Question 1

Which of the following is the fundamental resource that is the basis of labor?​

Accepted Answer

A)  Capital
B)  Natural resources
C)  Time
D)  Money
E)  Entrepreneurial ability

Question 2

When economists refer to capital, they might mean:​

Accepted Answer

A)  money.
B)  human skills used in production.
C)  stocks.
D)  bonds.
E)  bank loans.

Question 3

The assumption that individuals act rationally implies that:​

Accepted Answer

A)  people think only of themselves and disregard the well-being of others.
B)  people undertake all those activities that yield benefits to themselves.
C)  people only consider the costs of an activity to decide whether it is worthwhile.
D)  the greater the cost of a charitable deed to a benefactor, the more likely he or she is to perform that deed.
E)  people implicitly calculate the costs and benefits of an activity to decide if it is worthwhile.

Question 4

A resource is something that:​

Accepted Answer

A)  is used to produce goods and services.
B)  is provided by nature, not produced by society.
C)  exists in unlimited quantities.
D)  must be produced by a firm.
E)  is always available free of cost.

Question 5

The basic purpose of economic models is to:​

Accepted Answer

A)  construct simplifying assumptions about the real world.
B)  explain reality in all its complexity.
C)  collect empirical data to support the facts.
D)  construct situations where controlled experiments can be carried out.
E)  explain and predict economic events.

Question 6

Economics is best described as the:​

Accepted Answer

A)  study of choice when scarcity exists.
B)  study of how businesses earn profit.
C)  theory of consumer behavior.
D)  science of money.
E)  art of spending money wisely.

Question 7

An economic model that sometimes makes incorrect predictions may be used by economic decision makers:​

Accepted Answer

A)  under no circumstances.
B)  only if its assumptions are detailed and realistic.
C)  if it is mathematical and computerized.
D)  if it is simple enough for a child to understand.
E)  until a better model is developed.

Question 8

A normative economic statement:​

Accepted Answer

A)  is a hypothesis used to test economic theory.
B)  is a statement of fact.
C)  is a statement of what ought to be, not what is.
D)  indicates what will occur if certain assumptions are true.
E)  enables economists to test hypotheses.

Question 9

Your friend notices that U.S. auto production and U.S. population growth have moved together over several decades. He reasons that one way to slow population growth is for the government to order the auto makers to cut back on production. You gently point out to him that he:​

Accepted Answer

A)  would be correct only when the economy was in a recession.
B)  has committed the fallacy that association is causation.
C)  has ignored the secondary effects.
D)  has committed the fallacy of composition.
E)  would be correct only when the United States enjoyed economic growth.

Question 10

College graduates with history or literature as their major tend to earn more than those who choose more quantitative disciplines like economics.

Accepted Answer

A) True 
 B)False

Question 11

Economists believe that people respond in a predictable way to changes in costs and benefits. The term that best describes this phenomenon is:​

Accepted Answer

A)  opportunity cost.
B)  scarcity.
C)  innovation.
D)  marginal analysis.
E)  other things equal (or ceteris paribus) .

Question 12

A good economic theory:​

Accepted Answer

A)  has realistic assumptions.
B)  contains as much detail as possible.
C)  cannot be proven false.
D)  predicts well.
E)  can only be presented in mathematical terms.

Question 13

The simple circular-flow model for households and firms is an economic model that focuses on the interaction between households and firms. Which of the following statements regarding the model is correct?​

Accepted Answer

A)  The model is missing the interaction between firms and the resource market. Therefore, it cannot predict well.
B)  The model is missing the interaction between households and the product market. Therefore, it cannot predict well.
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)  The model is missing the interaction between firms and the product market. Therefore, it cannot predict well.

Question 14

The ceteris paribus assumption is the other-things-constant assumption.

Accepted Answer

A) True 
 B)False

Question 15

One might commit the fallacy of composition by concluding that:​

Accepted Answer

A)  statements that are true during prosperity are necessarily true during depression.
B)  what is good for the individual is necessarily good for the group.
C)  an event that precedes another is necessarily the cause of the latter.
D)  intentions need not coincide with actions.
E)  the composition of a complex product is not revealed by its exterior appearance.

