Question 1

The term "ceteris paribus" means:

Accepted Answer

A)   that if event A precedes event B, A has caused B
B)   that economics deals with facts, not values.
C)   other things equal.
D)   prosperity inevitably follows recession.

Question 2

Assume that if the interest rate that businesses must pay to borrow funds were 20 percent, it would be unprofitable for businesses to invest in new machinery and equipment so that investment would be zero. But if the interest rate were 16 percent, businesses would find it profitable to invest $10 billion. If the interest rate were 12 percent, $20 billion would be invested. Assume that total investment continues to increase by $10 billion for each successive 4 percentage point decline in the interest rate.
-Refer to the above information. Which of the following correctly expresses the indicated relationship as an equation?

Accepted Answer

A)   i = 20 - 4I.
B)   i = 20 - .4I.
C)   i = 24 - .4I.
D)   i = 20 - 10I.

Question 3

Economists:

Accepted Answer

A)   always put the independent variable on the horizontal axis and the dependent variable on the vertical axis.
B)   always put the dependent variable on the horizontal axis and the independent variable on the vertical axis.
C)   are somewhat arbitrary in assigning independent and dependent variables to the horizontal and vertical axes.
D)   measure the slope of a line differently than do mathematicians.

Question 4

Production possibilities tables for two countries, North Cantina and South Cantina:
North Cantina Production possibilities (alternatives) 
  South Cantina Production possibilities (alternatives) 
 
-Refer to the above tables. Suppose that resources in North Cantina and South Cantina are identical in quantity and quality. We can conclude that:

Accepted Answer

A)   South Cantina has better technology than North Cantina in producing both capital and consumer goods.
B)   North Cantina has better technology than South Cantina in producing both capital and consumer goods.
C)   North Cantina is growing more rapidly than South Cantina.
D)   North Cantina has better technology than South Cantina in producing consumer goods.

Question 5

At fast-food restaurants:

Accepted Answer

A)   consumers enjoy complete and accurate information.
B)   decisions are usually made by trial and error.
C)   decisions entail comparisons of marginal costs and marginal benefits.
D)   benefits always exceed costs.

Question 6

-The linear equation for line (1)  on the above graph is:

Accepted Answer

A)   y = 8 + 2x.
B)   y = 8 + .5x.
C)   x = 8 + .5y.
D)   y = 8 - 2x.

Question 7

Refer to the budget line shown in the diagram below. If the consumer's money income is $20, the:

Accepted Answer

A)   prices of C and D cannot be determined.
B)   price of C is $2 and the price of D is $4.
C)   consumer can obtain a combination of 5 units of both C and D
D)   price of C is $4 and the price of D is $2.

Question 8

-Although sleeping in on a work day or school day has an opportunity cost, sleeping late on the weekend does not.

Accepted Answer

A) True 
 B)False

Question 9

-Refer to the above diagram. The combination of computers and bicycles shown by point F:

Accepted Answer

A)   is unattainable, given currently available resources and technology.
B)   is attainable, but entails economic inefficiency.
C)   is irrelevant because it is inconsistent with consumer preferences.
D)   suggests that opportunity costs are constant.

Question 10

A normative statement is one which:

Accepted Answer

A)   is based on the law of averages.
B)   pertains only to microeconomics.
C)   pertains only to macroeconomics.
D)   is based upon value judgments.

Question 11

The negative slope of the production possibilities curve is a graphical way of indicating that:

Accepted Answer

A)   any economy "can have its cake and eat it too."
B)   to produce more of one product we must accept less of another.
C)   the principle of increasing opportunity costs does not apply to the economy as a whole.
D)   consumers buy more when prices are low than they do when prices are high.

Question 12

Ben says that "An increase in the tax on beer will raise its price." Holly argues that "Taxes should be increased on beer because college students drink too much." We can conclude that:

Accepted Answer

A)   Ben's statement is normative, but Holly's is positive.
B)   Holly's statement is normative, but Ben's is positive.
C)   Both statements are normative.
D)   Both statements are positive.

Question 13

If the equation y = 15 - 4x was plotted, the:

Accepted Answer

A)   vertical intercept would be -4.
B)   vertical intercept would be +4.
C)   vertical intercept would be +9.
D)   slope would be -4.

Question 14

The basic purpose of the "other things equal" assumption is to:

Accepted Answer

A)   allow one to reason about the relationship between variables X and Y without the intrusion of variable Z.
B)   allow one to focus upon micro variables by ignoring macro variables.
C)   allow one to focus upon macro variables by ignoring micro variables.
D)   determine whether X causes Y or vice versa.

