Question 1

Which of the following is a positive statement?

Accepted Answer

A)  We need to carefully protect our borders.
B)  Hyperinflation is the most damaging thing that can occur in an economy.
C)  When tax revenues are less than government spending there is a budget deficit.
D)  Foreign aid should be reduced to help our budget deficit.E) A) and B)
F) A) and D)

Question 2

Microeconomics is defined as that part of economic analysis that

Accepted Answer

A)  studies the behavior of the economy as a whole.
B)  includes the problems of inflation and unemployment.
C)  studies individual decision making by households and firms.
D)  concerns aggregate production and consumption.E) A) and D)
F) B) and D)

Question 3

Sara looks into her closet and discovers a pair of like-new shoes she no longer wears because they give her blisters.From the economist's perspective,was Sara behaving rationally when she bought those shoes?

Accepted Answer

A)  No.If any of a person's decisions have poor results,that person is irrational.
B)  Yes,as long as Sara didn't intentionally purchase blister-causing shoes.
C)  No.The rationality assumption states that rational people never make mistakes.
D)  It's not clear because psychology,not economics,deals with the rationality assumption.E) C) and D)
F) B) and D)

Question 4

Central planning is a key characteristic of which economic system?

Accepted Answer

A)  Free market
B)  Price system
C)  Command and control
D)  Mixed economic systemE) B) and D)
F) B) and C)

Question 5

The ceteris paribus assumption is important in economics because

Accepted Answer

A)  all empirical data are equal.
B)  it would be impossible to relate the effects of changes in one variable on another without holding some variables constant.
C)  economic data move very slowly over time and so they can always be considered constant.
D)  models are always complex and require as many variables as possible.E) A) and B)
F) None of the above

Question 6

Which of the following is a characteristic or focus of economics?

Accepted Answer

A)  allocation of limited resources in an effort to satisfy potentially unlimited wants
B)  positive economic analysis
C)  empirical analysis
D)  all of the aboveE) C) and D)
F) All of the above

Question 7

The macroeconomist would most likely study

Accepted Answer

A)  the effects of changing apple prices on the market for oranges.
B)  the effects of an increase in wage rates on a woman's decision to enter the labor force.
C)  the effects of a lower income tax rates on the nation's total production of goods and services.
D)  the effect of increased union wages on the cost of producing automobiles.E) A) and B)
F) A) and C)

Question 8

According to the bounded rationality hypothesis,an individual confronting a large number of complicated choices is most likely to respond by

Accepted Answer

A)  using a simple rule of thumb to choose among a subset of easiest-to-evaluate options.
B)  using the ceteris paribus assumption to assist in simplifying and examining each of the possible options.
C)  utilizing readily available empirical evidence to assist in evaluating every option.
D)  assessing every available choice by developing sophisticated theories regarding each option.E) None of the above
F) B) and C)

Question 9

Macroeconomics would be concerned with

Accepted Answer

A)  implications of changes in unemployment and inflation.
B)  the effects on individual consumers of changes in the price of gasoline for a business.
C)  the effects of a tax on beer.
D)  the effects of wage increases on steel manufacturers.E) A) and D)
F) A) and C)

Question 10

When constructing economic models,economists are more concerned with

Accepted Answer

A)  what people say than what they do.
B)  what people think than what they say.
C)  what people do than what they say.
D)  what people say than what they do or think.E) All of the above
F) A) and C)

Question 11

An economic system is

Accepted Answer

A)  the universe of all resources.
B)  a way to create new resources.
C)  a mechanism to allocate scarce resources.
D)  an organization that generates profits.E) C) and D)
F) None of the above

Question 12

Ceteris paribus means

Accepted Answer

A)  other variables are held constant.
B)  almost certainly.
C)  only if everything works just right.
D)  perhaps.E) B) and D)
F) B) and C)

Question 13

Is inflation a macroeconomic or a microeconomic question? Why?

Accepted Answer

Inflation is a macroeconomic question be...

Question 14

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

Accepted Answer

A)  Public school teachers are not paid enough.
B)  The average public school teacher earns less than the average truck driver.
C)  The average public school teacher earns more than the average truck driver.
D)  Students in smaller classes perform better on standardized tests.E) None of the above
F) A) and B)

Question 15

The study of how a particular firm might choose to maximize its profits would fall into what type of analysis?

Accepted Answer

A)  macroeconomics
B)  microeconomics
C)  labor economics
D)  aggregate economicsE) None of the above
F) A) and D)

Question 16

Normative economics

Accepted Answer

A)  is never studied at the undergraduate level.
B)  involves value judgments.
C)  is always objective.
D)  cannot be applied to all economic problems.E) A) and B)
F) A) and C)

Question 17

When we say that an individual behaves according to "rational self-interest," we mean that this individual

Accepted Answer

A)  is motivated by greed.
B)  will always buy the most fashionable items available.
C)  will always buy the cheapest products available on the market.
D)  is making choices that he or she believes will leave him or her better off.E) C) and D)
F) A) and B)

Question 18

"Ceteris paribus" means

Accepted Answer

A)  "invisible hand."
B)  "other things constant."
C)  "making all the necessary changes."
D)  "individual."E) A) and B)
F) All of the above

Question 19

Economics is a

Accepted Answer

A)  hard science.
B)  physical science.
C)  natural science.
D)  social science.E) A) and B)
F) A) and C)

Question 20

Mary says she plans to return to college next semester assuming her car keeps running,tuition fees don't go up,and her daycare provider continues to be dependable.An economist would say that Mary plans to return to college next semester,________.

Accepted Answer

A)  caveat emptor
B)  ceteris paribus
C)  laissez faire
D)  ipso factoE) B) and D)
F) B) and C)

Exam 1: The Nature of Economics

Is inflation a macroeconomic or a microeconomic question? Why?

Correct AnswerverifiedInflation is a macroeconomic question be...View AnswerShow Answer

The study of how a particular firm might choose to maximize its profits would fall into what type of analysis?

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Mary says she plans to return to college next semester assuming her car keeps running,tuition fees don't go up,and her daycare provider continues to be dependable.An economist would say that Mary plans to return to college next semester,________.

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Which of the following is a characteristic or focus of economics?

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Economics is a

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According to the bounded rationality hypothesis,an individual confronting a large number of complicated choices is most likely to respond by

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When we say that an individual behaves according to "rational self-interest," we mean that this individual

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Normative economics

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Microeconomics is defined as that part of economic analysis that

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Ceteris paribus means

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The ceteris paribus assumption is important in economics because

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The macroeconomist would most likely study

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Central planning is a key characteristic of which economic system?

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When constructing economic models,economists are more concerned with

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Sara looks into her closet and discovers a pair of like-new shoes she no longer wears because they give her blisters.From the economist's perspective,was Sara behaving rationally when she bought those shoes?

Correct AnswerverifiedShow Answer

Macroeconomics would be concerned with

Correct AnswerverifiedShow Answer

An economic system is

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Which of the following is a positive statement?

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

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"Ceteris paribus" means

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Inflation is a macroeconomic question be...
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