Question 1

Because households have limited incomes,they must

Accepted Answer

A)  rarely take vacations
B)  live below the poverty line
C)  allocate their spending carefully
D)  gamble in casinos frequently
E)  save for the futureF) All of the above
G) A) and B)

Question 2

Which of the following is a characteristic of entrepreneurship?

Accepted Answer

A)  the ability to navigate bodies of water
B)  it is produced using physical capital
C)  it is used up quickly in the production process
D)  it is a pre-existing resource like land
E)  it is associated with risk taking and innovationF) C) and D)
G) B) and D)

Question 3

Physical capital differs from raw materials in the sense that raw materials

Accepted Answer

A)  have a longer useful life in production
B)  are considered human capital
C)  cannot be used to produce goods and services
D)  are used up in production
E)  are not a resource used in productionF) A) and E)
G) B) and E)

Question 4

An economic model can be described as

Accepted Answer

A)  an abstract representation of reality
B)  a detailed description of some economic phenomenon
C)  something that is often more complex than the real-world phenomenon it represents
D)  a vehicle for making positive economic statements
E)  a vehicle for making normative economic statementsF) B) and D)
G) A) and C)

Question 5

Which of the following is the best example of physical capital used to produce a textbook?

Accepted Answer

A)  the expertise and writing ability of the author
B)  the ink used in the printing press
C)  the printing press
D)  the property on which the publisher's office is located
E)  the time spent by editors reviewing the textbookF) A) and B)
G) C) and D)

Question 6

The distinction between positive and normative economics

Accepted Answer

A)  is that positive economics applies only to microeconomic problems
B)  is that normative economics applies only to microeconomic problems
C)  is the difference between an assumption and a conclusion
D)  helps us understand why economists sometimes disagree with one another
E)  explains why economics is not a social scienceF) C) and E)
G) All of the above

Question 7

The unemployment rate for the economy as a whole is a(n)

Accepted Answer

A)  normative value judgment
B)  positive value judgment
C)  microeconomic statistic
D)  macroeconomic statistic
E)  example of an economic modelF) A) and D)
G) B) and D)

Question 8

Suppose your friends take you out for dinner on your birthday and you have a much better time than you would have had doing anything else.There is still an opportunity cost,even though they will not let you pay for anything.

Accepted Answer

A) True 
 B)False

Question 9

Even if economic theory is based on positive analysis,economists may still disagree with each other because

Accepted Answer

A)  economists tend to have excessive self-interest
B)  they ignore politics
C)  they are opinionated
D)  they may have different values,like everyone else
E)  they try to be right all the timeF) B) and E)
G) A) and E)

Question 10

The best economic theory is the one

Accepted Answer

A)  whose assumptions most closely match reality
B)  that yields the most accurate predictions
C)  that most simply represents reality
D)  that most closely matches the conscious behavior of economic decision makers
E)  that includes the most detailsF) C) and E)
G) A) and D)

Question 11

Land,labor,and money are the three categories of economic resources.

Accepted Answer

A) True 
 B)False

Question 12

A statement of fact that can be verified by observation is

Accepted Answer

A)  an abstraction
B)  a positive statement
C)  a normative statement
D)  a philosophical conundrum
E)  the basis of an assumptionF) D) and E)
G) C) and E)

Question 13

A critical assumption

Accepted Answer

A)  makes an economic model a more concrete representation of reality
B)  eliminates unnecessary details from an economic model
C)  has an important impact on the conclusions of an economic model
D)  is usually implicit in an economic model
E)  increases the level of abstraction of an economic modelF) C) and D)
G) All of the above

Question 14

Consider an economic model designed to analyze the behavior of business firms.An assumption that the goal of the firms is to maximize profit would be

Accepted Answer

A)  a simplifying assumption
B)  a critical assumption
C)  an abstraction from reality
D)  an unnecessary detail
E)  irrelevant to the conclusions of the modelF) A) and D)
G) All of the above

Question 15

An economic model is

Accepted Answer

A)  a concrete representation of reality
B)  as close to reality as possible
C)  too abstract to be useful when assumptions are involved
D)  unrelated to reality
E)  an abstract representation of realityF) B) and E)
G) C) and E)

Question 16

For an individual,opportunity costs

Accepted Answer

A)  decrease as consumption increases.
B)  include only the monetary costs of goods and services.
C)  reflect resource scarcity.
D)  reflect the fact that wants are unlimited.
E)  reflect the fundamental assumption that "more is better."F) B) and E)
G) A) and B)

Question 17

The statement "The unemployment rate in the U.S.was 5 percent last month" is

Accepted Answer

A)  a value judgment
B)  an economic opinion
C)  a normative statement
D)  a positive statement
E)  totally beyond anything that should be permitted by modern societyF) All of the above
G) B) and D)

Question 18

Understanding the distinction between positive and normative economic statements is important because it

Accepted Answer

A)  enables us to derive better forecasts of macroeconomic aggregates such as GDP
B)  explains why economics is not a physical science
C)  is the primary distinction between macroeconomics and microeconomics
D)  provides a framework for understanding differences among economists
E)  enables us to see the rationale behind economic modelsF) B) and C)
G) A) and C)

Question 19

The study of economics would be superfluous if __________ did not exist.

Accepted Answer

A)  demand
B)  capital
C)  corporations
D)  profit
E)  scarcityF) All of the above
G) C) and E)

Question 20

Suppose you start your own company making T-shirts that commemorate campus sporting events.An example of the resource capital would be

Accepted Answer

A)  the factory you created in a building you are leasing
B)  your time and effort used to produce T-shirts
C)  the entire campus,since the demand for T-shirts is obtained from campus students
D)  the athletic facilities,since the athletic teams generate sporting events advertised on the T-shirts
E)  your creative designs used to commemorate different sporting eventsF) C) and D)
G) B) and E)

Exam 1: What Is Economics

An economic model can be described as

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A statement of fact that can be verified by observation is

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Even if economic theory is based on positive analysis,economists may still disagree with each other because

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Suppose your friends take you out for dinner on your birthday and you have a much better time than you would have had doing anything else.There is still an opportunity cost,even though they will not let you pay for anything.

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Suppose you start your own company making T-shirts that commemorate campus sporting events.An example of the resource capital would be

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The unemployment rate for the economy as a whole is a(n)

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Which of the following is the best example of physical capital used to produce a textbook?

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The study of economics would be superfluous if __________ did not exist.

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Physical capital differs from raw materials in the sense that raw materials

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The statement "The unemployment rate in the U.S.was 5 percent last month" is

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A critical assumption

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Land,labor,and money are the three categories of economic resources.

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Because households have limited incomes,they must

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The best economic theory is the one

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Understanding the distinction between positive and normative economic statements is important because it

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Which of the following is a characteristic of entrepreneurship?

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The distinction between positive and normative economics

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Consider an economic model designed to analyze the behavior of business firms.An assumption that the goal of the firms is to maximize profit would be

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An economic model is

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For an individual,opportunity costs

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