Question 15

In drawing a production possibilities curve we hold constant:

Accepted Answer

A)   the money supply.
B)   the consumer price index.
C)   both technology and resource supplies
D)   resource supplies only.

Question 16

The production possibilities curve below shows the hypothetical relationship between the production of capital goods and consumer goods in an economy.
 
-Refer to the above diagram. Curve B is a:

Accepted Answer

A)   production possibilities curve indicating constant opportunity costs.
B)   production possibilities curve indicating increasing opportunity costs.
C)   demand curve indicating that the quantity of consumer goods demanded increases as the price of capital falls.
D)   technology frontier curve.

Question 17

Products and services are scarce because resources are scarce.

Accepted Answer

A) True 
 B)False

Question 18

The following production possibilities table represents an economy which is producing two products, tanks and autos. Refer to the table, in moving from possibility C to D, the cost of a tank in terms of autos is:

Accepted Answer

A)   50.
B)   100.
C)   200.
D)   300.

Question 19

Any combination of goods lying outside of the budget line:

Accepted Answer

A)   implies that the consumer is not spending all of his income.
B)   yields less utility than any point on the budget line.
C)   yields less utility than any point inside the budget line.
D)   is unattainable, given the consumer's income.

Question 20

-A typical concave production possibilities curve implies:

Accepted Answer

A)   that economic resources are scarce.
B)   that society must choose among various attainable combinations of goods.
C)   increasing opportunity costs.
D)   all of the above.

Exam 1: Limits, Alternatives, and Choices

A normative statement is one which:

Correct Answer
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If the equation y = 15 - 4x was plotted, the:

Correct Answer
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Economists:

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Products and services are scarce because resources are scarce.

Correct Answer
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In drawing a production possibilities curve we hold constant:

Correct Answer
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The negative slope of the production possibilities curve is a graphical way of indicating that:

Correct Answer
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-Refer to the above diagram. The combination of computers and bicycles shown by point F:

Correct Answer
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The basic purpose of the "other things equal" assumption is to:

Correct Answer
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Ben says that "An increase in the tax on beer will raise its price." Holly argues that "Taxes should be increased on beer because college students drink too much." We can conclude that:

Correct Answer
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-The linear equation for line (1) on the above graph is:

Correct Answer
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The production possibilities curve below shows the hypothetical relationship between the production of capital goods and consumer goods in an economy. -Refer to the above diagram. Curve B is a:

Correct Answer
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At fast-food restaurants:

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Any combination of goods lying outside of the budget line:

Correct Answer
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Refer to the budget line shown in the diagram below. If the consumer's money income is $20, the:

Correct Answer
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-Although sleeping in on a work day or school day has an opportunity cost, sleeping late on the weekend does not.

Correct Answer
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The following production possibilities table represents an economy which is producing two products, tanks and autos. Refer to the table, in moving from possibility C to D, the cost of a tank in terms of autos is:

Correct Answer
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The term "ceteris paribus" means:

Correct Answer
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-A typical concave production possibilities curve implies:

Correct Answer
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Exam 1: Limits, Alternatives, and Choices

A normative statement is one which:

Correct AnswerverifiedShow Answer

If the equation y = 15 - 4x was plotted, the:

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Economists:

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Products and services are scarce because resources are scarce.

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In drawing a production possibilities curve we hold constant:

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The negative slope of the production possibilities curve is a graphical way of indicating that:

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-Refer to the above diagram. The combination of computers and bicycles shown by point F:

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The basic purpose of the "other things equal" assumption is to:

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Ben says that "An increase in the tax on beer will raise its price." Holly argues that "Taxes should be increased on beer because college students drink too much." We can conclude that:

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-The linear equation for line (1) on the above graph is:

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The production possibilities curve below shows the hypothetical relationship between the production of capital goods and consumer goods in an economy. -Refer to the above diagram. Curve B is a:

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At fast-food restaurants:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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Any combination of goods lying outside of the budget line:

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Refer to the budget line shown in the diagram below. If the consumer's money income is $20, the:

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-Although sleeping in on a work day or school day has an opportunity cost, sleeping late on the weekend does not.

Correct AnswerverifiedShow Answer

The following production possibilities table represents an economy which is producing two products, tanks and autos. Refer to the table, in moving from possibility C to D, the cost of a tank in terms of autos is:

Correct AnswerverifiedShow Answer

The term "ceteris paribus" means:

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-A typical concave production possibilities curve implies:

Correct AnswerverifiedShow Answer

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