Exam 1: The Art and Science of Economic Analysis

A) incremental.
B) unimportant.
C) level or size.
D) scarcity.
E) inferior.

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A) the association-is-causation fallacy.
B) the fallacy of composition.
C) a primary effect.
D) a secondary effect.
E) a behavioral assumption.

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A) own and sell resources.
B) play a very minor role in an economy.
C) supply goods and services.
D) are the largest purchasers of resources.
E) set the price for goods.

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A) firms.
B) resource markets.
C) households.
D) product markets.
E) expenditures.

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A) rational self-interest
B) selfishness
C) greed
D) blind materialism
E) altruism

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A) the output decisions of individual firms.
B) the effect of a tariff on the demand for a good.
C) the factors that influence the spending decisions of particular households.
D) the rise and fall of economic activity relative to the long-term growth trend of the economy
E) economic systems.

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A) you can determine the composition of a complex product just by examining its exterior properties.
B) consumer durable goods today do not last as long as they did a generation ago.
C) any mistakes made in producing a product using an assembly line technique will lead to a compounding of errors as the product moves down the line.
D) what is true for any individual component in a group is true for the group as a whole.
E) what was true when a person was young will still be true today.

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A) includes every detail of reality.
B) involves no unproven assumptions.
C) is expressed in equations.
D) makes accurate predictions.
E) is simple enough to be understood by a child.

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A) sell it because the marginal benefit is smaller than the marginal cost.
B) not sell it because the marginal benefit is smaller than the marginal cost.
C) sell it because the marginal benefit is greater than the marginal cost.
D) not sell it because the marginal benefit is greater than the marginal cost.
E) sell it because the marginal benefit is equal to the marginal cost.

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A) the use of an economic model.
B) making decisions aimed at achieving some predetermined goal.
C) that only monetary costs and benefits are weighed.
D) that the individual will never regret any action taken.
E) that scarcity can be eliminated for that individual.

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A) an assumption about the behavior of economic agents.
B) a prediction of what will occur given certain assumptions.
C) a normative statement.
D) a forecast of future events.
E) useful only if assumptions are realistic.

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A) formulate a hypothesis.
B) reflect an opinion.
C) specify assumptions.
D) define relevant variables.
E) test a hypothesis.

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A) The study of the growth of the Chinese economy
B) The study of the causes of the relocation of U.S. manufacturing firms to China
C) The study of the differences in wages between men and women in the United States
D) The study of the effect of rent control on the housing market in New York City
E) The study of the impact of environmental regulations on the production levels of firms

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A) I'm not paying for any resources, so the toy trains I'm building are a good example of free goods.
B) I only paid $10 for the lumber, so the toy trains I'm building are a good example of free goods.
C) I'm using scarce resources to build the toy trains.
D) The resources I'm using to build the toy trains are not scarce.
E) If I had used lumber that I cut from the tree in my backyard instead of buying it from the store, then the toy trains I'm building would be a good example of free goods.

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A) As the model does not include the interaction between firms and resource markets, it does not predict correctly.
B) As the model does not include the interaction between households and product markets, it does not predict correctly.
C) The model has too many simplifying assumptions, and it cannot be used to make predictions about the real world.
D) The model is a simplification of the real world, and it can be used to make predictions about the real world.
E) As the model does not include the interaction between firms and product markets, it does not predict correctly.

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