Question 1

One problem with constructing a perfectly complete realistic economic model is that

Accepted Answer

A)   it would be too simplistic to have any value.
B)   it would be far too complicated to analyze.
C)   politicians see little value in such a model.
D)   None of the above is true.E) C) and D)
F) A) and C)

Question 2

When people donate money to a charity, they behave

Accepted Answer

A)   rationally if the act gives them satisfaction.
B)   irrationally because the act does not benefit anyone.
C)   in an unpredictable manner because the act involves no incentive.
D)   in a way that only makes themselves worse off.E) All of the above
F) A) and B)

Question 3

Which of the following is an example of a positive statement?

Accepted Answer

A)   It is too hot to go jogging.
B)   Ceteris paribus, a teacher should award a higher grade if you study more hours for an economics test.
C)   When the price of an item increases, people respond by reducing their consumption of the item.
D)   The government should balance the budget.E) A) and D)
F) None of the above

Question 4

Positive analysis can be described as

Accepted Answer

A)   the study of whether people respond to positive incentives.
B)   the study of whether people respond to negative incentives.
C)   a value-free approach to inquiry.
D)   a study that is not tested empirically.E) A) and B)
F) A) and C)

Question 5

Rational behavior for an economist means that individuals

Accepted Answer

A)   are motivated by self-interest.
B)   never change their minds.
C)   always make positive choices.
D)   are self-sacrificing.E) B) and D)
F) A) and B)

Question 6

Explain what economists mean when they apply the rationality assumption.

Accepted Answer

The rationality assumption means that pe...

Question 7

Consider the statement, "The number of beers consumed the night before a test affects the grade." In this statement

Accepted Answer

A)   beer is the dependent variable and test grade is the independent variable.
B)   beer is the independent variable and test grade is the dependent variable.
C)   both beer and grade are dependent variables.
D)   both beer and grade are independent variables.E) All of the above
F) A) and B)

Question 8

Which of the following is NOT a focus of the study of economics?

Accepted Answer

A)   how individual preferences are formed
B)   unemployment
C)   inflation
D)   prices in particular marketsE) C) and D)
F) B) and D)

Question 9

"To be useful, a model must be completely realistic." Evaluate.

Accepted Answer

This statement is incorrect. To be usefu...

Question 10

Mary says she plans to return to college next semester assuming her car keeps running, tuition fees don't go up, and her daycare provider continues to be dependable. An economist would say that Mary plans to return to college next semester, ________.

Accepted Answer

A)   caveat emptor
B)   ceteris paribus
C)   laissez faire
D)   ipso factoE) A) and B)
F) A) and D)

Question 11

The difference between positive statements and normative statements is that

Accepted Answer

A)   a positive statement involves a value judgment and a normative statement is a statement of fact.
B)   a positive statement is a statement of fact and a normative statement involves value judgments.
C)   value judgments are made in normative statements but assumed in positive statements.
D)   normative statements are provable while positive statements are not.E) B) and C)
F) A) and C)

Question 12

Ceteris paribus means

Accepted Answer

A)   other variables are held constant.
B)   almost certainly.
C)   only if everything works just right.
D)   perhaps.E) C) and D)
F) A) and B)

Question 13

Why do economists test their hypotheses?

Accepted Answer

A)   to see whether people are motivated by self-interest
B)   to see whether their models predict the choices people will make
C)   to determine whether government policies have effectively achieved their goals
D)   to learn what people are thinking when they make the choices they doE) B) and C)
F) C) and D)

Question 14

According to proponents of behavioral economics, because every possible choice cannot be considered, an individual will tend to fall back on methods of making decisions that are simpler than trying to sort through every single possibility, known as

Accepted Answer

A)   rules of thumb.
B)   rational options.
C)   irrational choices.
D)   normative decisions.E) A) and B)
F) C) and D)

Question 15

In an economic model, assumptions

Accepted Answer

A)   must be applicable to all real-world situations.
B)   must be eliminated before being used to make sure the model is realistic.
C)   are not important in determining the usefulness of the model.
D)   define the set of circumstances in which the model is most likely to be applicable in the real world.E) None of the above
F) A) and B)

Question 16

Why is economics called an empirical science?

Accepted Answer

A)   because economics has been used to both create and destroy empires
B)   because economics uses impressions to evaluate the usefulness of its models
C)   because economics relies on real-world data to determine the usefulness of a model
D)   because economics utilizes intuition rather than data to evaluate a model's worthE) B) and D)
F) B) and C)

Question 17

All of the following are aspects of macroeconomics EXCEPT

Accepted Answer

A)   the U.S. unemployment rate.
B)   the production decisions of a pharmaceutical firm.
C)   the budget deficit of the United States.
D)   foreign trade.E) B) and C)
F) A) and B)

Question 18

Economists assume that people are motivated by

Accepted Answer

A)   benevolence.
B)   altruism.
C)   greed.
D)   rational self-interest.E) C) and D)
F) A) and B)

Question 19

A relationship between two variables in which one variable increases at the same time that the other increases is called

Accepted Answer

A)   nonlinear.
B)   constant.
C)   inverse.
D)   direct.E) A) and D)
F) B) and C)

Question 20

When studying individuals' economic behavior, economists assume that

Accepted Answer

A)   individuals understand the rationale for all their actions.
B)   individuals act as if they were rational.
C)   only educated people act as if they were rational.
D)   self-interest is of limited relevance in predicting an individual's actions.E) A) and B)
F) B) and C)

Exam 1: The Nature of Economics

In an economic model, assumptions

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Which of the following is an example of a positive statement?

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Explain what economists mean when they apply the rationality assumption.

Correct AnswerverifiedThe rationality assumption means that pe...View AnswerShow Answer

When studying individuals' economic behavior, economists assume that

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Rational behavior for an economist means that individuals

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Why is economics called an empirical science?

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Ceteris paribus means

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A relationship between two variables in which one variable increases at the same time that the other increases is called

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Consider the statement, "The number of beers consumed the night before a test affects the grade." In this statement

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The difference between positive statements and normative statements is that

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Mary says she plans to return to college next semester assuming her car keeps running, tuition fees don't go up, and her daycare provider continues to be dependable. An economist would say that Mary plans to return to college next semester, ________.

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According to proponents of behavioral economics, because every possible choice cannot be considered, an individual will tend to fall back on methods of making decisions that are simpler than trying to sort through every single possibility, known as

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Why do economists test their hypotheses?

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"To be useful, a model must be completely realistic." Evaluate.

Correct AnswerverifiedThis statement is incorrect. To be usefu...View AnswerShow Answer

All of the following are aspects of macroeconomics EXCEPT

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Economists assume that people are motivated by

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Which of the following is NOT a focus of the study of economics?

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Positive analysis can be described as

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One problem with constructing a perfectly complete realistic economic model is that

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When people donate money to a charity, they behave

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The rationality assumption means that pe...
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This statement is incorrect. To be usefu...
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