61) Which of the following is an example of a normative economic statement?
A) Universal access to quality health insurance is the most important domestic policy issue
of our time.
B) Extending the time in which laid-of workers are eligible to receive government
unemployment compensation has increased the unemployment rate.
C) Lowering marginal income tax rates depresses consumer spending.
D) Prices rise when the government prints too much money.
E) Interest rates rise when the government runs persistent budget deicits.
Skill: Level 2: Using deinitions
Section: Checkpoint 1.2
Status: New
AACSB: Relective thinking
62) A statement that “All children should receive free health care” is an example of what
kind of statement?
A) a fair statement
B) a natural experiment statement
C) a normative statement
D) a positive statement
E) a statement on the margin
Skill: Level 2: Using deinitions
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
63) Which of the following statements is a normative statement?
A) Inlation has been at an all-time low this year.
B) The minimum wage should be increased to $8.50 per hour.
C) Unemployment this month has increased by less than 0.5 percentage point..
D) Additional spending on education has not produced any rise in test scores.
E) Pepsi is less expensive than Coke this week.
Skill: Level 2: Using deinitions
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
41
64) Which of the following is an example of a normative statement?
A) If cars become more expensive, fewer people will buy them.
B) Car prices should be afordable.
C) If wages increase, irms will ire some workers.
D) Fewer people die in larger cars than in smaller cars.
E) Cars emit pollution.
Skill: Level 2: Using deinitions
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
65) Which of the following statements is a normative statement?
A) Every American household should have health care insurance coverage.
B) Military spending as a percent of government spending decreased by 5 percent in the
1990s.
C) Welfare reform has decreased the amount the government spends on welfare.
D) The price of computers fell last year.
E) Fewer people are unemployed this year than last year.
Skill: Level 2: Using deinitions
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
66) Congress and the President passed a national health care policy. This is an example of
A) the government using economic tools to make policy decisions.
B) answering the “how” question.
C) increasing the marginal cost of health care.
D) increasing the marginal beneit of health care.
E) normative versus positive economics.
Skill: Level 2: Using deinitions
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
42
67) Opportunity cost is best deined as
A) how much money is paid for something.
B) how much money and time it takes to consume something.
C) the value of the highest-valued alternative that is forgone in making a choice.
D) the total of all other alternatives that are forgone in making a choice.
E) the sunk cost of any decision.
Skill: Level 1: Deinition
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
68) John has two hours of free time this evening. He ranked his alternatives, irst go to a
concert, second go to a movie, third study for an economics exam, and fourth answer his e-
mail. What is the opportunity cost of attending the concert for John?
A) attending a movie
B) studying for an economics exam
C) answering his e-mail
D) attending a movie, studying for an economics exam, and answering his e-mail
E) going to the concert because that is what John chooses to do
Skill: Level 2: Using deinitions
Section: Checkpoint 1.2
Status: Old
AACSB: Analytical thinking
69) Jamie has enough money to buy either a Mountain Dew, or a Pepsi, or a bag of chips.
He chooses to buy the Mountain Dew. The opportunity cost of the Mountain Dew is
A) the Pepsi and the bag of chips.
B) the Pepsi or the bag of chips, whichever is the highest-valued alternative forgone.
C) the Mountain Dew.
D) the Pepsi because it is a drink, as is the Mountain Dew.
E) zero because he enjoys the Mountain Dew.
Skill: Level 2: Using deinitions
Section: Checkpoint 1.2
Status: Old
AACSB: Analytical thinking
43
70) Amy can study for an hour or spend that hour sleeping or going out for dinner. If she
decides to study for the hour, the opportunity cost of the hour spent studying is
A) deinitely going to sleep.
B) studying, since this is the choice she opted for.
C) sleeping or going out for dinner, whichever she would have preferred the most.
D) sleeping and going out for dinner.
E) deinitely going out to dinner because she must eat at some time.
Skill: Level 2: Using deinitions
Section: Checkpoint 1.2
Status: Old
AACSB: Analytical thinking
71) If there is no scarcity,
A) the opportunity cost of an action would be greater than its sunk cost.
B) an action would have zero opportunity cost.
C) choices are no longer rational.
D) marginal cost of an action is greater than its marginal beneit.
E) all marginal beneits would equal zero.
Skill: Level 3: Using models
Section: Checkpoint 1.2
Status: Old
AACSB: Analytical thinking
72) The beneit of an activity is
A) purely objective and measured in dollars.
B) the gain or pleasure that it brings.
C) the value of its opportunity cost.
D) measured by what must be given up to get one more unit of the activity.
E) not measurable on the margin.
Skill: Level 1: Deinition
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
44
73) The ________ of something is the gain or pleasure that it brings.
A) opportunity cost
B) beneit
C) marginal cost
D) rational choice
E) rational margin
Skill: Level 1: Deinition
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
74) The cost of a one-unit increase in an activity
A) is called the total one-unit cost.
B) is called the marginal cost.
C) decreases as more of the activity is done.
D) is called the marginal beneit/cost.
E) is called the unit cost.
