Question 1

Which of the following is not scarce?

Accepted Answer

A)   an individual's time
B)   air
C)   pencils
D)   automobilesE) C) and D)
F) A) and B)

Question 2

The basic difference between macroeconomics and microeconomics is that

Accepted Answer

A)   macroeconomics looks at how people make choices, and microeconomics looks at why they make those choices.
B)   macroeconomics is concerned with economic policy, and microeconomics is concerned with economic theory.
C)   macroeconomics focuses on the aggregate economy, and microeconomics focuses on small components of that economy.
D)   macroeconomics is associated with the fallacy of composition, and microeconomics has little to do with the fallacy of composition.E) All of the above
F) A) and B)

Question 3

Positive economics

Accepted Answer

A)   postulates relationships among economic variables that are potentially refutable by real-world events.
B)   is strictly quantitative and is, therefore, of little value to policy makers.
C)   will usually indicate which economic policy is best.
D)   is the same as normative economics.E) A) and D)
F) None of the above

Question 4

Which of the following is true of resources?

Accepted Answer

A)   Resources are inputs used to produce goods and services.
B)   Human resources reflect the skills and productive knowledge of human beings.
C)   With the passage of time, investment activities can increase the availability of resources.
D)   All of the above are true.E) C) and D)
F) B) and C)

Question 5

Deciding how to make the best use of limited resources to satisfy virtually unlimited wants is known in economics as

Accepted Answer

A)   economizing behavior.
B)   the fallacy of composition.
C)   ceteris paribus.
D)   the fallacy that good intentions do not guarantee the desired outcome.E) C) and D)
F) B) and C)

Question 6

The difference between a positive economic statement and a normative statement is that

Accepted Answer

A)   a positive statement must be true; a normative statement is often not true
B)   a normative statement must be true; a positive statement is often not true
C)   a positive statement can be proved; a normative statement cannot
D)   a normative statement can be proved; a positive statement cannot
E)   a positive economic statement is a moral judgment; a normative economic statement is not a moral judgmentF) A) and B)
G) C) and E)

Question 7

During a war, governments will sometimes draft people, most of whom are presently employed, into the army. An economist, computing the real cost of the war, would be sure to include which of the following items?

Accepted Answer

A)   the value of the civilian goods no longer produced by the new soldiers
B)   the cost of feeding and clothing the new soldiers
C)   the dollar cost of the payroll
D)   the higher prices of civilian goods due to wartime shortages
E)   the cost of transporting the soldiers to combatF) A) and B)
G) A) and C)

Question 8

By scientific method we mean

Accepted Answer

A)   the use of modern electronic testing equipment to understand the world.
B)   the dispassionate development and testing of theories about how the world works.
C)   the use of controlled laboratory experiments to understand the way the world works.
D)   finding evidence to support preconceived theories about how the world works.E) B) and C)
F) A) and B)

Question 9

The economizing problem is essentially one of deciding how to make the best use of

Accepted Answer

A)   limited resources to satisfy limited wants.
B)   unlimited resources to satisfy limited wants.
C)   limited resources to satisfy virtually unlimited wants.
D)   unlimited resources to satisfy unlimited wants.E) A) and D)
F) B) and C)

Question 10

Which one of the following statements is correct?

Accepted Answer

A)   Policymakers have good intentions and therefore their proposals will create good outcomes.
B)   Potential secondary effects do not need to be considered when deciding whether to implement a new government program.
C)   A good outcome is guaranteed from a government program if it is created with good intentions.
D)   Government programs can be implemented with good intentions but can lead to undesirable outcomes because of unintended consequences.E) A) and D)
F) A) and B)

Question 11

When economists use the term ceteris paribus , they are indicating that

Accepted Answer

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

Question 12

The decision makers described by economic analysis

Accepted Answer

A)   economize when seeking information.
B)   must have essentially perfect knowledge to make choices.
C)   will seek as much information as they can get.
D)   generally ignore the cost of seeking information.E) All of the above
F) A) and B)

Question 13

Which of the following is true?

