67)
Which of the following statements is NOT true?
67)
A)
Economics is the study of how people allocate their limited resources to satisfy their
unlimited wants.
B)
Economics is a social science.
C)
Economics does not use theories.
D)
Economics is an empirical science.
68)
Models must
68)
A)
be able to yield useable predictions.
B)
be totally realistic in every detail.
C)
include every relationship that exists.
D)
be a complete reproduction of the real world.
Explanation:
69)
If a straight line crosses the Y–axis at 5 and crosses the X–axis at 10, we can conclude that the slope
of the line is
69)
A)
infinity.
B)
zero.
C)
negative.
D)
positive.
Explanation:
70)
Which one of the following is an example of a normative statement?
70)
A)
The average public school teacher earns more than the average truck driver.
B)
Public school teachers are not paid enough.
C)
The average public school teacher earns less than the average truck driver.
D)
Students in smaller classes perform better on standardized tests.
Explanation:
71)
The intersection of the x axis and the y axis is called the
71)
A)
“meeting point.“
B)
origin.
C)
corresponding point.
D)
“zero” point.
Explanation:
Explanation:
72)
It is assumed in economics that people make decisions based upon
72)
A)
tradition.
B)
altruism.
C)
rational self–interest.
D)
governmental persuasion.
73)
“No individual should have less than $20,000 income in the United States in 2010″ is an example of
73)
A)
an illogical and refutable statement.
B)
a normative statement.
C)
a positive statement.
D)
a truism.
74)
Jose is rational if he
74)
A)
does not intentionally make decisions that would leave him worse off.
B)
always uses a model or mathematical formula to help him make a decision.
C)
only responds to rewards that involve money.
D)
never makes a mistake in his life.
75)
A possible rational reason why older people, on average, show less interest in learning how to use
new technologies is because
75)
A)
they are acting irrationally.
B)
older people are not as smart as (today’s) young people.
C)
the financial cost for older people is greater than the cost to younger people.
D)
they have fewer years to gain a return from learning how to use new technologies.
76)
To test their theories, economists usually have to
76)
A)
set up careful laboratory experiments with all variables controlled.
B)
use only models that have a proven record of success.
C)
first examine theory and what has happened in the past in the real world.
D)
anticipate every factor with 100 percent accuracy.
77)
Which of the following would NOT provide an incentive to reduce the amount of beef consumed?
77)
A)
A ban on beef sales by the Food and Drug Administration
B)
A decrease in the price of chicken
C)
An increase in the price of beef
D)
A subsidy to buyers of beef
78)
One topic of study for a microeconomist would be the
78)
A)
effects of a gasoline price increase on consumer behavior.
B)
causes of inflation.
C)
effects of an increase in government spending on overall economic activity.
D)
causes of aggregate unemployment.
79)
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?
79)
A)
You constructed a model that made a prediction, and the prediction was refuted.
B)
You roommate does not know his own preferences as well as you do.
C)
Your roommate is irrational.
D)
Your roommate does not know what is in his own best interests.
80)
Which of the following is always true of rational behavior?
80)
A)
It always entails pursuing one‘s own best interest.
B)
It never involves taking into account the interests of others.
C)
It never involves the pursuit of greedy self–interest.
D)
It always yields the best possible outcome for all individuals.
81)
Macroeconomics is concerned with studying the
81)
A)
behavior of individual decision makers.
B)
prices of specific companies‘ stocks.
C)
wants of individuals.
D)
behavior of the economy as a whole.
82)
The rationality assumption states that
82)
A)
people make decisions regardless of how the outcome will affect them.
B)
all actions taken by consumers are based on what is good for society.
C)
people make decisions to buy only those goods that they need rather than goods that they
want.
D)
people do not intentionally make decisions that would leave them worse off.
83)
Economics is the study of how people make
83)
A)
investments.
B)
money.
C)
choices.
D)
judgments.
84)
An example of a microeconomic decision is a situation in which
84)
A)
Congress and the president seek to reach a compromise on how much to increase government
spending in an effort to influence national expenditures.
B)
the U.S. Treasury contemplates buying foreign currencies in an effort to influence exchange
rates with an aim to boosting demand for U.S. goods and services.
C)
a firm evaluates how much to reduce the price of its product in an effort to influence sales and
boost its profits.
D)
the Federal Reserve considers how much to increase the money supply during the coming
month in an effort to constrain the rate of inflation.
85)
The assumption that individuals do NOT intentionally make decisions that would leave them
worse off is referred to as
85)
A)
the premium assumption.
B)
the rationality assumption.
C)
the law of demand.
D)
the law of comparative advantage.
86)
Normative economics involves
86)
A)
a statement that is purely descriptive.
B)
a statement of fact.
C)
a statement of “what is.”
D)
a statement of “what should be.”
D
87)
What is the type of mechanism that answers the basic economic questions through a decentralized
decision making process?
