Question 1

According to economists, when two people make exactly the opposite decision

Accepted Answer

A)  one of them is acting irrationally.
B)  each person evaluates the situation according to his/her individual self-interest.
C)  one of them is acting out of spite.
D)  one of them should compromise.E) B) and C)
F) C) and D)

Question 2

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.E) A) and C)
F) A) and D)

Question 3

"No individual should have less than $20,000 income in the United States in 2010" is an example of

Accepted Answer

A)  a normative statement.
B)  a positive statement.
C)  an illogical and refutable statement.
D)  a truism.E) None of the above
F) All of the above

Question 4

Explain the study of economics.

Accepted Answer

Economics is the study of how people all...

Question 5

Positive analysis can be described as

Accepted Answer

A)  the study of whether people respond to positive incentives.
B)  the study of whether people respond to negative incentives.
C)  a value-free approach to inquiry.
D)  a study that is not tested empirically.E) All of the above
F) C) and D)

Question 6

Normative economics is

Accepted Answer

A)  analysis involving value judgments about economic policies; or a statement of "what ought to be."
B)  analysis that is strictly limited to making either purely descriptive statements or scientific predictions.
C)  analysis of the behavior of the economy as a whole.
D)  decision making undertaken by households and business firms.E) C) and D)
F) A) and D)

Question 7

A negative slope

Accepted Answer

A)  represents an inverse relationship, such as beers consumed and test score.
B)  represents a direct relationship, such as snow fall and car accidents.
C)  indicates that there is no relationship between two variables, such as women's wages and likelihood of sunshine.
D)  means that the line crosses below the x-axis.E) A) and B)
F) A) and C)

Question 8

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

Accepted Answer

A)  Lower income tax rates will generate greater income tax revenue to the government.
B)  Income tax rates should be lower because that will increase government revenue.
C)  Lower income tax rates yield a larger federal government deficit.
D)  The federal budget deficit has increased every year for the last twenty years.E) All of the above
F) A) and C)

Question 9

An appropriate test of the effectiveness of an economic model is

Accepted Answer

A)  the number of variables contained within the model.
B)  the model's ability to predict future economic activity.
C)  the number of economists who have worked on the model.
D)  the number of assumptions which the economist has made.E) None of the above
F) A) and B)

Question 10

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) B) and D)
F) A) and C)

Question 11

Which of the following is NOT a characteristic or focus of microeconomics?

Accepted Answer

A)  individual consumers.
B)  analysis of aggregate economic variables
C)  firm behavior
D)  individual marketsE) None of the above
F) B) and C)

Question 12

The usefulness of a model is determined by

Accepted Answer

A)  whether it helps to explain or predict real world phenomena.
B)  whether it possesses realistic assumptions.
C)  how well it uses the ceteris paribus assumption.
D)  how many of the possible relationships that exist are included in the model.E) B) and C)
F) B) and D)

Question 13

Why do economists test their hypotheses?

Accepted Answer

A)  to see whether people are motivated by self-interest
B)  to see whether their models predict the choices people will make
C)  to determine whether government policies have effectively achieved their goals
D)  to learn what people are thinking when they make the choices they doE) A) and C)
F) None of the above

Question 14

The assumption that individuals do NOT intentionally make decisions that would leave them worse off is referred to as

Accepted Answer

A)  the premium assumption.
B)  the law of comparative advantage.
C)  the rationality assumption.
D)  the law of demand.E) A) and B)
F) A) and C)

Question 15

A simplified representation of the real world that is used to explain economic phenomena is a(n)

Accepted Answer

A)  viewpoint.
B)  model.
C)  assumption.
D)  implication.E) A) and D)
F) B) and C)

Question 16

An incentive is a

Accepted Answer

A)  need.
B)  want.
C)  reward for desired behavior.
D)  resource.E) B) and C)
F) A) and D)

Question 17

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.E) B) and C)
F) All of the above

Question 18

How does the science of economics deal with the fact that we all have different values?

Accepted Answer

A)  by assuming that values don't play a role in economic behavior
B)  by seeking to discover the sources of different value systems
C)  by using positive analysis
D)  by surveying the public to see what the most common values are, and then incorporating those as assumptions into their modelsE) A) and C)
F) C) and D)

Question 19

Ceteris paribus means

Accepted Answer

A)  all men are created equal.
B)  wage parity between men and women is a worthy goal.
C)  there are an infinite number of factors affecting each human decision and they change all the time.
D)  economists isolate one or two factors that change when analyzing human decisions.E) None of the above
F) B) and D)

Question 20

Rational behavior for an economist means that individuals

Accepted Answer

A)  are motivated by self-interest.
B)  never change their minds.
C)  always make positive choices.
D)  are self-sacrificing.E) All of the above
F) A) and D)

Exam 1: The Nature of Economics

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

Correct AnswerverifiedShow Answer

Explain the study of economics.

Correct AnswerverifiedEconomics is the study of how people all...View AnswerShow Answer

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

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Normative economics is

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Why do economists test their hypotheses?

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The usefulness of a model is determined by

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Positive analysis can be described as

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An appropriate test of the effectiveness of an economic model is

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Rational behavior for an economist means that individuals

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How does the science of economics deal with the fact that we all have different values?

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"No individual should have less than $20,000 income in the United States in 2010" is an example of

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A simplified representation of the real world that is used to explain economic phenomena is a(n)

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Jose is rational if he

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An economic system is

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A negative slope

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According to economists, when two people make exactly the opposite decision

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The assumption that individuals do NOT intentionally make decisions that would leave them worse off is referred to as

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An incentive is a

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Ceteris paribus means

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Which of the following is NOT a characteristic or focus of microeconomics?

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Economics is the study of how people all...
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