Question 16

In economics, money is an example of capital.

Accepted Answer

A) True 
 B)False

Question 17

The choices made by economic decision makers:​

Accepted Answer

A)  are government decisions only.
B)  are the primary focus of economics.
C)  are not important in economic analysis.
D)  occur infrequently.
E)  do not involve ordinary citizens.

Question 18

A fallacy of composition involves assuming that:​

Accepted Answer

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 younger will still be true today.

Question 19

Rent is the payment received by resource owners for the use of their natural resources.

Accepted Answer

A) True 
 B)False

Question 20

Economists generally believe that:​

Accepted Answer

A)  buyers and sellers have all the information they can use.
B)  additional information is costly to acquire.
C)  decision makers have complete knowledge of all the alternatives available.
D)  economic decisions result from random behavior.
E)  decision makers never make mistakes.

Exam 1: The Art and Science of Economic Analysis

Economics is best described as the:​

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When economists refer to capital, they might mean:​

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The basic purpose of economic models is to:​

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Economists generally believe that:​

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The simple circular-flow model for households and firms is an economic model that focuses on the interaction between households and firms. Which of the following statements regarding the model is correct?​

Correct AnswerverifiedShow Answer

Economists believe that people respond in a predictable way to changes in costs and benefits. The term that best describes this phenomenon is:​

Correct AnswerverifiedShow Answer

One might commit the fallacy of composition by concluding that:​

Correct AnswerverifiedShow Answer

A resource is something that:​

Correct AnswerverifiedShow Answer

An economic model that sometimes makes incorrect predictions may be used by economic decision makers:​

Correct AnswerverifiedShow Answer

The assumption that individuals act rationally implies that:​

Correct AnswerverifiedShow Answer

A normative economic statement:​

Correct AnswerverifiedShow Answer

The ceteris paribus assumption is the other-things-constant assumption.

Correct AnswerverifiedShow Answer

College graduates with history or literature as their major tend to earn more than those who choose more quantitative disciplines like economics.

Correct AnswerverifiedShow Answer

Which of the following is the fundamental resource that is the basis of labor?​

Correct AnswerverifiedShow Answer

A good economic theory:​

Correct AnswerverifiedShow Answer

Your friend notices that U.S. auto production and U.S. population growth have moved together over several decades. He reasons that one way to slow population growth is for the government to order the auto makers to cut back on production. You gently point out to him that he:​

Correct AnswerverifiedShow Answer

In economics, money is an example of capital.

Correct AnswerverifiedShow Answer

A fallacy of composition involves assuming that:​

Correct AnswerverifiedShow Answer

The choices made by economic decision makers:​

Correct AnswerverifiedShow Answer

Rent is the payment received by resource owners for the use of their natural resources.

Correct AnswerverifiedShow Answer

Economics is best described as the:

Correct Answer
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When economists refer to capital, they might mean:

Correct Answer
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The basic purpose of economic models is to:

Correct Answer
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Economists generally believe that:

Correct Answer
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The simple circular-flow model for households and firms is an economic model that focuses on the interaction between households and firms. Which of the following statements regarding the model is correct?

Correct Answer
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Economists believe that people respond in a predictable way to changes in costs and benefits. The term that best describes this phenomenon is:

Correct Answer
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One might commit the fallacy of composition by concluding that:

Correct Answer
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A resource is something that:

Correct Answer
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An economic model that sometimes makes incorrect predictions may be used by economic decision makers:

Correct Answer
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The assumption that individuals act rationally implies that:

Correct Answer
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A normative economic statement:

Correct Answer
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Correct Answer
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Correct Answer
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Which of the following is the fundamental resource that is the basis of labor?

Correct Answer
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A good economic theory:

Correct Answer
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Your friend notices that U.S. auto production and U.S. population growth have moved together over several decades. He reasons that one way to slow population growth is for the government to order the auto makers to cut back on production. You gently point out to him that he:

Correct Answer
verified

Correct Answer
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A fallacy of composition involves assuming that:

Correct Answer
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The choices made by economic decision makers:

Correct Answer
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Correct Answer
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