87)
A)
Command and control
B)
Mixed economic system
C)
Dictatorship
D)
Market system
D
88)
An economic system is
88)
A)
a way to create new resources.
B)
the universe of all resources.
C)
a mechanism to allocate scarce resources.
D)
an organization that generates profits.
C
89)
What is the type of economic system that relies on one central authority to make economic
decisions?
89)
A)
Price system
B)
Command and control
C)
Mixed economic system
D)
Free market
B
B
90)
The assumption that people do not intentionally make decisions that would leave them worse off is
known as
90)
A)
the normative assumption.
B)
the microeconomic assumption.
C)
the ceteris paribus assumption.
D)
the rationality assumption.
91)
Macroeconomics deals with ________ while microeconomics deals with ________.
91)
A)
choices of rich people; choices of poor people
B)
economywide choices; choices of individuals
C)
choices that involve money; choices that does not involve money
D)
choices important to people; choices not important to people
92)
Why is economics called an empirical science?
92)
A)
because economics relies on real–world data to determine the usefulness of a model
B)
because economics utilizes intuition rather than data to evaluate a model’s worth
C)
because economics has been used to both create and destroy empires
D)
because economics uses impressions to evaluate the usefulness of its models
93)
The use of data in economic models is important because
93)
A)
social problems analyzed by economists require long streams of data.
B)
the models are always complex in nature.
C)
models must analyze every possible angle of the problem.
D)
the model’s predictive value rests on supportive evidence from real–world data.
94)
Positive economic analysis is said to be
94)
A)
objective.
B)
value–laden.
C)
right.
D)
true.
95)
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
95)
A)
ask business people whether it is true or not.
B)
find out whether U.S. businesses are more profitable than European businesses.
C)
see whether it generates accurate predictions about the choices of business people.
D)
take a survey of people and see if they agree with this assumption.
96)
According to proponents of behavioral economics, because every possible choice cannot be
considered, an individual will tend to fall back on methods of making decisions that are simpler
than trying to sort through every single possibility, known as
96)
A)
normative decisions.
B)
irrational choices.
C)
rational options.
D)
rules of thumb.
97)
Which one of the following is an example of a positive statement?
97)
A)
State governments should provide economic assistance to farmers.
B)
The federal government should provide economic assistance to farmers.
C)
The amount of financial assistance given to farmers is higher this year than it was 10 years
ago.
D)
Farmers need some type of government aid.
98)
Which of the following is NOT an alleged “unrealistic” assumption that proponents of behavioral
economics suggest are commonly utilized in traditional economic models based on the rationality
assumption?
98)
A)
unbounded resources
B)
unbounded rationality
C)
unbounded selfishness
D)
unbounded will power
99)
Macroeconomics might study which of the following?
99)
A)
the causes of domestic unemployment
B)
determinants of the prices of rare goods (e.g., diamonds)
C)
decision making undertaken by firms
D)
decision making undertaken by households
100)
Economics is most precisely defined as
100)
A)
a study of the mechanics of buying and selling on the stock exchange.
B)
a study of how culture evolves in different geographic areas.
C)
the study of how people make choices.
D)
the same as the study of finance and management.
C
SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question.
101)
“Rational, self–interested people would never end up worse off by any decision they make.
Obviously, people often make mistakes or have regrets. Therefore, people do not act
rationally or out of self–interest.” Do you agree with these statements? Why or why not?
101)
102)
Distinguish between a command–and–control economic system and a price system.
102)
A
103)
Suppose a survey is taken concerning car safety. According to the survey, people strongly
desire safer cars and indicate they are willing to pay substantially more for safer cars.
Using this information, one auto firm adds numerous safety features to its car, raising the
price by several thousand dollars. Sales drop sharply, and the firm loses profits. What went
wrong?
103)
104)
What does it mean to say economics is an empirical science, and how is this related to the
question of deciding on the usefulness of a model?
104)
105)
What is economics and what does it try to explain?
105)
106)
What assumption about human motivation is made in economics? Explain.
106)
107)
“To be useful, a model must be completely realistic.” Evaluate.
107)
108)
What does scarcity have to do with the fact that people must make choices?
108)
109)
“A positive economic statement is always true and a normative economic statement is
always false.” Do you agree or disagree with this statement? Explain.
109)
110)
What is the purpose of knowing “the economic way of thinking”?
110)
111)
What is meant by the term “incentives,” and why are they important?
111)
112)
Explain the study of economics.
112)
113)
Is inflation a macroeconomic or a microeconomic question? Why?
113)
114)
Distinguish between macroeconomics and microeconomics.
114)
115)
Explain what economists mean when they apply the rationality assumption.
115)
116)
During the Middle Ages, heretics were often burned at the stake. Were the heretics
violating the assumption of rational self–interest? Explain.
116)
117)
“Economists assume people are selfish.” Do you agree with this statement or not? Explain.
117)
Answer Key
Testname: C1
Answer Key
Testname: C1
Answer Key
Testname: C1
Answer Key
Testname: C1
30