Question 1

Economic resources are also known as:

Accepted Answer

A)  elements.
B)  financial capital.
C)  factors of production.
D)  building blocks.

Question 2

Scarcity applies to:

Accepted Answer

A)  only the poor.
B)  everyone but the very wealthy.
C)  the value of our time.
D)  both the rich and poor.
E)  the value of our time and to both the rich and poor.

Question 3

A microeconomist would most likely study the effect of a reduction in income tax rates on:

Accepted Answer

A)  total output in the economy.
B)  the output of the steel industry.
C)  inflation.
D)  unemployment

Question 4

Graphs are useful because of the way they:

Accepted Answer

A)  facilitate interpretation and analysis of data.
B)  clarify interpretation and analysis of ideas.
C)  permit a person to more easily see relationships.
D)  convey an idea that might otherwise take many words.
E)  do all of the functions listed.

Question 5

Which of the following is an example of a relationship with a negative slope?

Accepted Answer

A)  spending increases as incomes rise
B)  more items purchased when prices drop
C)  more items sold when quality improves
D)  less items purchased when quality decreases

Question 6

An economist at the University of Alaska at Anchorage has been asked to explain why the price of Alaskan crude oil has fallen recently.In order to assemble a scholarly answer, the professor should take which steps?

Accepted Answer

A)  Develop a hypothesis, test the proposition by engaging in empirical analysis, and examine the data to see if it fits with the facts.
B)  Gather data on crude oil prices and seemingly unrelated variables in order to look for associations, then formulate a hypothesis based on those unexpected associations.
C)  Ask people in Alaska why they are not purchasing oil.
D)  None of the above. The oil industry is controlled by a cartel; therefore price changes in the industry cannot be explained using economic theories.

Question 7

What is the difference between a theory and a hypothesis?

Accepted Answer

A)  A hypothesis abstracts from reality while a theory describes reality.
B)  A theory abstracts from reality while a hypothesis describes reality.
C)  A theory is an established explanation.
D)  A hypothesis is not an established explanation.
E)  A theory is an established explanation AND a hypothesis is not an established explanation.

Question 8

"A reduction in the rate at which stock dividends are taxed will lead to greater investment in the stock market." This is an example of:

Accepted Answer

A)  a positive economic statement.
B)  a negative economic statement.
C)  the fallacy of composition.
D)  a normative economic statement.
E)  confusing correlation with causation.

Question 9

If rain dancing is associated with rain, does that necessarily mean rain dancing causes rain?

Accepted Answer

A)  No. This is an example of a failure to properly employ the ceteris paribus assumption.
B)  If it rains after individuals have engaged in rain dancing then there is certainly causation at work.
C)  No. This is an example of the fallacy of composition.
D)  No. Two variables may be correlated without one necessarily causing the other.
E)  No. This is an example of a failure to understand the difference between positive and normative economic analysis.

Question 10

Economists use the term "ceteris paribus" to indicate that:

Accepted Answer

A)  the analysis is true for the individual but not for the economy as a whole.
B)  supply and demand are in balance.
C)  their conclusions are based on normative rather than positive economic analysis.
D)  other things are assumed to remain constant.

Question 11

Human capital is:

Accepted Answer

A)  machinery owned by firms, but not by individuals.
B)  machinery owned by individuals, but not by firms.
C)  machinery owned by individuals or firms, but not by the government.
D)  the skill or knowledge of individuals.

Question 12

The simple circular flow model shows that workers and owners of land and capital offer their services through:

Accepted Answer

A)  product markets.
B)  factor markets.
C)  money markets.
D)  government.
E)  the foreign currency market.

Question 13

Economics:

Accepted Answer

A)  is a natural science like biology and chemistry.
B)  is composed of two main branches known as positive and normative economics.
C)  is a science concerned with reaching generalizations about human behavior, not unlike sociology or psychology.
D)  is concerned with predicting business conditions in the future, not with the current state of the stock market.
E)  is concerned with firm behavior, not human behavior.

Question 14

Microeconomic topics do not usually include:

Accepted Answer

A)  the regulation of monopoly firms.
B)  the impact of large government budget deficits on private investment spending.
C)  the determinants of the supply of wheat by farmers.
D)  the determinants of the demand for DVD players by consumers.
E)  the impact of a change in the price of leather used to manufacture shoes.

Question 15

Which of the following is an example of microeconomic analysis?

Accepted Answer

A)  impact of taxation on national income
B)  impact of national income on tax revenues
C)  rate of increase in the national debt
D)  relationship between inflation and interest rates set by the Federal Reserve
E)  none of the above

Question 16

A student football team manager examined variables influencing the team's record and concluded that the best scores resulted when the "third-string" team played the most minutes.Therefore he recommended that the third-string team become the first team.This conclusion was probably erroneous because the manager has:

Accepted Answer

A)  confused positive and normative analysis.
B)  committed the fallacy of composition.
C)  failed to recognize that correlation is not causation.
D)  incorrectly analyzed the direction of causation.

