177)
The slope of a straight line
177)
A)
is the same at all points along that line.
B)
is always equal to zero.
C)
changes from one point to the next on that line.
D)
cannot be defined.
178)
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
178)
A)
ask business people whether it is true or not.
B)
take a survey of people and see if they agree with this assumption.
C)
find out whether U.S. businesses are more profitable than European businesses.
D)
see whether it generates accurate predictions about the choices of business people.
D
179)
Which of the following is NOT a focus of the study of economics?
179)
A)
B)
C)
D)
D
180)
The assumption that people do not intentionally make decisions that would leave them worse off is
known as
180)
A)
B)
C)
D)
D
181)
The idea of bounded rationality is used to address all of the following characteristics EXCEPT
181)
A)
B)
C)
D)
B
A
182)
People respond to incentives
182)
A)
by ignoring negative incentives and responding to positive incentives only.
B)
when they have low incomes.
C)
as they never intentionally make decisions that would leave them worse off.
D)
only when they are irrational.
183)
Underlying economic theory is the idea that
183)
A)
value judgments do not play a role in the economic decisions people make.
B)
choices are affected by both positive and negative incentives.
C)
money is the only incentive that matters.
D)
people respond only to negative incentives, not to positive ones.
Explanation:
184)
One reason why economists often use models in their analysis is that
184)
A)
a model relates to individual thought processes rather than behavior.
B)
it is relatively easy to perfectly specify a model.
C)
a model helps us to understand, explain, and predict economic phenomena in the real world.
D)
a model accurately pictures every detail of the real world economy.
Explanation:
185)
In economics, the concept that individuals are motivated by self–interest and respond predictably
to opportunities for gain is known as
185)
A)
B)
C)
D)
Explanation:
Explanation:
186)
Economic models
186)
A)
are essential representations of the real world.
B)
are used to explain how people think.
C)
are never used for making economic projections or predictions.
D)
are used to explain how people behave.
187)
What would lead an economist to conclude that Theory A is superior to Theory B?
187)
A)
Theory A predicts real–world events better than does Theory B.
B)
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.
C)
The assumptions underlying Theory A are more realistic than are the assumptions underlying
Theory B.
D)
Theory A explains how people think, whereas Theory B only explains what they do.
188)
Analysis that involves value judgments about economic policies is
188)
A)
B)
C)
D)
189)
The headline in the local paper today is “College tuition next fall rise by 6 percent.” This statement
is an example of
189)
A)
B)
C)
D)
190)
Which of the following statements is TRUE?
190)
A)
No economic model captures every detail that affects a problem.
B)
Economic models use economists’ opinions with no use of data.
C)
Economic models always make accurate predictions about behaviors.
D)
Economic models must fully reflect reality.
191)
Which of the following is a microeconomic concern?
191)
A)
national output of the United States
B)
consumer behavior
C)
the rate of economic growth in the United States
D)
the current unemployment rate in the United States
B
192)
Which of the following would most likely NOT be taught in a macroeconomics course?
192)
A)
changes in the health care industry
B)
the relationship between the inflation rate and the unemployment rate
C)
government actions in response to a slowdown in the economy
D)
factors leading to different economic growth rates among countries
A
193)
All of the following are aspects of microeconomics EXCEPT
193)
A)
a worker choosing one job over another.
B)
monopolies.
C)
the average level of prices of all goods and services produced in a country in a year.
D)
a firm maximizing profit.
C
A
194)
The way that a society uses to allocate resources to satisfy human wants is called
194)
A)
B)
C)
D)
195)
The impact of an increase in the gasoline tax on SUV sales is
195)
A)
not an economic issue, but rather a political issue.
B)
insignificant.
C)
a macroeconomics topic because it deals with taxes.
D)
a microeconomics topic because it deals with one industry.
D
196)
“If the United States enters a war in the Middle East, gasoline prices will go up.” This statement is
an example of
196)
A)
B)
C)
D)
B
197)
Assumptions are necessary to
197)
A)
define the relationship between wants and resources under all circumstances.
B)
define the specific cause and effect relationship that is being explained by social sciences.
C)
define a set of circumstances where a model is most likely to apply.
D)
make economics a social science.
C
198)
The assumption that individuals will not intentionally make decisions that will leave them worse
off is known as
198)
A)
B)
C)
D)
A
C
199)
A five–cent deposit on beer bottles
199)
A)
provides a negative incentive because it punishes people who do not recycle.
B)
provides a positive incentive because it rewards people for recycling.
C)
is an irrational policy, because it fails to take into account incentives.
D)
is an irrational policy, because it fails to take into account self–interest.
200)
A fundamental aspect of economics is to
200)
A)
ensure that every firm makes a profit.
B)
satisfy all our wants.
