Question 1

The hypothesis that people are nearly, but not fully rational, cannot possibly fully examine every available choice, and utilize simple rules of thumb in making decisions is known as the

Accepted Answer

A)  irrationality hypothesis.
B)  ceteris paribus hypothesis.
C)  individual aggregation hypothesis.
D)  bounded rationality hypothesis.

Question 2

What would lead an economist to conclude that Theory A is superior to Theory B?

Accepted Answer

A)  Theory A predicts real-world events better than does Theory B.
B)  The assumptions underlying Theory A are more realistic than are the assumptions underlying Theory B.
C)  Theory A explains how people think, whereas Theory B only explains what they do.
D)  Theory A is based on the assumption that an individual typically cannot determine what is in his or her own best interest, whereas Theory B assumes that each person knows what is in his or her own best interest and acts accordingly.

Question 3

A possible rational reason why older people, on average, show less interest in learning how to use new technologies is because

Accepted Answer

A)  older people are not as smart as (today's) young people.
B)  they are acting irrationally.
C)  they have fewer years to gain a return from learning how to use new technologies.
D)  the financial cost for older people is greater than the cost to younger people.

Question 4

Which of the following is an example of a positive economic statement?

Accepted Answer

A)  In order to reduce the budget deficit, tax rates should be increased.
B)  In order to increase employment, the minimum wage should be decreased.
C)  If payroll taxes are raised, then the Social Security crisis will be resolved.
D)  If gas prices fall, consumers should purchase more gas.

Question 5

Based on your understanding of your roommate's preferences, you predict that he will select the spaghetti for his lunch at the cafeteria, but instead he chooses the gyros. How do you describe this event in terms of economic theory?

Accepted Answer

A)  Your roommate is irrational.
B)  Your roommate does not know what is in his own best interests.
C)  You roommate does not know his own preferences as well as you do.
D)  You constructed a model that made a prediction, and the prediction was refuted.

Question 6

If the government offers to reduce your property taxes by 10 percent if you install solar heating for your home, this would be an example of

Accepted Answer

A)  police power.
B)  incentives.
C)  disincentives.
D)  ceteris paribus.

Question 7

An inverse relationship will be graphed as

Accepted Answer

A)  a line that is upward sloping.
B)  a line that is downward sloping.
C)  a loop.
D)  a U-shaped curve.

Question 8

What is economics and what does it try to explain?

Accepted Answer

Economics is the study of how people all...

Question 9

Normative economic analysis tends to

Accepted Answer

A)  generate testable hypotheses.
B)  include the way someone thinks things should be or ought to be.
C)  involve descriptive statements.
D)  lead to empirical testing of data.

Question 10

Which of the following would likely be considered as falling into the domain of microeconomics?

Accepted Answer

A)  the U.S. unemployment rate
B)  the Gross Domestic Product
C)  the price of apples
D)  the effects of fiscal policy on the U.S. economy

Question 11

Which statement most accurately defines economics?

Accepted Answer

A)  Economics is the study of how people make money.
B)  Economics is the study of how people make choices to satisfy their wants.
C)  Economics is the study of values a society should choose.
D)  Economics is the study of how to eliminate scarcity.

Question 12

If economists are making the assumption that business people try to maximize profits, the best way to determine whether this assumption is useful or not is to

Accepted Answer

A)  see whether it generates accurate predictions about the choices of business people.
B)  ask business people whether it is true or not.
C)  find out whether U.S. businesses are more profitable than European businesses.
D)  take a survey of people and see if they agree with this assumption.

Question 13

In constructing models, economists

Accepted Answer

A)  include all independent variables.
B)  include all available information.
C)  attempt to duplicate the real world.
D)  make simplifying assumptions.

Question 14

Which of the following is an example of an application of the ceteris paribus assumption?

Accepted Answer

A)  An analysis of how price changes affect how much of a good people will purchase when all other factors are held constant
B)  An analysis of how people purchase more goods when prices decline and income increases
C)  After reading an article on the dangers of high-fat diets, an individual buys less red meat when prices increase
D)  An analysis of how worker productivity increases when a firm invests in new machines and training programs

Question 15

Microeconomics is concerned with studying which of the following?

Accepted Answer

A)  the determinants of national unemployment
B)  the effects of monetary policy
C)  the study of individual markets
D)  all of the above

Question 16

Analysis that involves value judgments about economic policies is

Accepted Answer

A)  positive economics.
B)  normative economics.
C)  microeconomics.
D)  macroeconomics.

Question 17

Which of the following ways to recruit soldiers utilizes incentives?

Accepted Answer

A)  a draft
B)  universal service
C)  higher salaries
D)  longer lengths of service

Question 18

-In the above graphs, an inverse relationship is shown by

Accepted Answer

A)  Graph A.
B)  Graph B.
C)  Graph C.
D)  Graph D.

Question 19

"The U.S. government should not use my tax dollars to subsidize people on welfare"

Accepted Answer

A)  is a positive economic statement because it simply describes one person's opinion.
B)  is a normative economic statement because it involves a value judgment about an economic policy.
C)  is a positive economic statement because it predicts that my tax dollars will go to welfare.
D)  is a normative economic statement because it is a scientific fact.

Question 20

Ceteris paribus means

Accepted Answer

A)  all men are created equal.
B)  wage parity between men and women is a worthy goal.
C)  there are an infinite number of factors affecting each human decision and they change all the time.
D)  economists isolate one or two factors that change when analyzing human decisions.

Exam 1: The Nature of Economics

Based on your understanding of your roommate's preferences, you predict that he will select the spaghetti for his lunch at the cafeteria, but instead he chooses the gyros. How do you describe this event in terms of economic theory?

Correct AnswerverifiedShow Answer

What would lead an economist to conclude that Theory A is superior to Theory B?

Correct AnswerverifiedShow Answer

Normative economic analysis tends to

Correct AnswerverifiedShow Answer

Ceteris paribus means

Correct AnswerverifiedShow Answer

Which of the following ways to recruit soldiers utilizes incentives?

Correct AnswerverifiedShow Answer

-In the above graphs, an inverse relationship is shown by

Correct AnswerverifiedShow Answer

Which statement most accurately defines economics?

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"The U.S. government should not use my tax dollars to subsidize people on welfare"

Correct AnswerverifiedShow Answer

Which of the following is an example of a positive economic statement?

Correct AnswerverifiedShow Answer

The hypothesis that people are nearly, but not fully rational, cannot possibly fully examine every available choice, and utilize simple rules of thumb in making decisions is known as the

Correct AnswerverifiedShow Answer

Analysis that involves value judgments about economic policies is

Correct AnswerverifiedShow Answer

Microeconomics is concerned with studying which of the following?

Correct AnswerverifiedShow Answer

If the government offers to reduce your property taxes by 10 percent if you install solar heating for your home, this would be an example of

Correct AnswerverifiedShow Answer

Which of the following is an example of an application of the ceteris paribus assumption?

Correct AnswerverifiedShow Answer

A possible rational reason why older people, on average, show less interest in learning how to use new technologies is because

Correct AnswerverifiedShow Answer

In constructing models, economists

Correct AnswerverifiedShow Answer

What is economics and what does it try to explain?

Correct AnswerverifiedEconomics is the study of how people all...View AnswerShow Answer

Which of the following would likely be considered as falling into the domain of microeconomics?

Correct AnswerverifiedShow Answer

If economists are making the assumption that business people try to maximize profits, the best way to determine whether this assumption is useful or not is to

Correct AnswerverifiedShow Answer

An inverse relationship will be graphed as

Correct AnswerverifiedShow Answer

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Economics is the study of how people all...
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