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Test Bank: I
Topi c:
Unemployment, Growth, and the Future
187.
A country can achieve some combination of goods outside its production possibilities
curve by
A. idling some of its resources.
188.
In recent years the economy of Japan has grown, despite the fact that the population of
Japan has declined. Which of the following would best explain Japan‘s economic
growth
despite having a smaller population?
A. immigration of new workers into Japan
189.
(Consider This) Free products offered by firms
D.
are usually items nobody wants.
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190.
(Consider This) The assertion by economists that “there is no free lunch“
A.
is contradicted by the presence of free goods offered by firms.
191.
(Consider This) The economic perspective used in customer decision making at fast-
food restaurants is reflected in
D.
irrational purchasing of high–fat-content food.
192.
(Consider This) At fast-food restaurants
A.
consumers enjoy complete and accurate information.
193.
(Consider This) Consumers might leave a fast-food restaurant without being served
because
A. they are misinformed about the marginal cost and marginal benefits of the food being
served.
194.
(Consider This) A direct cost of going to college is
A.
tuition, while an indirect cost (opportunity cost) is books and other supplies.
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195.
(Consider This) An exception to the advice “go to college, stay in college, and earn a
degree” occurs when
A. tuition expenses are high and rising.
196.
(Consider This) Refer to the diagram. The direct economic impact of the destruction and
loss of lives caused by the terrorist attacks of September 11, 2001, is
illustrated by the
C.
move from x to y on production possibilities curve AB.
D.
move from y to x on production possibilities curve AB.
197.
(Consider This) Refer to the diagram. The U.S. response to the events of September 11,
2001, is illustrated by the
A.
shift of the production possibilities curve from CD to AB.
B.
shift of the production possibilities curve from AB to CD.
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198.
(Consider This) Refer to the diagram. Suppose that point y represents the optimal
combination of civilian goods and defense goods. We can conclude that at y, the
marginal benefit of defense goods
A. exceeds the marginal cost of defense goods.
199.
(Consider This) In response to the terrorist attacks of September 11, 2001, the
government decided to allocate more resources toward defense goods. The government’s
decision reflects their assessment that
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D.
civilian goods are not worth producing.
200.
(Last Word) The fallacy of composition states that
A.
because economic systems are composed of so many diverse economic units, economic
laws are necessarily inexact.
201.
(Last Word) The “after this, therefore because of this” fallacy states that
D.
generalizations that are accurate at the level of microeconomics may be inaccurate at the
level of macroeconomics.
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202.
(Last Word) The safest way for an individual to leave a burning theater is to run for
the nearest exit; it is therefore also the best means of escape for a large audience.
This
assertion illustrates the
A.
“after this, therefore because of this” fallacy.
203.
(Last Word) The post hoc, ergo propter hoc fallacy suggests that
A.
positive statements are always followed by normative judgments.
204.
(Last Word) Which of the following has to do with the problem of distinguishing cause
and effect in economic reasoning?
A.
the law of large numbers
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205.
(Last Word) Which of the following best illustrates the post hoc, ergo propter hoc
fallacy?
A. Because it was 90 degrees today, I worked up a sweat playing tennis.
206.
(Last Word) The fallacy of composition is essentially the error of
A.
omitting relevant variables in constructing a model.
B.
reasoning from the general to the particular.
207.
(Last Word) The post hoc fallacy and the correlation problem both relate to
A. the calculation of marginal costs and marginal benefits of any economic activity.
208.
(Last Word) If variables X and Y are positively correlated, this means that
A.
X is the cause of Y.
209.
(Last Word) “The government deregulated the electricity industry in California, and
a shortage of electricity soon occurred. It is clear that the deregulation caused the
shortage.” This statement needs careful analysis because it may reflect the
A. fallacy of composition.
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210.
(Last Word) A caller to a radio talk show states that oil companies are “greedy price
gougers.” This is an example of
D.
the economic perspective.
211.
(Last Word) A caller to a radio talk show states that protesters against
globalization are a collection of “anarchist punks, naïve college students, and trade
union
radicals.” This is an example of
A.
the fallacy of composition.
212.
(Last Word) A study found that the incidence of skin cancer increases along with the
amount of time people work under fluorescent light, leading some people to
conclude
that fluorescent lighting is a cause of skin cancer. But further analysis found that people
who work in offices, where fluorescent light is common, suffer more
sunburn on their
vacations than other workers. The sunburns, not the fluorescent light, were the cause of
the higher incidence of skin cancer. The original conclusion
illustrates
A. the fallacy of composition.
True / False Questions
213.
An economic model is an ideal or utopian type of economy that society should strive to
obtain through economic policy.
214.
Because economic generalizations are simplifications from reality, they are impractical
and useless.
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Test Bank: I
To p i c :
Theories, Principles, and Models
215.
If economic theories are solidly based on relevant facts, then appropriate economic
policy becomes obvious and uncontroversial.
216.
Normative statements are expressions of facts.
217.
Positive statements are expressions of value judgments.
218.
Macroeconomics explains the behavior of individual households and business firms;
microeconomics is concerned with the behavior of aggregates or the economy as a
whole.
219.
Purposeful behavior implies that everyone will make identical choices.
220.
Marginal analysis means that decision makers compare the extra benefits with the extra
costs of a specific choice.
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221.
Rational individuals may make different choices because their preferences and
circumstances differ.
222.
Choices entail marginal costs because resources are scarce.
223.
The production possibilities curve shows various combinations of two products that an
economy can produce when achieving full employment.
224.
The entrepreneur’s sole function is to combine other resources (land, labor, and capital)
in the production of some good or service.
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225.
Products and services are scarce because resources are scarce.
226.
An economy cannot produce at a point outside of its production possibilities curve
because human economic wants are insatiable.
227.
The process by which capital goods are accumulated is known as investment.
228.
The present choice of position on the production possibilities curve will not influence
the future location of the curve.
229.
Although sleeping in on a work day or school day has an opportunity cost, sleeping late
on the weekend does not.
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230.
Refer to the diagram. Given production possibilities curve a, the combination of civilian and
war goods indicated by point X is unattainable to this economy.
231.
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Refer to the diagram. Given production possibilities curve a, point Y indicates that society is
failing to use available resources efficiently.
232.
Refer to the diagram. The movement from curve a to curve b could be explained by an
increase in the quantity and/or quality of society’s productive resources.
233.
Refer to the diagram. The movement from curve a to curve c suggests an improvement in
civilian goods technology but not in war goods technology.