264)
Why is economics called an empirical science?
264)
A)
because economics utilizes intuition rather than data to evaluate a model’s worth
B)
because economics uses impressions to evaluate the usefulness of its models
C)
because economics has been used to both create and destroy empires
D)
because economics relies on real–world data to determine the usefulness of a model
265)
Economic models are NOT used to
265)
A)
explain economic phenomena.
B)
describe all economic phenomena in minute detail.
C)
understand economic phenomena.
D)
predict economic phenomena.
266)
Which of the following is NOT a positive statement?
266)
A)
The unemployment rate is 5.8 percent.
B)
The federal government budget for 2004 is $2.2 trillion.
C)
The inflation rate for 2002 was 2.3 percent.
D)
The national debt is too high.
267)
Microeconomics is defined as that part of economic analysis that
267)
A)
concerns aggregate production and consumption.
B)
includes the problems of inflation and unemployment.
C)
studies the behavior of the economy as a whole.
D)
studies individual decision making by households and firms.
268)
Macroeconomics deals with
268)
A)
aggregates within the economy.
B)
decisions made by firms.
C)
specific sectors within the economy.
D)
the retail industry only.
269)
John has an economics test tomorrow. He must study and has planned the rest of his day so that he
can fit some study time in. He has decided to go to the gym and then study for several hours.
Which of the following statements is TRUE?
269)
A)
John did not use the economic way of thinking because his decision on how to allocate his
time did not involve money.
B)
John’s decision does not involve his pursuit of self–interest.
C)
John‘s decision on how to allocate his time is inconsistent with the rationality assumption
since he has decided to go to the gym.
D)
John’s decision on how to allocate his time is consistent with the rationality assumption since
the decision is intended to make him better off.
270)
In order to study how changing price affects consumer decisions, we must assume all other factors,
such as income and the prices of other goods are constant. This assumption is best know as
270)
A)
behavioral economics.
B)
ceteris paribus.
C)
normative economics.
D)
rationality.
271)
Economists assume that people are motivated by
271)
A)
a desire to please others.
B)
self–interest.
C)
the interests of the community at large.
D)
morally correct behavior.
272)
Which of the following would most likely NOT be taught in a microeconomics course?
272)
A)
the effects of a gas tax on gas purchases
B)
the effect of an increase in wheat prices on farmers’ behavior
C)
the unemployment rate
D)
changes in prices of automobiles
273)
Which of the following is always TRUE of rational behavior?
273)
A)
It always entails pursuing one‘s own best interest.
B)
It never involves the pursuit of greedy self–interest.
C)
It never involves taking into account the interests of others.
D)
It always yields the best possible outcome for all individuals.
274)
The economic way of thinking will help you
274)
A)
decide whether the U.S. government should encourage or discourage immigration.
B)
make decisions in financing your home.
C)
make better decisions concerning your education.
D)
all of the above
275)
In economics
275)
A)
both resources and wants are unlimited.
B)
resources are unlimited but wants are limited.
C)
both resources and wants are limited.
D)
resources are limited but wants are unlimited.
276)
In economics, all the items that people would consume if they had unlimited income are known as
276)
A)
wants.
B)
needs.
C)
outputs.
D)
aggregates.
277)
Which of the following is a positive statement?
277)
A)
Hyperinflation is the most damaging thing that can occur in an economy.
B)
We need to carefully protect our borders.
C)
When tax revenues are less than government spending there is a budget deficit.
D)
Foreign aid should be reduced to help our budget deficit.
278)
Models must
278)
A)
include every relationship that exists.
B)
be totally realistic in every detail.
C)
be able to yield useable predictions.
D)
be a complete reproduction of the real world.
279)
In building a model to analyze economic situations, one of the important assumptions is
279)
A)
ceteris paribus.
B)
cognitive dissonance.
C)
scarcity.
D)
conversion abstraction.
280)
When the president says that “High inflation rates are a much more serious economic problem than
high unemployment rates,” it is an example of
280)
A)
an empirically proven fact.
B)
a positive statement.
C)
an irrational argument.
D)
a normative statement.
281)
Economic analysis is used
281)
A)
in all decision making.
B)
only in economics classrooms.
C)
only by policy makers.
D)
only by business people.
282)
Microeconomics examines the
282)
A)
aggregate business spending.
B)
decision making undertaken by individual households.
C)
behavior of the economy as a whole.
D)
total household expenditures.
B
283)
Which of the following is an example of a positive statement?
283)
A)
Ceteris paribus, a teacher should award a higher grade if you study more hours for an
economics test.
B)
When the price of an item increases, people respond by reducing their consumption of the
item.
C)
The government should balance the budget.
D)
It is too hot to go jogging.
B
284)
Which one of the following is an example of a normative statement?