C)
analyze how choices are made.
D)
make sure that our resources will always be unlimited.
C
201)
Because resources are scarce relative to wants, the study of economics concerns
201)
A)
how money is used to buy what people want.
B)
how money is important to people.
C)
how individuals, businesses, and governments make choices.
D)
None of the above are correct.
C
202)
Which of the following is a microeconomic topic?
202)
A)
the increase in the amount of imports from China to the United States
B)
the increase in the employment level of the United States in the past year
C)
the rate at which the cost of living has increased in Canada
D)
the marketing strategy of the Apple Computer company
D
B
203)
Economists develop models to
203)
A)
justify the assumptions they make about people‘s behavior.
B)
make their arguments more realistic.
C)
help us understand economic phenomena in the real world.
D)
capture every detail of the real world.
204)
A difference between biology and economics is that
204)
A)
biologists often use laboratory methods and economists do less often.
B)
economists use models and biologists use theories.
C)
economics explains events while biology predict events.
D)
biologists use the scientific method while economists do not.
205)
Normative economics is
205)
A)
analysis that is strictly limited to making either purely descriptive statements or scientific
predictions.
B)
decision making undertaken by households and business firms.
C)
analysis involving value judgments about economic policies; or a statement of “what ought to
be.”
D)
analysis of the behavior of the economy as a whole.
206)
The questions that an economic system attempts to solve include
206)
A)
B)
C)
D)
207)
Economics deals with
207)
A)
how individuals allocate scarce resources to satisfy unlimited human wants.
B)
how to satisfy limited human wants.
C)
how society allocates unlimited resources.
D)
how to profit from the stock market.
208)
Which of the following is an example of a positive economic statement?
208)
A)
In order to reduce the budget deficit, tax rates should be increased.
B)
If payroll taxes are raised, then the Social Security crisis will be resolved.
C)
In order to increase employment, the minimum wage should be decreased.
D)
If gas prices fall, consumers should purchase more gas.
209)
When the text refers to rational self–interest, it means
209)
A)
behavior that makes society better off.
B)
your focus on your own contributions to society.
C)
behavior that helps your employer earn higher profits.
D)
your looking out for what is best for you as an individual.
210)
In economics, items that are used to produce goods and services are known as
210)
A)
resources.
B)
aggregates.
C)
wants.
D)
factors of need.
211)
All of the following are examples of macroeconomic problems EXCEPT
211)
A)
inflationary pressures caused by an increase in the cost of petroleum.
B)
a decline in the rate of overall economic growth.
C)
unemployment caused by a fall off in the level of residential construction.
D)
consumers deciding to buy more fish and less beef because of concerns about a healthier diet.
212)
“All Americans should have access to health care” is an example of
212)
A)
B)
C)
D)
213)
If the slope of a curve is 1/5, we know that
213)
A)
the relationship is linear, and the line moves from lower left to upper right.
B)
the relationship is linear, and the line moves from upper left to lower right.
C)
the relationship is non–linear, and the line moves from lower left to upper right.
D)
the relationship is non–linear, and the line moves from upper left to lower right.
A
214)
Holding all variables constant but one and assessing the impact of the one variable that has
changed is an example of using
214)
A)
an economic model based on unrealistic assumptions.
B)
the ceteris paribus assumption.
C)
an untestable proposition.
D)
a flawed economic model.
B
215)
Economic theory predicts that people make choices in a manner that
215)
A)
makes them better off.
B)
reflects the fact that resources are unlimited.
C)
makes them well liked by others.
D)
shows that they do not respond to monetary incentives.
A
216)
What type of economics would most typically deal with aggregates?
216)
A)
B)
C)
D)
C
A
217)
How does the science of economics deal with the fact that we all have different values?
217)
A)
by surveying the public to see what the most common values are, and then incorporating
those as assumptions into their models
B)
by using positive analysis
C)
by seeking to discover the sources of different value systems
D)
by assuming that values don’t play a role in economic behavior
218)
An economic model should capture
218)
A)
only social value related variables.
B)
the essential relationships that help to analyze the problem.
C)
all possible variables that apply to the problem.
D)
all of the above.
219)
Mary says she plans to return to college next semester assuming her car keeps running, tuition fees
don’t go up, and her daycare provider continues to be dependable. An economist would say that
Mary plans to return to college next semester
219)
A)
laissez faire.
B)
ipso facto.
C)
ceteris paribus.
D)
caveat emptor.
220)
The rationality assumption states that
220)
A)
people make decisions to buy only those goods that they need rather than goods that they
want.
B)
people do not intentionally make decisions that would leave them worse off.
C)
people make decisions regardless of how the outcome will affect them.
D)
all actions taken by consumers are based on what is good for society.
