Question 1

The purpose of an economic model is to

Accepted Answer

A)   be a complex, exact replica of reality.
B)   demonstrate which values and beliefs are best for the economy.
C)   explain the behavior of the issue being examined.
D)   manage the economy like an automatic pilot.E) B) and C)
F) A) and D)

Question 2

Which statement about incentives is TRUE?

Accepted Answer

A)   Each person is motivated by the same incentive.
B)   Each person is motivated by different incentives.
C)   Incentives can be manipulated with precision.
D)   Price is the only relevant economic incentive.E) B) and C)
F) A) and B)

Question 3

(Table)  If the numbers in the table were placed on a graph, with hot chocolate sales on the vertical axis and temperature on the horizontal axis, the slope would be

Accepted Answer

A)   -10.
B)   -2.
C)   -1/2.
D)   2.E) A) and B)
F) A) and C)

Question 4

When the _____ outweigh(s)  the _____ of information, people will attempt to obtain the information.

Accepted Answer

A)   costs; benefits
B)   benefits; costs
C)   equity; efficiency
D)   efficiency; equityE) B) and D)
F) All of the above

Question 5

Admission prices to Dollywood are $50 for a one-day ticket, $80 for a two-day ticket, and $100 for an annual pass. Based on these prices, the marginal cost of visiting Dollywood the second day is _____, the third day is _____, and the fourth day is _____.

Accepted Answer

A)   $30; $20; $0
B)   $30; $10; $10
C)   $40; $33.33; $25
D)   $80; $100; $100E) C) and D)
F) B) and C)

Question 6

Which statement is NOT a macroeconomic issue?

Accepted Answer

A)   The Federal Reserve will raise interest rates this week.
B)   The unemployment rate will exceed 6% this month.
C)   The country's price level has increased over the last quarter.
D)   The production of automobiles decreased last year.E) B) and C)
F) B) and D)

Question 7

Economists generally do NOT define an institution as a

Accepted Answer

A)   government free of corruption.
B)   government that controls resource allocation.
C)   legal system that enforces contracts and laws.
D)   strong monetary system.E) A) and B)
F) None of the above

Question 8

(Table)  Assume the relationship between temperature (T)  and hot chocolate (C)  sales can be written as C = 150 - 2T. An updated study shows that the amount of hot chocolate sales at every temperature has actually doubled. The new equation for this relationship would be

Accepted Answer

A)   C = 150 - 2T
B)   C = 75 - T
C)   C = 300 - 4T
D)   C = 300 - 2TE) A) and B)
F) B) and D)

Question 9

Is understanding recessions a macroeconomic or a microeconomic issue? Explain.

Accepted Answer

It is a macroeconomi...

Question 10

A strong monetary system is an example of an institution that influences the wealth of nations.

Accepted Answer

A) True 
 B)False

Question 11

Government intervention in the market is helpful when

Accepted Answer

A)   consumers are free to buy from a number of different firms.
B)   consumers and firms have good information.
C)   firms face increasing competition from new entrants into the market.
D)   firms engage in production activities that pollute the air and water.E) B) and D)
F) B) and C)

Question 12

Specialization and exchange between two individuals generally benefit the poorer individual at the expense of the richer individual.

Accepted Answer

A) True 
 B)False

Question 13

Explain the meaning of the phrase "People respond to incentives."

Accepted Answer

People are rational, that is, they make ...

Question 14

Macroeconomics does NOT deal with

Accepted Answer

A)   recessions.
B)   inflation.
C)   job creation rates.
D)   the market for semiconductor chips.E) All of the above
F) A) and C)

Question 15

To be useful, an economic model must include every detail possible and not be an abstraction.

Accepted Answer

A) True 
 B)False

Question 16

Which statement is NOT a key principle of economics?

Accepted Answer

A)   People follow incentives.
B)   Productivity determines the standard of living.
C)   Rational thinking requires perfect information.
D)   Government can sometimes correct market failure.E) B) and D)
F) B) and C)

Question 17

A recent decision regarding the Federal Reserve's impending interest rate increase is an example of a _____ topic. On the other hand, a debate on the impact of the arrival of Uber on local taxi businesses is an example of a _____ topic.