284)
A)
The hotel vacancy rate in Hawaii will increase as airfares to Hawaii increase.
B)
Hotels in Colorado are more expensive than are hotels in Hawaii.
C)
The busiest tourist month in Colorado is July.
D)
A vacation in Colorado is better than a vacation in Hawaii.
D
A
285)
“Ceteris paribus” assumption means
285)
A)
that nothing else changes except the variables under consideration.
B)
relying on real–world data in evaluating the usefulness of a model.
C)
analysis that is strictly limited to making either purely descriptive statements or scientific
predictions.
D)
the role of rational self–interest in the economy.
286)
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
286)
A)
incentives.
B)
disincentives.
C)
ceteris paribus.
D)
police power.
287)
Positive statements can contain
287)
A)
opinions and conditions.
B)
a mixture of facts and opinions.
C)
facts and predictions.
D)
logical arguments mixed with statements of opinion.
288)
Which of the following describes that people cannot examine every possible choice available to
them but instead use simple rules of thumb to sort among the alternatives that happen to occur to
them?
288)
A)
ceteris paribus
B)
bounded rationality
C)
self–interest
D)
normative economics
289)
All of the following are positive statements EXCEPT
289)
A)
California is in the United States.
B)
migratory birds fly south for the winter.
C)
the President of the United States in 2008 was George W. Bush.
D)
a dog is man’s best friend.
290)
Economic models relate to
290)
A)
people’s choices.
B)
how people think about something.
C)
the reasons people give for donating to charity.
D)
group opinions.
291)
Which of the following is NOT a characteristic or focus of microeconomics?
291)
A)
individual consumers.
B)
firm behavior
C)
analysis of aggregate economic variables
D)
individual markets
292)
Sara looks into her closet and discovers a pair of like–new shoes she no longer wears because they
give her blisters. From the economist’s perspective, was Sara behaving rationally when she bought
those shoes?
292)
A)
No. The rationality assumption states that rational people never make mistakes.
B)
Yes, as long as Sara didn’t intentionally purchase blister–causing shoes.
C)
No. If any of a person’s decisions have poor results, that person is irrational.
D)
It’s not clear because psychology, not economics, deals with the rationality assumption.
293)
Which of the following statements about economic models is TRUE?
293)
A)
Economic models are designed to explain what people need.
B)
A good model does not rely on any assumptions.
C)
A good economic model is complex.
D)
Every model is based on a set of assumptions.
294)
A characteristic of a good model is that
294)
A)
it is useful for making irrefutable predictions.
B)
it applies to all situations.
C)
it predicts perfectly.
D)
its predictions can be tested using real–world data.
295)
The term or phrase most likely to indicate a normative statement is
295)
A)
“factual.” or “what is” statement.
B)
“holding other things constant.”
C)
“ceteris paribus.”
D)
“should” or “ought to.”
296)
Which of the following is an example of a normative economic statement?
296)
A)
Income tax rates should be lower because that will increase government revenue.
B)
Lower income tax rates yield a larger federal government deficit.
C)
The federal budget deficit has increased every year for the last twenty years.
D)
Lower income tax rates will generate greater income tax revenue to the government.
297)
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?
297)
A)
unbounded resources
B)
unbounded will power
C)
unbounded selfishness
D)
unbounded rationality
298)
The threat of a large fine for failure to pay income taxes is an example of
298)
A)
the ineffectiveness of incentives to get people to pay their taxes.
B)
people failing to consider all the benefits the government provides them.
C)
a negative incentive to get all people to pay taxes.
D)
the excessive power of the Internal Revenue Service.
C
299)
An economic theory is also known as an economic
299)
A)
prediction.
B)
assumption.
C)
model.
D)
conclusion.
C
300)
Which of the following is NOT studied in microeconomics?
300)
A)
the impact of higher fuel prices on the cost of airline tickets
B)
the impact of firms’ collective hiring choices on the aggregate unemployment rate
C)
the effect of an increase in gasoline taxes on the purchase of gasoline
D)
the impact of an increase in the unemployment rate on economic production
D
A
301)
According to the bounded rationality hypothesis, an individual confronting a large number of
complicated choices is most likely to respond by
301)
A)
using the ceteris paribus assumption to assist in simplifying and examining each of the possible
options.
B)
utilizing readily available empirical evidence to assist in evaluating every option.
C)
using a simple rule of thumb to choose among a subset of easiest–to–evaluate options.
D)
assessing every available choice by developing sophisticated theories regarding each option.
302)
Which one of the following is an example of a normative statement?
302)
A)
The average public school teacher earns more than the average truck driver.
B)
Students in smaller classes perform better on standardized tests.
C)
The average public school teacher earns less than the average truck driver.
D)
Public school teachers are not paid enough.
303)
By using the ceteris paribus assumption in conjunction with a model, economists can
303)
A)
hold certain factors constant.