221)
A friend wants to learn how the unemployment rate is calculated and how inflation is measured.
He asks you which economics course to take and you advise him to enroll in
221)
A)
either micro– or macroeconomics. They both concentrate equally on those issues.
B)
macroeconomics.
C)
microeconomics.
D)
financial accounting because economics doesn’t address those topics in its courses.
222)
A poll conducted by a national firm finds that most Americans say they care more about safety
when buying a car than about fuel efficiency. As a result, a car maker produces a car with many
safety features, but it doesn‘t sell well. This behavior
222)
A)
does not contradict economic theory because economic theory only relates to prices and not to
features such as safety.
B)
contradicts economic theory because it is irrational not to purchase safer cars.
C)
does not contradict economic theory because economists focus on what people do rather than
on what they say.
D)
contradicts economic theory because the people didn’t do what they said they would do.
C
223)
In the above graphs, an inverse relationship is shown by
223)
A)
Graph A.
B)
Graph B.
C)
Graph C.
D)
Graph D.
A
B
224)
Normative economic statements
224)
A)
are statements that may be tested by referring to facts and data.
B)
are statements of “what is.”
C)
do not involve value judgments.
D)
are statements of “what ought to be.”
225)
The “paired observation” of (–14, –6) means
225)
A)
the origin is at –14 and –6.
B)
x = – 14, y = – 6
C)
x = – 6, y = – 14
D)
that the distance between the two points will be 8.
226)
Economics seeks to use only positive analysis to
226)
A)
B)
C)
D)
227)
Which of the following ways to recruit soldiers utilizes incentives?
227)
A)
B)
C)
D)
228)
Which of the following topics is a macroeconomic subject?
228)
A)
the level of sales at a particular department store
B)
increases in the overall price level of the United States
C)
a proposed merger between two companies
D)
the decision of an automobile manufacturer
229)
Normative economics
229)
A)
involves value judgments.
B)
cannot be applied to all economic problems.
C)
is never studied at the undergraduate level.
D)
is always objective.
230)
Economic models are used to
230)
A)
B)
C)
D)
C
231)
Which of the following would likely be considered as a topic of microeconomics?
231)
A)
B)
C)
D)
A
232)
One topic of study for a microeconomist would be the
232)
A)
effects of a gasoline price increase on consumer behavior.
B)
causes of inflation.
C)
causes of a nation’s unemployment level.
D)
effects of an increase in government spending on overall economic activity.
A
233)
Which of the following is a positive economic statement?
233)
A)
If the price of eggs increases, the quantity demanded of bacon will fall.
B)
We should try to eliminate poverty in the United States.
C)
We should strive to achieve full employment in the United States.
D)
The President of the United States should promote stable prices in the United States.
A
A
234)
Incentives are
234)
A)
ineffective as a device to get people to behave in a certain fashion.
B)
potential rewards available if a particular activity is undertaken.
C)
useless when people behave rationally.
D)
inappropriate ways to obtain a certain kind of behavior.
235)
Rational self–interest means
235)
A)
pursuing activities that maximize income.
B)
always pursuing activities that are consistent with your faith.
C)
always increasing your wealth.
D)
pursuing what makes you better off.
236)
Which of the following statements is an example of positive economic analysis?
236)
A)
If the government increases the rate of growth of the money supply, the inflation rate will
increase, ceteris paribus.
B)
The inflation rate is too high.
C)
The elderly live on a fixed income, so the government has an obligation to keep inflation rates
low.
D)
The government should worry less about inflation and more about unemployment.
237)
In his book, An Inquiry into the Nature and Causes of the Wealth of Nations, economist Adam Smith
argued that individuals
237)
A)
always tend to act in an altruistic manner.
B)
are generally not concerned with economic questions.
C)
are motivated by self–interest.
D)
always consider the impact of their actions on the welfare of others.
238)
The term ceteris paribus means
238)
A)
value–free and testable.
B)
the greatest good for all.
C)
the study of scarcity and choice.
D)
all other things remaining constant or equal.
239)
Economics is a social science that involves the study of how individuals
239)
A)
choose among alternatives to satisfy their unlimited wants.
B)
define happiness.
C)
maximize their wealth.
D)
develop their tastes and preferences.
A
240)
Economics is a part of the
240)
A)
B)
C)
D)
C
241)
The macroeconomist would most likely study
241)
A)
the effect of increased union wages on the cost of producing automobiles.
B)
the effects of an increase in wage rates on a woman’s decision to enter the labor force.
C)
the effects of changing apple prices on the market for oranges.
D)
the effects of a lower income tax rates on the nation’s total production of goods and services.
D
D
242)
Behavioral economics is an approach to the study of consumer behavior
242)
A)
that emphasizes the capabilities of individuals to succeed in attaining all their unlimited
wants utilizing limited resources.
