Question 1

Consider the following economic agents: 
a.the government
b. consumers
c. producers
Who, in a centrally planned 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

Question 2

The government makes all economic decisions in a mixed economy.

Accepted Answer

A) True 
 B)False

Question 3

'The distribution of income should be left to the market' is an example of a positive economic statement.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is a normative economic statement?

Accepted Answer

A) The price of petrol is too high. 
B) The current high price of petrol is the result of strong worldwide demand. 
C) When the price of petrol rises, the quantity of petrol purchased falls. 
D) When the price of petrol rises, transportation costs rise.

Question 5

A university must decide if it wants to offer more Internet-based classes.This decision involves answering the economic question of 'what to produce.'

Accepted Answer

A) True 
 B)False

Question 6

Suppose that to increase sales of hybrid vehicles, auto manufacturers are offering large cash incentives.This is an example of a macroeconomics topic.

Accepted Answer

A) True 
 B)False

Question 7

Suppose a doctor can earn an additional $25 000 in revenue per year by keeping her office open on Sundays.At what additional cost would keeping the office open on Sundays not be considered economically rational?
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

The answer of Suppose a doctor can earn an additional...

Question 8

What is the extra cost associated with undertaking an activity called?

Accepted Answer

A) Net loss 
B) Marginal cost 
C) Opportunity cost 
D) Foregone cost

Question 9

Economists assume that rational people do all of the following except:

Accepted Answer

A) use all available information as they act to achieve their goals. 
B) undertake activities that benefit others and hurt themselves. 
C) weigh the benefits and costs of all possible alternative actions. 
D) respond to economic incentives.

Question 10

What does the term 'equity' mean, in economics?

Accepted Answer

A) Everyone has an equal standard of living. 
B) The hardest working individuals consume all they want. 
C) Only elected officials have high standards of living. 
D) Economic benefits are distributed fairly.

Question 11

Explain the economic idea that 'people respond to incentives.'
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

The answer of Explain the economic idea that 'people respond...

Question 12

In a market economy, what is generated by voluntary exchange between buyers and sellers?

Accepted Answer

A) Scarcity 
B) Allocative efficiency 
C) Productive efficiency 
D) Equity

Question 13

Scarcity refers to a situation in which unlimited wants exceed the limited resources available to fulfil those wants.

Accepted Answer

A) True 
 B)False

Question 14

A market economy results in:

Accepted Answer

A) environmental protection. 
B) an equal income distribution. 
C) agreement on equity. 
D) voluntary exchange.

Question 15

What is a mixed economy?
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

The answer of What is a mixed economy?
__________________________________________________________________________________________________________________________________________________________________________________________...

Question 16

The highest valued alternative that must be given up to engage in an activity is the definition of:

Accepted Answer

A) economic equity. 
B) marginal benefit. 
C) opportunity cost. 
D) marginal cost.

Question 17

What is the 'omitted variable' problem in determining cause and effect?

Accepted Answer

A) It is a problem that arises when an insignificant variable is given too much weight in an economic analysis, leading to skewed conclusions about cause and effect. 
B) It is a problem that arises when a significant variable is not given enough weight in an economic analysis, leading to skewed conclusions about cause and effect. 
C) It is a problem that arises when an insignificant economic variable that should have been omitted is included in an economic analysis, leading to false conclusions about cause and effect. 
D) It is a problem that arises when an economic variable that affects other variables is omitted from an analysis, and its omission leads to false conclusions about cause and effect.

Question 18

'The distribution of income should be determined by the government' is an example of a positive economic statement.

Accepted Answer

A) True 
 B)False

Question 19

Suppose the extra cost for a doctor to keep his office open for one extra hour is $200.Then, the doctor should stay open for the extra hour if he can generate additional revenue of $200 for that hour.

Accepted Answer

A) True 
 B)False

Question 20

Economists assume that rational behaviour is useful in explaining choices people make________.

Accepted Answer

A) because irrational people do not make economic choices. 
B) even though people may not behave rationally all the time. 
C) because individuals act rationally all the time in all circumstances. 
D) even though people rarely, if ever, behave in a rational manner.

Exam 1: Economics: Foundations and Models

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

The government makes all economic decisions in a mixed economy.

'The distribution of income should be left to the market' is an example of a positive economic statement.

Which of the following is a normative economic statement?

A university must decide if it wants to offer more Internet-based classes.This decision involves answering the economic question of 'what to produce.'

Suppose that to increase sales of hybrid vehicles, auto manufacturers are offering large cash incentives.This is an example of a macroeconomics topic.

What is the extra cost associated with undertaking an activity called?

Economists assume that rational people do all of the following except:

What does the term 'equity' mean, in economics?

Explain the economic idea that 'people respond to incentives.' __________________________________________________________________________________________________________________________________________________________________________________________

In a market economy, what is generated by voluntary exchange between buyers and sellers?

Scarcity refers to a situation in which unlimited wants exceed the limited resources available to fulfil those wants.

A market economy results in:

What is a mixed economy? __________________________________________________________________________________________________________________________________________________________________________________________

The highest valued alternative that must be given up to engage in an activity is the definition of:

What is the 'omitted variable' problem in determining cause and effect?

'The distribution of income should be determined by the government' is an example of a positive economic statement.

Suppose the extra cost for a doctor to keep his office open for one extra hour is $200.Then, the doctor should stay open for the extra hour if he can generate additional revenue of $200 for that hour.

Economists assume that rational behaviour is useful in explaining choices people make________.