Question 1

In a congressional debate about agricultural price supports, senators, members of congress, and other experts made the following four statements. Which of these is a normative statement?

Accepted Answer

A)  "Price supports are important because America should preserve the small family farm."
B)  "Without price supports, the price of wheat and corn will fall by over twenty percent."
C)  "The decline in commodity prices caused by the removal of price supports will result in fewer, larger farms."
D)  "The decline in commodity prices caused by the removal of price supports will reduce the number of tractors sold in the United States."E) A) and B)
F) A) and C)

Question 2

The definition of a model is a:

Accepted Answer

A)  description of all variables affecting a situation.
B)  positive analysis of all variables affecting an event.
C)  simplified description of reality to understand and predict an economic event.
D)  data adjusted for rational action.E) A) and B)
F) B) and C)

Question 3

The perpetual state of insufficiency of resources to satisfy people's unlimited wants is:

Accepted Answer

A)  apparent only in poor countries.
B)  completely unrealistic.
C)  present in modern economies, but not in the past.
D)  the definition of scarcity.E) B) and C)
F) All of the above

Question 4

A positive economic statement must be verifiable.

Accepted Answer

A) True 
 B)False

Question 5

The basic difference between macroeconomics and microeconomics is:

Accepted Answer

A)  microeconomics concentrates on individual markets while macroeconomics focuses primarily on international trade.
B)  microeconomics concentrates on the behavior of individual consumers while macroeconomics focuses on the behavior of firms.
C)  microeconomics concentrates on the behavior of individual consumers and firms while macroeconomics focuses on the performance of the entire economy.
D)  microeconomics explores the causes of inflation while macroeconomics focuses on the causes of unemployment.E) A) and C)
F) All of the above

Question 6

Financial capital by itself is not a factor of production; instead it is only a paper claim on economic capital.

Accepted Answer

A) True 
 B)False

Question 7

Entrepreneurs can delegate every one of the following tasks to labor except:

Accepted Answer

A)  hiring and training new employees.
B)  assuming business risk and uncertainty.
C)  supervision of the production process.
D)  researching ideas for new products.
E)  marketing the goods and services produced.F) A) and B)
G) C) and D)

Question 8

Which of the following is a statement of positive economics?

Accepted Answer

A)  Too much government spending is the biggest problem facing the U.S. economy.
B)  Creating jobs is the most serious problem facing the U.S. economy.
C)  Raising taxes provides additional revenue that should be used to finance health care.
D)  If taxes are over 50 percent of national income, job creation falls.E) A) and C)
F) B) and C)

Question 9

Which of the following is a normative economic statement?

Accepted Answer

A)  The unemployment rate for the United States is currently 5.4 percent.
B)  The inflation rate in the United States is too high.
C)  An increase in the price of a good will reduce the amount purchased.
D)  Higher profits in an industry will attract more entrepreneurs into the industry.E) All of the above
F) B) and C)

Question 10

Which of the following is the best example of a microeconomic topic?

Accepted Answer

A)  The impact that the money supply has on inflation.
B)  The reasons for increases in the price of soft drinks.
C)  The effect that federal budget deficits have on the interest rate.
D)  The tradeoff between inflation and unemployment.E) A) and B)
F) C) and D)

Question 11

Microeconomics and macroeconomics use different types of analysis.

Accepted Answer

A) True 
 B)False

Question 12

To abstract from reality in an economic model means that:

Accepted Answer

A)  we include only a few of the essential aspects of reality.
B)  the economic study surveys only a very limited period of time.
C)  we include only those elements which support our hypothesis.
D)  the model includes every aspect of the real world.
E)  the model examines the actions of the consumers in the absence of producers and the government.F) B) and C)
G) All of the above

Question 13

The perpetual problem in economics is:

Accepted Answer

A)  our inability to work together effectively.
B)  our inability to satisfy everyone's wants with the available resources.
C)  a recognition of continual class differences.
D)  our inability to utilize resources efficiently.
E)  likely to be solved in resource-rich countries.F) B) and D)
G) D) and E)

Question 14

The person who assumes the risks and uncertainties of starting a new business is considered to be:

Accepted Answer

A)  the manager.
B)  the out-resourcer.
C)  a sales representative.
D)  an entrepreneur.E) A) and D)
F) All of the above

Question 15

An analysis of IBM's pricing decisions would be classified as a macroeconomic study.

Accepted Answer

A) True 
 B)False

Question 16

A model is defined as a:

Accepted Answer

A)  description of all variables affecting a situation.
B)  positive analysis of all variables affecting an event.
C)  simplified description of reality to understand and predict an economic event.
D)  prediction based on historical evidence.E) All of the above
F) B) and C)

Question 17

Positive economics is a(n) :

Accepted Answer

A)  reflection of a country's values.
B)  judgment of the correctness of an economic outcome.
C)  statement of fact.
D)  analysis of what ought to be.
E)  analysis of all the good market outcomes.F) C) and E)
G) B) and E)

Question 18

Economics is the study of decisions made necessary by the problem of unlimited wants and limited means to satisfy them.

Accepted Answer

A) True 
 B)False

Question 19

A positive economic statement simply describes what is.

Accepted Answer

A) True 
 B)False

Question 20

The Latin expression Ceteris paribus means:

Accepted Answer

A)  everything else being equal.
B)  economic model.
C)  economists are partly right.
D)  partial scarcity is certain.E) C) and D)
F) All of the above

Exam 1: Introducing the Economic Way of Thinking

Entrepreneurs can delegate every one of the following tasks to labor except:

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The Latin expression Ceteris paribus means:

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Economics is the study of decisions made necessary by the problem of unlimited wants and limited means to satisfy them.

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The person who assumes the risks and uncertainties of starting a new business is considered to be:

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The definition of a model is a:

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The perpetual problem in economics is:

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Positive economics is a(n) :

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A positive economic statement simply describes what is.

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Which of the following is a statement of positive economics?

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An analysis of IBM's pricing decisions would be classified as a macroeconomic study.

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Which of the following is a normative economic statement?

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A model is defined as a:

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Financial capital by itself is not a factor of production; instead it is only a paper claim on economic capital.

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The basic difference between macroeconomics and microeconomics is:

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Microeconomics and macroeconomics use different types of analysis.

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Which of the following is the best example of a microeconomic topic?

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To abstract from reality in an economic model means that:

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The perpetual state of insufficiency of resources to satisfy people's unlimited wants is:

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A positive economic statement must be verifiable.

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In a congressional debate about agricultural price supports, senators, members of congress, and other experts made the following four statements. Which of these is a normative statement?

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