Accepted Answer

A)   microeconomics; macroeconomics
B)   macroeconomics; macroeconomics
C)   microeconomics; microeconomics
D)   macroeconomics; microeconomicsE) A) and B)
F) None of the above

Question 18

Which statement is TRUE?

Accepted Answer

A)   Low productivity and low pay go together.
B)   High productivity and low pay go together.
C)   Low productivity and high pay go together.
D)   The most productive countries are those with the lowest per capita incomes.E) All of the above
F) A) and B)

Question 19

The highest valued alternative that is forgone when you choose an action is called its

Accepted Answer

A)   opportunity cost.
B)   utility.
C)   scarcity.
D)   benefit.E) B) and C)
F) A) and B)

Question 20

Marginal analysis is defined as when a person continues to make a decision until the value of the outcome is zero.

Accepted Answer

A) True 
 B)False

Exam 1: Exploring Economics

Which statement about incentives is TRUE?

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A recent decision regarding the Federal Reserve's impending interest rate increase is an example of a _____ topic. On the other hand, a debate on the impact of the arrival of Uber on local taxi businesses is an example of a _____ topic.

Correct AnswerverifiedShow Answer

Specialization and exchange between two individuals generally benefit the poorer individual at the expense of the richer individual.

Correct AnswerverifiedShow Answer

Which statement is TRUE?

Correct AnswerverifiedShow Answer

Macroeconomics does NOT deal with

Correct AnswerverifiedShow Answer

(Table) If the numbers in the table were placed on a graph, with hot chocolate sales on the vertical axis and temperature on the horizontal axis, the slope would be

Correct AnswerverifiedShow Answer

To be useful, an economic model must include every detail possible and not be an abstraction.

Correct AnswerverifiedShow Answer

When the _____ outweigh(s) the _____ of information, people will attempt to obtain the information.

Correct AnswerverifiedShow Answer

Government intervention in the market is helpful when

Correct AnswerverifiedShow Answer

Is understanding recessions a macroeconomic or a microeconomic issue? Explain.

Correct AnswerverifiedIt is a macroeconomi...View AnswerShow Answer

Economists generally do NOT define an institution as a

Correct AnswerverifiedShow Answer

The highest valued alternative that is forgone when you choose an action is called its

Correct AnswerverifiedShow Answer

Which statement is NOT a macroeconomic issue?

Correct AnswerverifiedShow Answer

Which statement is NOT a key principle of economics?

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(Table) Assume the relationship between temperature (T) and hot chocolate (C) sales can be written as C = 150 - 2T. An updated study shows that the amount of hot chocolate sales at every temperature has actually doubled. The new equation for this relationship would be

Correct AnswerverifiedShow Answer

Marginal analysis is defined as when a person continues to make a decision until the value of the outcome is zero.

Correct AnswerverifiedShow Answer

A strong monetary system is an example of an institution that influences the wealth of nations.

Correct AnswerverifiedShow Answer

Explain the meaning of the phrase "People respond to incentives."

Correct AnswerverifiedPeople are rational, that is, they make ...View AnswerShow Answer

The purpose of an economic model is to

Correct AnswerverifiedShow Answer

Admission prices to Dollywood are $50 for a one-day ticket, $80 for a two-day ticket, and $100 for an annual pass. Based on these prices, the marginal cost of visiting Dollywood the second day is _____, the third day is _____, and the fourth day is _____.

Correct AnswerverifiedShow Answer

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A recent decision regarding the Federal Reserve's impending interest rate increase is an example of a _ topic. On the other hand, a debate on the impact of the arrival of Uber on local taxi businesses is an example of a _ topic.

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When the _ outweigh(s) the _ of information, people will attempt to obtain the information.

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It is a macroeconomi...
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People are rational, that is, they make ...
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Admission prices to Dollywood are $50 for a one-day ticket, $80 for a two-day ticket, and $100 for an annual pass. Based on these prices, the marginal cost of visiting Dollywood the second day is ___, the third day is _, and the fourth day is ___.

Correct Answer
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