B)
be sure that the model will predict correctly.
C)
suspend the rationality assumption.
D)
avoid having their model depend on any additional assumptions.
304)
If people act as if they systematically pursue their own self–interest, then they will most likely
304)
A)
respond irrationally to any incentive.
B)
respond predictably to a given incentive.
C)
not respond to any incentive.
D)
respond to a given incentive in a random manner.
305)
In economics, ________ are limited but ________ are unlimited.
305)
A)
ideas; money
B)
money; ideas
C)
resources; wants
D)
wants; resources
306)
Professor’s economics students are constructing models for how gasoline prices change. Maria’s
model has very realistic assumptions and is quite complex. Anna’s model is less complicated and
less realistic. Maria’s model correctly predicts gas price increases 5% of the time. Anna’s model
predicts correctly 15% of the time. On the basis of usefulness or “goodness,” Professor will give
which student’s model the higher grade and why?
306)
A)
Anna’s model gets the higher grade because it is simpler.
B)
Maria’s model gets the higher grade because it is more realistic.
C)
Anna’s model gets the higher grade because it predicts accurately more often.
D)
Maria’s model gets the higher grade because it is more complex.
C
307)
A good economic model
307)
A)
cannot be refuted.
B)
captures all relationships about the problem under consideration.
C)
describes the real world completely and in detail.
D)
captures the essential relationships of the problem under consideration.
D
308)
When we say that an individual behaves according to “rational self–interest,” we mean that this
individual
308)
A)
will always buy the cheapest products available on the market.
B)
is making choices that he or she believes will leave him or her better off.
C)
is motivated by greed.
D)
will always buy the most fashionable items available.
B
C
309)
“The U.S. government should not use my tax dollars to subsidize people on welfare”
309)
A)
is a normative economic statement because it is a scientific fact.
B)
is a positive economic statement because it predicts that my tax dollars will go to welfare.
C)
is a positive economic statement because it simply describes one person’s opinion.
D)
is a normative economic statement because it involves a value judgment about an economic
policy.
310)
The assumption that nothing changes except the variables being studied is
310)
A)
normative economic analysis.
B)
positive economic analysis.
C)
the ceteris paribus assumption.
D)
the rationality assumption.
C
311)
Economics is the study of
311)
A)
the way people think rather than the way they act.
B)
how to own as many resources as possible.
C)
how people allocate their limited resources to satisfy their unlimited wants.
D)
ceteris paribus.
C
312)
What is the type of mechanism that answers the basic economic questions through a decentralized
decision making process?
312)
A)
dictatorship
B)
command and control
C)
market system
D)
mixed economic system
C
D
313)
Economics is the study of
313)
A)
ways to use fewer resources.
B)
why some people want certain goods and services.
C)
earning the most income.
D)
the allocation of scarce resources to satisfy unlimited wants.
314)
Economists assume people behave rationally, which means that people
314)
A)
never make a mistake.
B)
always understand the consequences of their decisions.
C)
do not intentionally make decisions that make themselves worse off.
D)
have the necessary information to always make correct decisions.
315)
Which of the following is a normative economic statement?
315)
A)
If banks create more money, unemployment will decrease.
B)
If the price of gasoline rises, car pooling will increase.
C)
The government should increase spending during times of economic recession.
D)
If the government increases spending, unemployment will fall.
316)
How could Adam Smith’s comment about the butcher, the brewer, and the baker be accurately
rephrased in modern terms?
316)
A)
The butcher, the brewer, and the baker give us our dinner because they will be sued if they
don’t do so.
B)
The butcher, the brewer, and the baker give us our dinner because they view doing so as a
public service.
C)
The butcher, the brewer, and the baker give us our dinner because they want to be well liked
in the community.
D)
The butcher, the brewer, and the baker give us our dinner because they each earn a living by
doing so.
317)
The difference between positive statements and normative statements is that
317)
A)
value judgments are made in normative statements but assumed in positive statements.
B)
a positive statement is a statement of fact and a normative statement involves value
judgments.
C)
a positive statement involves a value judgment and a normative statement is a statement of
fact.
D)
normative statements are provable while positive statements are not.
318)
Which of the following statements about economic models is TRUE?
318)
A)
The predictive power of models is not important.
B)
Economic models are designed so that every detail of the real world can be analyzed.
C)
Every economic model is based on a set of assumptions.
D)
Economic models are not empirically testable.
319)
Economics is the study of how
319)
A)
psychology influences preferences.
B)
people make money.
C)
preferences are determined.
D)
people make choices.
320)
Economics can be described as the study of how people use ________ resources to satisfy ________
wants.
320)
A)
unlimited; unlimited
B)
limited; limited
C)
unlimited; limited
D)
limited; unlimited