Question 1

An economic model is useful if it

Accepted Answer

A)  includes every detail of reality
B)  involves no unproven assumptions
C)  is expressed in equations
D)  makes accurate predictions
E)  is simple enough to be understood by a childF) B) and C)
G) A) and E)

Question 2

According to a 2011 PayScale.com survey,among college majors with 10-20 years of experience,economics ranks second only to computer engineering in terms of the median pay.

Accepted Answer

A) True 
 B)False

Question 3

Because resources are scarce,

Accepted Answer

A)  opportunity costs are zero
B)  people must make choices among alternatives
C)  all human wants and desires can be satisfied
D)  resource prices are fixed
E)  commodities are freeF) C) and D)
G) All of the above

Question 4

An example of a positive economic statement is,"An increase in the price of a product causes consumers to purchase more of that product."

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is a positive statement?

Accepted Answer

A)  An unemployment rate of 7 percent or higher is a national disgrace.
B)  Unemployment is a less important problem than inflation.
C)  When the national unemployment rate is 7 percent,the unemployment rate for inner-city youth is often close to 40 percent.
D)  Unemployment and inflation are equally important problems.
E)  An inflation rate of 7 percent is too high.F) A) and D)
G) None of the above

Question 6

In a circular-flow model,households supply all of the following except

Accepted Answer

A)  labor
B)  goods and services
C)  capital
D)  entrepreneurial ability
E)  natural resourcesF) C) and D)
G) A) and B)

Question 7

One of the difficulties with an economic policy such as rent control is that

Accepted Answer

A)  politicians do not consider its secondary effects
B)  economists disagree about the impacts of the policy
C)  it is difficult to enforce antidiscrimination laws in the rental housing market
D)  it makes landlords wealthy at the expense of renters
E)  pressure from landlords resulted in its repeal in many citiesF) A) and B)
G) C) and D)

Question 8

Secondary effects are consequences of economic actions that develop slowly over time as people react to events.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is an accurate list,in order,of the steps of the scientific process?

Accepted Answer

A)  define variables; state assumptions; form a hypothesis; test
B)  state assumptions; define variables; form a hypothesis; test
C)  identify variables; state assumptions; test; form a hypothesis
D)  identify variables; form "other things equal" assumptions; form behavioral assumptions; test
E)  form "other things equal" assumptions; form behavioral assumptions; form hypothesis; testF) A) and D)
G) C) and D)

Question 10

Most of the disagreement among economists involves normative debates.

Accepted Answer

A) True 
 B)False

Question 11

When economic choice involves an adjustment to an existing situation,marginal analysis

Accepted Answer

A)  has no practical applications or real-world uses
B)  eliminates incorrect decisions and bad choices
C)  involves comparing the additional costs and additional benefits of an activity before deciding
D)  involves examining only the total costs and total benefits of an activity before deciding
E)  none of the aboveF) All of the above
G) C) and D)

Question 12

A market

Accepted Answer

A)  is often a physical place
B)  facilitates exchanges between buyers and sellers
C)  typically involves monetary transactions
D)  might not have well-defined geographical limits
E)  all of the aboveF) C) and E)
G) A) and B)

Question 13

When people are assumed to implicitly calculate the costs and benefits of an activity to decide if it is worthwhile,they are behaving

Accepted Answer

A)  rationally
B)  self-interestedly
C)  greedily
D)  marginally
E)  expectantlyF) All of the above
G) A) and E)

Question 14

Economics studies how decision makers use scarce resources to satisfy unlimited wants.

Accepted Answer

A) True 
 B)False

Question 15

In an economic model of consumer behavior,rational self-interest would likely be

Accepted Answer

A)  a key variable
B)  the hypothesis of the model
C)  a behavioral assumption
D)  a prediction of the model
E)  a method of testing the modelF) B) and E)
G) A) and E)

Question 16

A normative economic statement

Accepted Answer

A)  is a hypothesis used to test economic theory
B)  is a statement of fact
C)  is a statement of what ought to be,not what is
D)  indicates what will occur if certain assumptions are true
E)  enables economists to test hypothesesF) A) and C)
G) C) and D)

Question 17

An entrepreneur

Accepted Answer

A)  always makes a profit
B)  generally avoids risky situations
C)  claims the residual (i.e.,whatever is left over) after other resource suppliers are compensated
D)  is a parasite that benefits by not paying other resources for their services
E)  is the manager who runs an enterprise and keeps the customers happyF) All of the above
G) None of the above

Question 18

All economic models must involve simplifications because

Accepted Answer

A)  economists would be unable to command high salaries if their models were so simple that anyone could understand them
B)  human behavior is very erratic and unpredictable
C)  reality is too complex to understand in its entirety,so we must reduce it to a level that we can understand
D)  they always try to duplicate all possible information and cover all possible variables that might influence decision making
E)  we must rely on value judgments and ignore realityF) A) and E)
G) A) and B)

Question 19

Someone who committed the association-is-causation fallacy might conclude that

Accepted Answer

A)  event B,which follows event A,was caused by the event A
B)  event B,which follows event A,was not necessarily caused by event A
C)  the simplest model is the best predictor
D)  what is true for the individual is also true for the group
E)  what is true for the individual is not necessarily true for the groupF) None of the above
G) C) and E)

Question 20

One problem with rent controls is that policy makers often ignore its secondary effects.

Accepted Answer

A) True 
 B)False

Exam 1: The Art and Science of Economic Analysis

Because resources are scarce,

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Economics studies how decision makers use scarce resources to satisfy unlimited wants.

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When economic choice involves an adjustment to an existing situation,marginal analysis

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In an economic model of consumer behavior,rational self-interest would likely be

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Which of the following is a positive statement?

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Secondary effects are consequences of economic actions that develop slowly over time as people react to events.

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An example of a positive economic statement is,"An increase in the price of a product causes consumers to purchase more of that product."

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A market

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Which of the following is an accurate list,in order,of the steps of the scientific process?

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According to a 2011 PayScale.com survey,among college majors with 10-20 years of experience,economics ranks second only to computer engineering in terms of the median pay.

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When people are assumed to implicitly calculate the costs and benefits of an activity to decide if it is worthwhile,they are behaving

Correct AnswerverifiedShow Answer

An economic model is useful if it

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All economic models must involve simplifications because

Correct AnswerverifiedShow Answer

One of the difficulties with an economic policy such as rent control is that

Correct AnswerverifiedShow Answer

Someone who committed the association-is-causation fallacy might conclude that

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A normative economic statement

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An entrepreneur

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In a circular-flow model,households supply all of the following except

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One problem with rent controls is that policy makers often ignore its secondary effects.

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Most of the disagreement among economists involves normative debates.

Correct AnswerverifiedShow Answer

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