Accepted Answer

A)   Changes in personal costs and benefits will exert a predictable influence on the choices of people.
B)   If one individual gains from an economic activity, then someone else must lose.
C)   If a good is provided free to an individual by government, its production will not consume valuable scarce resources.
D)   If the intentions behind a policy are good, you can be assured that the outcome will be desirable.E) A) and B)
F) C) and D)

Question 14

What is the best test of an economic theory?

Accepted Answer

A)   the accuracy of the assumptions behind the theory
B)   the ability of the theory to predict real-world events
C)   the implications of the theory for current public policy
D)   how much mathematical detail is behind the theoryE) A) and D)
F) All of the above

Question 15

The value of a good

Accepted Answer

A)   depends on many factors, including who uses it and under what circumstances.
B)   is determined by the cost of producing it.
C)   depends on the labor necessary to supply the good.
D)   can be measured objectively by a survey of manufacturers of the good.E) A) and D)
F) All of the above

Question 16

When economists say that people choose rationally, this means

Accepted Answer

A)   they gather all relevant information before making their purchases
B)   once a pattern of behavior has been established, people tend to become set in their ways
C)   people respond in predictable ways to changes in costs and benefits
D)   people rarely make errors when they are permitted to make transactions
E)   once made, decisions are never reversedF) A) and B)
G) A) and D)

Question 17

Which of the following is a normative economic statement?

Accepted Answer

A)   If we doubled the size of welfare payments, we would reduce the number of homeless persons.
B)   Companies should be concerned with more than just their profits.
C)   An increase in spending on airport security will reduce the number of hijackings.
D)   If social security were to be privatized, workers would earn a higher rate of return on their retirement contributions.E) A) and B)
F) C) and D)

Question 18

Legislation to protect red-cockaded woodpeckers created incentives that resulted in premature harvesting of trees the woodpeckers like to nest in. This is an example of which of the following?

Accepted Answer

A)   Association is not causation.
B)   the fallacy of composition
C)   the use of ceteris paribus conditions in economic analysis
D)   Good intentions do not always lead to desirable outcomes.E) B) and C)
F) A) and D)

Question 19

The economic way of thinking stresses that

Accepted Answer

A)   changes in personal costs and benefits will exert a predictable influence on the choices of human decision makers.
B)   only direct monetary costs matter in making decisions.
C)   if a good is provided free to an individual, its production will not consume valuable scarce resources.
D)   secondary effects are not important to consider when making decisions.E) A) and C)
F) C) and D)

Question 20

The economic way of thinking is

Accepted Answer

A)   a set of historical generalizations that indicates what goods should be produced.
B)   a body of statistical data that indicates how an economy should be organized.
C)   a set of basic concepts that helps one understand human choices.
D)   a set of complex, highly abstract theories that provides persons skilled in statistics with the information necessary to tell others what choices they should make.E) A) and D)
F) A) and C)

Exam 1: The Economic Approach

Which of the following is true of resources?

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Which of the following is a normative economic statement?

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The economic way of thinking is

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The value of a good

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Positive economics

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Which one of the following statements is correct?

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The decision makers described by economic analysis

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Which of the following is not scarce?

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Which of the following is true?

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Deciding how to make the best use of limited resources to satisfy virtually unlimited wants is known in economics as

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During a war, governments will sometimes draft people, most of whom are presently employed, into the army. An economist, computing the real cost of the war, would be sure to include which of the following items?

Correct AnswerverifiedShow Answer

Legislation to protect red-cockaded woodpeckers created incentives that resulted in premature harvesting of trees the woodpeckers like to nest in. This is an example of which of the following?

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By scientific method we mean

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The economic way of thinking stresses that

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The economizing problem is essentially one of deciding how to make the best use of

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The difference between a positive economic statement and a normative statement is that

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When economists say that people choose rationally, this means

Correct AnswerverifiedShow Answer

The basic difference between macroeconomics and microeconomics is that

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What is the best test of an economic theory?

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When economists use the term ceteris paribus , they are indicating that

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