Skill: Level 1: Deinition
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
75) The marginal beneit of an activity is
i. the beneit from a one-unit increase in the activity.
ii. the beneit of a small, unimportant activity.
iii. measured by what the person is willing to give up to get one additional unit of the
activity.
A) i only
B) ii only
C) iii only
D) i and iii
E) ii and iii
Skill: Level 1: Deinition
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
45
76) The additional beneit of increasing some activity by one-unit is called the
A) marginal beneit.
B) opportunity cost.
C) total beneit.
D) scarcity.
E) unit cost/beneit.
Skill: Level 1: Deinition
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
77) If the marginal beneit of the next slice of pizza exceeds the marginal cost, you will
A) eat the slice of pizza.
B) not eat the slice of pizza.
C) be unable to choose between eating or not eating.
D) eat half the slice.
E) More information is needed about how much the marginal beneit exceeds the marginal
cost to determine if you will or will not eat the slice.
Skill: Level 2: Using deinitions
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
78) When people make rational choices, they
A) behave selishly.
B) do not consider their emotions.
C) weigh the costs and beneits of their options and act to satisfy their wants.
D) necessarily make a decision in the social interest.
E) are necessarily making the best decision.
Skill: Level 1: Deinition
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
46
79) By donating $1,000 to the Salvation Army, Caroline reduces her taxable income. To
Caroline, the reduction in her taxable income is
A) a marginal beneit.
B) an opportunity cost.
C) an incentive.
D) a marginal cost.
E) the margin.
Skill: Level 2: Using deinitions
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
80) When the Dallas Cowboys score more than 30 points in a game, they win the game.
This is an example of
A) an economic theory.
B) a correlation.
C) an incentive to win the game.
D) a normative statement.
E) a statement on the margin.
Skill: Level 2: Using deinitions
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
81) A positive statement
A) must always be right.
B) cannot be tested.
C) might be right or wrong.
D) depends on someone’s value judgment.
E) cannot be negative.
Skill: Level 1: Deinition
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
47
82) Which of the following is a positive statement?
A) Taxes should be lower because then people get to keep more of what they earn, so they
will work more.
B) My economics class should last for two terms because it is my favorite class.
C) A 10 percent increase in income leads to a 4 percent increase in the consumption of
beef.
D) Given their negative impact on productivity, the government should eliminate labor
unions.
E) The class average on this test should be more than 80 percent.
Skill: Level 2: Using deinitions
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
83) Which of the following is NOT a normative economic statement?
A) States should reduce the tax on heating fuel oil during the winter.
B) People over the age of 75 should not be allowed to drive cars.
C) Teenagers are responsible for most driving fatalities.
D) We don’t spend enough money on anti-smoking campaigns.
E) The price of gasoline is too high.
Skill: Level 2: Using deinitions
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
1.3 Appendix: Making and Using Graphs
1) The horizontal axis in a graph
A) measures time on a scatter diagram.
B) measures the quality of a variable.
C) is named the y-axis.
D) is named the x-axis.
E) is called the origin.
Skill: Level 1: Deinition
Section: Chapter 1 Appendix – Checkpoint 1
Status: Old
AACSB: Analytical thinking
48
2) Most economic graphs have two lines perpendicular to each other. The vertical line is
called the
A) origin.
B) y-axis.
C) x-axis.
D) variable.
E) time axis.
Skill: Level 1: Deinition
Section: Chapter 1 Appendix – Checkpoint 1
Status: Old
AACSB: Analytical thinking
3) The vertical axis in a graph
A) is named the y-axis.
B) is named the x-axis.
C) measures time in a cross-section and time series graph.
D) has no origin.
E) measures time only in a time series graph.
Skill: Level 1: Deinition
Section: Chapter 1 Appendix – Checkpoint 1
Status: Old
AACSB: Analytical thinking
4) Most economic graphs have two lines perpendicular to each other. Where these lines
meet is called the
A) origin.
B) y-axis.
C) x-axis.
D) variable.
E) point of beginning.
Skill: Level 1: Deinition
Section: Chapter 1 Appendix – Checkpoint 1
Status: Old
AACSB: Analytical thinking
49
5) A graph of the value of one variable against the value of another variable is known as a
A) two-dimensional graph.
B) three-dimensional graph.
C) time-series graph.
D) scatter diagram.
E) two-variable graph.
Skill: Level 1: Deinition
Section: Chapter 1 Appendix – Checkpoint 1
Status: Old
AACSB: Analytical thinking
6) A scatter diagram can be used to see
A) if the value of a variable is rising or falling.
B) the value of a variable for diferent groups in a population.
C) if a relationship exists between two variables.
D) how a variable behaves over time.
E) whether a variable is positively or negatively related to itself.
Skill: Level 1: Deinition
Section: Chapter 1 Appendix – Checkpoint 1
Status: Old
AACSB: Analytical thinking
7) To show how a variable ________, we typically use a ________.
A) relates to another variable; time series graph
B) relates to another variable; pie chart
C) changes over time; time series graph
D) changes over time; cross section graph
E) changes over time; cross time chart
Skill: Level 1: Deinition
Section: Chapter 1 Appendix – Checkpoint 1
Status: Old
AACSB: Analytical thinking
50