B)
that, in contrast to standard approaches in economics, utilizes the ceteris paribus assumption.
C)
that, in contrast to standard approaches in economics, relies on real–world data to evaluate
the usefulness of economic models.
D)
that emphasizes psychological limitations and complications that potentially interfere with
rational decision making.
243)
Father says, “Earn a B–average on your next report card and I’ll help you buy a car.” An economist
would say that this parent is providing his child a(n)
243)
A)
incentive.
B)
reason to slack off and not worry about her grades.
C)
bribe.
D)
study disincentive.
244)
Which of the following statements concerning the distinction between positive and normative
economics is TRUE?
244)
A)
Positive statements are concerned with what is while normative statements are concerned
with what will be.
B)
Positive statements are concerned with what people think, while normative statements are
concerned with what people do.
C)
Positive statements are true while normative statements are false.
D)
Positive statements are concerned with what is, while normative statements are concerned
with what someone thinks should be.
245)
Which of the following is TRUE of incentives?
245)
A)
All of the people in a particular nation are motivated by the same incentives.
B)
Different people are motivated by different incentives.
C)
Money is the only measure of incentives.
D)
In economics, people are assumed to respond to disincentives instead of incentives.
246)
Which of the following terms identifies something that macroeconomists would study but that
microeconomists would NOT?
246)
A)
incentives
B)
rationality
C)
resources
D)
aggregates
247)
Which of the following is an aggregate?
247)
A)
the bushels of apples one farmer sells
B)
the number of shoes in one man’s closet
C)
the price of a particular textbook
D)
the total production of all goods and services
248)
Which of the following would likely be studied in a macroeconomics course?
248)
A)
B)
C)
D)
249)
Economics is a study of
249)
A)
B)
C)
D)
250)
The value of a model is determined by
250)
A)
the model’s attention to real world details.
B)
the extent of the profit earned by applying it.
C)
the realism of its assumptions.
D)
the usefulness of its predictions in the real world.
251)
Economics may be referred to as a(n) ________ science, meaning that data is looked at to see
whether assertions are correct.
251)
A)
empirical
B)
assumptive
C)
soft
D)
exact
252)
Charitable donations to the Red Cross
252)
A)
can be explained by the rational ignorance theory.
B)
prove that there is no scarcity in the United States.
C)
cannot be explained by the rational self–interest theory.
D)
can be explained by the rational self–interest theory.
253)
If two competing models are offered to explain a certain economic phenomenon, the better model is
the one
253)
A)
that more often predicts with most accuracy.
B)
that is not subject to empirical verification.
C)
that is the newest since newer models are better than old models.
D)
with the fewest unrealistic assumptions.
254)
A microeconomist would study all of the following issues EXCEPT
254)
A)
the most efficient means for General Motors to produce an automobile.
B)
the impact of a change in consumer income on the sales of corn.
C)
the impact of a snowstorm on the sales of snow shovels.
D)
the effect of a change in income taxes on the nation’s rate of unemployment.
255)
Another term for “economic models” is
255)
A)
B)
C)
D)
256)
Wants are
256)
A)
the things people would consume if they had unlimited incomes.
B)
the things people consume with their income.
C)
another term for needs.
D)
all the things people really need in order to live comfortably.
257)
Which of the following is a normative economic statement?
257)
A)
Teenage unemployment is too high.
B)
The costs of medical care are increasing faster than the incomes of U.S. citizens.
C)
Teenage unemployment is over ten percent.
D)
An increase in corporate income taxes will cause the unemployment rate to increase.
A
258)
The primary purpose of economics is to understand how people make
258)
A)
B)
C)
D)
C
259)
When constructing economic models, economists are more concerned with
259)
A)
what people say than what they do or think.
B)
what people do than what they say.
C)
what people say than what they do.
D)
what people think than what they say.
B
A
260)
A politician says that the government should tax behavior they want less of and subsidize behavior
they want more of. This is an example of
260)
A)
failing to consider the alternatives available to the government.
B)
using incentives to alter behavior.
C)
cynical behavior in modern democracies.
D)
a concern that people are not rational when they make decisions.
261)
In a market system, ________ provide signals about whether resources are relatively scarce or
abundant.
261)
A)
B)
C)
D)
262)
One problem with constructing a perfectly complete realistic economic model is that
262)
A)
it would be far too complicated to analyze.
B)
it would be too simplistic to have any value.
C)
politicians see little value in such a model.
D)
None of the above is true.
263)
A useful economic model
263)
A)
generates statements that are incapable of refutation.
B)
utilizes only the two most important factors to analyze the problem under consideration.
C)
yields usable predictions and implications for the real world.
D)
represents every detail of the real world.