Question 1

Which expression below matches most closely the way economists go about testing their models?

Accepted Answer

A) "Consistency is the hobgoblin of small minds." 
B) "Seeing the results is the only way to know if you are right." 
C) "A bird in the hand is worth two in the bush." 
D) "In the long run we are all dead."

Question 2

The study of the aggregate economic variables is

Accepted Answer

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

Question 3

Analysis that is limited to making either purely descriptive statements or scientific predictions is

Accepted Answer

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

Question 4

Which of the following is a behavioral implication of bounded rationality?

Accepted Answer

A) unbounded selfishness 
B) a rule of thumb 
C) a rational mistake 
D) a nervous breakdown

Question 5

Given a linear curve, the value on the y-axis changes from 100 to 120 when the value on the x-axis changes from 20 to 10, then the slope of that curve is

Accepted Answer

A) -20. 
B) +20. 
C) -2. 
D) +2.

Question 6

The assumption that people do not intentionally make decisions that would leave them worse off is known as

Accepted Answer

A) the rationality assumption. 
B) the microeconomic assumption. 
C) the ceteris paribus assumption. 
D) the normative assumption.

Question 7

What assumption about human motivation is made in economics? Explain.

Accepted Answer

The answer of What assumption about human motivation is made...

Question 8

Economics

Accepted Answer

A) is a social science. 
B) is concerned with limited resources. 
C) is concerned with unlimited wants. 
D) All of the above are correct.

Question 9

In order to study how changing price affects consumer decisions, we must assume all other factors, such as income and the prices of other goods are constant. This assumption is best know as

Accepted Answer

A) rationality. 
B) ceteris paribus. 
C) normative economics. 
D) behavioral economics.

Question 10

Jose is rational if he

Accepted Answer

A) does not intentionally make decisions that would leave him worse off. 
B) never makes a mistake in his life. 
C) only responds to rewards that involve money. 
D) always uses a model or mathematical formula to help him make a decision.

Question 11

The slope of a straight line

Accepted Answer

A) is the same at all points along that line. 
B) cannot be defined. 
C) changes from one point to the next on that line. 
D) is always equal to zero.

Question 12

A decision made by a rational person

Accepted Answer

A) is intended to make the person worse off. 
B) would always make the person wealthier. 
C) is identical to a decision that would be made by any other person facing the same choices. 
D) is intended to make the person better off.

Question 13

Which of the following would NOT provide an incentive to reduce the amount of beef consumed?

Accepted Answer

A) An increase in the price of beef 
B) A subsidy to buyers of beef 
C) A decrease in the price of chicken 
D) A ban on beef sales by the Food and Drug Administration

Question 14

Macroeconomics often relies on microeconomic analysis because

Accepted Answer

A) microeconomics is older than macroeconomics. 
B) microeconomic theory can be tested and macroeconomic theory cannot be tested. 
C) all aggregates are made up of individuals and firms. 
D) the effects of macroeconomic subjects such as inflation and unemployment are independent of individual consumers and firms.

Question 15

If a straight line crosses the Y-axis at 5 and crosses the X-axis at 10, we can conclude that the slope of the line is

Accepted Answer

A) positive. 
B) negative. 
C) zero. 
D) infinity.

Question 16

The study of an individual's choice about what type of computer to buy is a subject of

Accepted Answer

A) macroeconomics. 
B) microeconomics. 
C) an aggregate concept. 
D) not a concern for economic analysis.

Question 17

Explain the study of economics.

Accepted Answer

The answer of Explain the study of economics....

Question 18

Individual decision making by consumers and producers is the focus of

Accepted Answer

A) macroeconomics. 
B) microeconomics. 
C) aggregate measures. 
D) any economic model.

Question 19

Microeconomics is the study of

Accepted Answer

A) the behavior of the economy as a whole. 
B) how rising prices affect the level of employment in the economy. 
C) how individuals and firms make decisions. 
D) the effect that money has in the economic system.

Question 20

Which of the following is a normative statement?

Accepted Answer

A) The Gross Domestic Product is the dollar value of all goods and services produced in a country in a year. 
B) Fiscal policy is determined by the Congress and the president. 
C) Tax cuts ought to be enacted for the good of the economy. 
D) Monetary policy is determined by the Federal Reserve System.

Exam 1: The Nature of Economics