Question 17

Scarcity, as defined by an economist, means:

Accepted Answer

A)  demand exceeds supply at the current market price.
B)  consumers are too poor to purchase the available goods and services.
C)  supply exceeds demand at the current market price.
D)  the desire for goods exceeds our ability to produce them with limited available resources.

Question 18

Bill says: "The imposition of a tax on tequila will increase its price." Bob says: "Taxes should be imposed on tequila because college students drink too much."

Accepted Answer

A)  Both statements are normative.
B)  Both statements are positive.
C)  Bill's statement is normative, and Bob's statement is positive.
D)  Bill's statement is positive, and Bob's statement is normative.

Question 19

Scarcity implies that:

Accepted Answer

A)  consumers are too poor to afford the goods and services available.
B)  at the current market price, consumers are willing to purchase more of a good than suppliers are willing to produce.
C)  it is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available.
D)  consumers would be willing to purchase the same quantity of a good at a higher price.

Question 20

Economics is primarily concerned with the study of:

Accepted Answer

A)  problems such as poverty and unemployment.
B)  limited desires pursuing unlimited resources.
C)  production and distribution of goods in a world of unlimited resources.
D)  production and distribution of goods in a world of limited resources.
E)  the evolution of firms from small startups to successful corporations.

Exam 1: The Role and Method of Economics

Which of the following is an example of microeconomic analysis?

Correct Answer
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A microeconomist would most likely study the effect of a reduction in income tax rates on:

Correct Answer
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What is the difference between a theory and a hypothesis?

Correct Answer
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The simple circular flow model shows that workers and owners of land and capital offer their services through:

Correct Answer
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Which of the following is an example of a relationship with a negative slope?

Correct Answer
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Economic resources are also known as:

Correct Answer
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If rain dancing is associated with rain, does that necessarily mean rain dancing causes rain?

Correct Answer
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Correct Answer
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Scarcity implies that:

Correct Answer
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Bill says: "The imposition of a tax on tequila will increase its price." Bob says: "Taxes should be imposed on tequila because college students drink too much."

Correct Answer
verified

An economist at the University of Alaska at Anchorage has been asked to explain why the price of Alaskan crude oil has fallen recently.In order to assemble a scholarly answer, the professor should take which steps?

Correct Answer
verified

Scarcity, as defined by an economist, means:

Correct Answer
verified

Economics is primarily concerned with the study of:

Correct Answer
verified

"A reduction in the rate at which stock dividends are taxed will lead to greater investment in the stock market." This is an example of:

Correct Answer
verified

Scarcity applies to:

Correct Answer
verified

Economists use the term "ceteris paribus" to indicate that:

Correct Answer
verified

Microeconomic topics do not usually include:

Correct Answer
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Graphs are useful because of the way they:

Correct Answer
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Economics:

Correct Answer
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Human capital is:

Correct Answer
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Exam 1: The Role and Method of Economics

Which of the following is an example of microeconomic analysis?

Correct AnswerverifiedShow Answer

A microeconomist would most likely study the effect of a reduction in income tax rates on:

Correct AnswerverifiedShow Answer

What is the difference between a theory and a hypothesis?

Correct AnswerverifiedShow Answer

The simple circular flow model shows that workers and owners of land and capital offer their services through:

Correct AnswerverifiedShow Answer

Which of the following is an example of a relationship with a negative slope?

Correct AnswerverifiedShow Answer

Economic resources are also known as:

Correct AnswerverifiedShow Answer

If rain dancing is associated with rain, does that necessarily mean rain dancing causes rain?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Scarcity implies that:

Correct AnswerverifiedShow Answer

Bill says: "The imposition of a tax on tequila will increase its price." Bob says: "Taxes should be imposed on tequila because college students drink too much."

Correct AnswerverifiedShow Answer

An economist at the University of Alaska at Anchorage has been asked to explain why the price of Alaskan crude oil has fallen recently.In order to assemble a scholarly answer, the professor should take which steps?

Correct AnswerverifiedShow Answer

Scarcity, as defined by an economist, means:

Correct AnswerverifiedShow Answer

Economics is primarily concerned with the study of:

Correct AnswerverifiedShow Answer

"A reduction in the rate at which stock dividends are taxed will lead to greater investment in the stock market." This is an example of:

Correct AnswerverifiedShow Answer

Scarcity applies to:

Correct AnswerverifiedShow Answer

Economists use the term "ceteris paribus" to indicate that:

Correct AnswerverifiedShow Answer

Microeconomic topics do not usually include:

Correct AnswerverifiedShow Answer

Graphs are useful because of the way they:

Correct AnswerverifiedShow Answer

Economics:

Correct AnswerverifiedShow Answer

Human capital is:

Correct AnswerverifiedShow Answer

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