Question 1

The fact that people have unlimited wants means that

Accepted Answer

A)   they always want more of at least one good
B)   each person has an unlimited desire for every good
C)   labor unions demand wage increases
D)   selfish people are not concerned about others
E)   people buy goods without regard to what they can affordF) None of the above
G) All of the above

Question 2

The fallacy of composition is the error of believing a cause-effect relationship exists between two events that are associated in time.

Accepted Answer

A) True 
 B)False

Question 3

"There should be less discrimination against the elderly." This is an example of a

Accepted Answer

A)   normative statement
B)   positive statement
C)   forecast
D)   hypothesis
E)   predictionF) B) and C)
G) B) and E)

Question 4

Which of the following is true about entrepreneurs?

Accepted Answer

A)   They have the talent required to dream up a new product or find a better way to produce an existing one.
B)   They are rewarded by profits.
C)   They sometimes suffer losses.
D)   They benefit from what's left over after paying other resource suppliers.
E)   All of the answers are correct.F) C) and D)
G) A) and B)

Question 5

A good economic theory

Accepted Answer

A)   has realistic assumptions
B)   contains as much detail as possible
C)   cannot be proven false
D)   predicts well
E)   can only be presented in mathematical termsF) A) and D)
G) A) and E)

Question 6

Goods and services are scarce because

Accepted Answer

A)   people are greedy
B)   they are produced using scarce resources
C)   firms keep production low in order to earn higher profits
D)   they are produced by firms that seeks profits
E)   government wants to maintain its power over the economyF) C) and E)
G) A) and D)

Question 7

Economic theories are

Accepted Answer

A)   useful because they are as exact as theories in the physical sciences
B)   useless because they are based on abstractions
C)   useful because they allow us to make predictions
D)   too complex to understand because they include all of reality
E)   useful in predicting events only if their assumptions are realisticF) A) and C)
G) A) and B)

Question 8

To say that people make marginal decisions means that

Accepted Answer

A)   they usually wait until the last minute before making a decision to buy
B)   they weigh the additional costs and additional benefits of various activities before they make a decision
C)   most people just barely get by on the incomes they earn and live from day to day on the very edge of subsistence
D)   given a choice,most people would prefer to make their own decisions concerning the things that affect their lives
E)   they consider the total cost and benefit of various activities before they make a purchaseF) A) and B)
G) A) and E)

Question 9

In economics,"capital" refers to

Accepted Answer

A)   money
B)   stocks,bonds,and other financial assets
C)   the seat of government
D)   machines,buildings,tools,and knowledge
E)   net worth (assets minus liabilities) F) All of the above
G) A) and B)

Question 10

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

Accepted Answer

A)   If the money supply falls,interest rates will rise.
B)   Teenage unemployment would be lower if there were no minimum wage.
C)   The quantity of shirts sold increases as the price of shirts decreases.
D)   The federal government's total spending should be reduced.
E)   If interest rates go up,then construction activity will fall.F) B) and E)
G) A) and B)

Question 11

A hypothesis is

Accepted Answer

A)   an assumption about behavior
B)   a prediction of what will occur given certain assumptions
C)   a prediction of what will occur regardless of assumptions
D)   a forecast of future events
E)   useful only if the assumptions are realisticF) A) and D)
G) B) and D)

Question 12

The basic purpose of economic models is to

Accepted Answer

A)   construct simplifying assumptions about the real world
B)   explain reality in all its complexity
C)   collect empirical data to support the facts
D)   construct situations where controlled experiments can be carried out
E)   provide explanations for,and predictions of,economic eventsF) A) and D)
G) B) and D)

Question 13

The expression "There's no such thing as a free lunch" means

Accepted Answer

A)   that even if the lunch is free,we pay for it in extra calories
B)   that resources used up in producing the lunch are not available to satisfy other wants
C)   the same thing as "The best things in life are free"
D)   you can eat only if you work first
E)   neither sea water nor air is freeF) None of the above
G) D) and E)

Question 14

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 verified; a normative statement cannot
D)   a normative statements can be verified; a positive statement cannot
E)   a positive economic statement is a moral judgment; a normative economic statement is not a moral judgmentF) B) and D)
G) None of the above

Question 15

Unlike a "service," a "good"

Accepted Answer

A)   is desirable
B)   uses resources to satisfy wants
C)   is physical and tangible
D)   is abundant and free
E)   is a resourceF) A) and E)
G) A) and D)

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is not a part of the scientific method in economics?

Accepted Answer

A)   normative statements
B)   comparing predictions to evidence
C)   formulating a hypothesis
D)   a hypothesis
E)   behavioral assumptionsF) B) and D)
G) C) and D)

Question 18

To tell a compelling story,an economist relies on

Accepted Answer

A)   case studies
B)   anecdotes
C)   irrelevant data
D)   anecdotes and irrelevant data
E)   case studies and anecdotesF) A) and B)
G) A) and C)

Question 19

When economists refer to capital,they might mean

Accepted Answer

A)   money
B)   human skills used in production
C)   stocks
D)   bonds
E)   bank loansF) A) and B)
G) A) and C)

Question 20

Some individuals or families can become completely saturated with a service such as television.This suggests that

Accepted Answer

A)   wants are limited
B)   desires for a single commodity can be satisfied but then the focus will switch to other goods and services
C)   a highly productive economy may someday be able to satisfy all human desires
D)   resources are not truly fixed in supply as we generally assume
E)   scarcity does not existF) C) and D)
G) A) and C)

Exam 1: The Art and Science of Economic Analysis

Economic theories are

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Goods and services are scarce because

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The basic purpose of economic models is to

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

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The expression "There's no such thing as a free lunch" means

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"There should be less discrimination against the elderly." This is an example of a

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To say that people make marginal decisions means that

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The fact that people have unlimited wants means that

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Unlike a "service," a "good"

Correct AnswerverifiedShow Answer

In economics,"capital" refers to

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To tell a compelling story,an economist relies on

Correct AnswerverifiedShow Answer

When economists refer to capital,they might mean

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Some individuals or families can become completely saturated with a service such as television.This suggests that

Correct AnswerverifiedShow Answer

The fallacy of composition is the error of believing a cause-effect relationship exists between two events that are associated in time.

Correct AnswerverifiedShow Answer

A good economic theory

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Which of the following is true about entrepreneurs?

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A hypothesis is

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Which of the following is not a part of the scientific method in economics?

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