Question 1

An economic theory claims that a rise in gasoline prices will cause gasoline purchases to fall, Ceteris paribus . The phrase " Ceteris paribus " means that:

Accepted Answer

A)  other relevant factors like consumer incomes must be held constant.
B)  the gasoline prices must first be adjusted for inflation.
C)  the theory is widely accepted but cannot be accurately tested.
D)  consumers' need for gasoline remains the same regardless of the price.E) All of the above
F) A) and D)

Question 2

Which one of the following is a positive economic statement?

Accepted Answer

A)  An increase in the minimum wage will reduce employment for teenagers.
B)  The minimum wage should be increased.
C)  Social justice will be served by increasing the minimum wage.
D)  Thoughtful people oppose an increase in the minimum wage.E) B) and D)
F) A) and D)

Question 3

A positive statement is:

Accepted Answer

A)  something good or desirable.
B)  a call for improvement.
C)  a statement of opinion.
D)  a statement testable by facts.
E)  a suggestion for policy.F) B) and D)
G) D) and E)

Question 4

If the price of a textbook rises and then students purchase fewer textbooks, an economic model can show a cause-and-effect relationship only if which of the following conditions holds:

Accepted Answer

A)  students' incomes fall.
B)  tuition decreases.
C)  the number of students increases.
D)  everything else is constant.
E)  the bookstore no longer accepts used book trade-ins.F) B) and C)
G) A) and B)

Question 5

The three basic categories of resources are land, labor, and:

Accepted Answer

A)  money.
B)  time.
C)  energy.
D)  capital.E) B) and C)
F) A) and D)

Question 6

People are forced to make choices because of:

Accepted Answer

A)  unlimited wants and unlimited resources.
B)  limited wants and unlimited resources.
C)  unlimited wants and limited resources.
D)  limited wants and limited resources.
E)  irrational wants and limited resources.F) B) and E)
G) A) and D)

Question 7

A model (or theory) :

Accepted Answer

A)  is a general statement about the causal relationship between variables based on facts.
B)  helps explain and predict the relationship between variables.
C)  when expressed as a downward (negatively) sloping graph implies an inverse relationship between the variables.
D)  all of these.E) A) and B)
F) A) and C)

Question 8

Which of the following is a microeconomics topic?

Accepted Answer

A)  A price of a new home.
B)  The inflation rate.
C)  The economy's growth rate.
D)  The unemployment rate.
E)  Forecasts of a recession next year.F) B) and E)
G) All of the above

Question 9

Which of the following is a normative statement?

Accepted Answer

A)  A decrease in price leads to an increase in quantity consumed.
B)  Incomes grow more rapidly in high-tax states than low-tax states.
C)  People would be better off if government expenditures were higher.
D)  People will buy less butter at $1.50 per pound than they will at $1 per pound.E) None of the above
F) All of the above

Question 10

Which of the following would an economist classify as capital?

Accepted Answer

A)  100 shares of Microsoft stock.
B)  $50 bill.
C)  credit card.
D)  lawyer's personal computer.E) B) and D)
F) B) and C)

Question 11

Microeconomics only looks at the behavior of one consumer or one firm in a market, while macroeconomics looks at the behavior of an entire industry or group of consumers.

Accepted Answer

A) True 
 B)False

Question 12

Labor resources:

Accepted Answer

A)  include only physical activities.
B)  are only counted as a resource if used in the production of other resources.
C)  include only skilled labor.
D)  include both physical and mental activities.
E)  include human effort involved in the production of goods, but not services.F) A) and B)
G) B) and C)

Question 13

"An increase in the federal minimum wage will provide a living wage for the working poor" is:

Accepted Answer

A)  a statement of positive economics.
B)  a fallacy of composition.
C)  a tautology.
D)  a statement of normative economics.E) B) and C)
F) B) and D)

Question 14

Which of the following is included in the study of macroeconomics?

Accepted Answer

A)  Salaries of college professors.
B)  Computer prices.
C)  Unemployment in the nation.
D)  Silver prices.E) None of the above
F) All of the above

Question 15

All human wants cannot be satisfied because of the problem of scarcity.

Accepted Answer

A) True 
 B)False

Question 16

An economist at the University of Alaska at Anchorage has been asked to explain why the price of Alaskan crude oil has fallen recently. In order to develop a model, the professor should take which steps?

Accepted Answer

A)  Identify the problem, develop a model based on simplifying assumptions and test the model to formulate a conclusion.
B)  Gather data on crude oil prices and seemingly unrelated variables in order to look for associations, then formulate a hypothesis based on those unexpected associations.
C)  Ask people in Alaska why they are not purchasing oil.
D)  None of these. The oil industry is controlled by a cartel; therefore price changes in the industry cannot be explained using economic theories.E) None of the above
F) B) and C)

Question 17

The most fundamental concepts underlying the discipline of economics are:

Accepted Answer

A)  scarcity and choice.
B)  supply and demand.
C)  money, stocks, and bonds.
D)  inflation and unemployment.E) None of the above
F) All of the above

Question 18

A chain saw is an example of which of the following factors of production?

Accepted Answer

A)  Land.
B)  Labor.
C)  Capital.
D)  None of these.E) B) and D)
F) B) and C)

Question 19

An entrepreneur is a(n) :

Accepted Answer

A)  individual who has much education.
B)  organizer who seeks profitable opportunities and is willing to accept risks.
C)  business organization that uses inputs to produce output.
D)  depot or warehouse for commercial products.E) B) and C)
F) C) and D)

Question 20

Which of the following represents positive economics?

Accepted Answer

A)  Policy A is fair.
B)  Outcome B is the best objective to achieve.
C)  If policy A is followed, then outcome B results.
D)  All of these.E) B) and D)
F) A) and D)

Exam 1: Introducing the Economic Way of Thinking

An entrepreneur is a(n) :

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Which one of the following is a positive economic statement?

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An economist at the University of Alaska at Anchorage has been asked to explain why the price of Alaskan crude oil has fallen recently. In order to develop a model, the professor should take which steps?

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Which of the following is a microeconomics topic?

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The three basic categories of resources are land, labor, and:

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If the price of a textbook rises and then students purchase fewer textbooks, an economic model can show a cause-and-effect relationship only if which of the following conditions holds:

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People are forced to make choices because of:

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An economic theory claims that a rise in gasoline prices will cause gasoline purchases to fall, Ceteris paribus . The phrase " Ceteris paribus " means that:

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Labor resources:

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A chain saw is an example of which of the following factors of production?

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A positive statement is:

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All human wants cannot be satisfied because of the problem of scarcity.

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"An increase in the federal minimum wage will provide a living wage for the working poor" is:

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A model (or theory) :

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Which of the following is a normative statement?

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Which of the following would an economist classify as capital?

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Which of the following is included in the study of macroeconomics?

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Microeconomics only looks at the behavior of one consumer or one firm in a market, while macroeconomics looks at the behavior of an entire industry or group of consumers.

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Which of the following represents positive economics?

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The most fundamental concepts underlying the discipline of economics are:

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