand

A) forever, ignoring all criticism.
B) until it is refuted by someone.
C) until the model produces the same results with added complexity.
D) until every microeconomic courses uses the model.

Question 37

If actual experience supports two competing theories,then both theories are proven to be true.

Question 38

Every economic model should include money as a variable.This statement is

A) true, because every transaction in the economy uses money.
B) true, because the federal reserve is very important.
C) false, because some transactions in the economy are accomplished without money.
D) false, because a model can get unnecessarily complex if it includes money.

Question 39

Economic models are most useful in

A) predicting changes in one variable due to a change in one or more other variables.
B) predicting the direction of the stock market.
C) explaining the future with the past.
D) generating untestable hypotheses.

Question 40

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

A) Since this good is bad for you, you should not consume it.
B) If this good is bad for you, you should not consume it.
C) If you consume this good, you will get sick.
D) None of the above.

Question 41

One million automobiles have a defect that could cause the car to explode; however,only one of those cars will actually explode.Nobody knows which one car it is.When the car does explode,the victim's family will sue the automaker for $1 million and win.The defect costs $2 per car to repair.What does economics predict about the automaker's decision to repair the defect?

Question 42

Economic models are only applicable to free-market countries.

A) False. Economic models are applicable wherever there is scarcity.
B) True. Economic models are applicable only when private citizens are free to make their own decisions.
C) False. Economic models are applicable in all countries with more than one million people, regardless of political structure.
D) True. Economic models are only applicable when government is small relative to the rest of the economy.

Question 43

Microeconomics can be used by governments to predict the impacts of a policy and suggest solutions to problems.

Question 44

The testing of economic models facilitates

A) proving a model is false.
B) proving a model is true.
C) proving that one person's opinion is morally incorrect.
D) proving that one society's legal structure is better than another country's.

Question 45

Individuals use microeconomic models to determine

A) their optimal consumption of beer given an increase in inflation.
B) their optimal amount of leisure.
C) whether or not to go to college given current student loan interest rates.
D) All of the above.

Question 46

A microeconomic model CANNOT be used to

A) evaluate the impact of a price change on a firm's revenue.
B) predict the impact of an increase in the minimum wage on unemployment.
C) evaluate the fairness of a proposal to nationalize health insurance.
D) evaluate the effect of an increase in stadium size on the price of a sport team's tickets.

Question 47

Economic models are only useful in analyzing government policy.

A) True, individuals are irrational and therefore economic models are useless.
B) False, economic models can be used to predict individual and firm behavior.
C) True, economists only model those questions for which they are hired.
D) False, economic models are not even useful in analyzing government policy.

Question 48

Firms do NOT use microeconomic models to

A) determine what inputs will be used for production.
B) determine whether they should advertise in the newspaper or on the radio.
C) strategically raise profits over competitors.
D) None of the above.

Question 49

Describe in words the anatomy of an economic model.

Question 50

Governments use microeconomic models to

A) predict the impact of a policy before adopting it.
B) consider the tradeoff between clean air and a high level of GDP.
C) determine the tradeoff between equity and efficiency.
D) All of the above.