Question 1

When economists speak of markets, they primarily refer to:

Accepted Answer

A)  the places where the exchange of services takes place
B)  those locations where the stocks and bonds of corporations are bought.
C)  the mechanisms that coordinate the actions of buyers and sellers.
D)  the foreign exchange markets where trillions of dollars change hands.
E)  the goods market where tangible products are bought and sold.F) A) and E)
G) C) and D)

Question 2

Economists presume that while making a decision, individuals consider both the current action and the expected future consequences of that action.

Accepted Answer

A) True 
 B)False

Question 3

In a market system, one symptom of market failure is:

Accepted Answer

A)  competition
B)  falling prices
C)  scarcity of resources.
D)  air pollution.
E)  surplus.F) A) and E)
G) B) and E)

Question 4

The problem of scarcity:

Accepted Answer

A)  exists because resources are limited relative to wants.
B)  exists because wants are limited relative to resources.
C)  can be eliminated through appropriate government intervention in markets.
D)  does not exist in communist societies.
E)  does not exist in a barter economy.F) None of the above
G) B) and E)

Question 5

If a university begins a policy of permanently expelling any student caught cheating in any way, you would expect that:

Accepted Answer

A)  no students would cheat.
B)  fewer students would cheat.
C)  there would be no difference in the amount of cheating.
D)  the enrollment of students would triple
E)  the enrollment of students would doubleF) A) and D)
G) None of the above

Question 6

Economists believe that individuals:

Accepted Answer

A)  aim to maximize social welfare.
B)  aim to maximize their material consumption.
C)  are motivated by self-interest and rational behavior
D)  are motivated by altruism and selflessness.
E)  always ensure an efficient allocation of resources in the market economy.F) A) and D)
G) C) and D)

Question 7

"The government should do all it can to slow the process of global warming." Is this a positive or a normative statement? Explain your answer.

Accepted Answer

Answers will vary. This is a normative s...

Question 8

It is possible to completely eliminate scarcity.

Accepted Answer

A) True 
 B)False

Question 9

An economic study concludes that an investment tax credit would increase business investment next year. This is an example of:​

Accepted Answer

A)  normative analysis.
B)  positive analysis.
C)  mistaking correlation for causation.
D)  the fallacy of composition
E)  ignoring secondary effects.F) B) and D)
G) B) and C)

Question 10

Economics is the study of:​

Accepted Answer

A)  Economics is the study of:
B)  limited desires pursuing unlimited resources.
C)  the production and the distribution of goods in a world with limited resources.
D)  the evolution of society and human behavior over the ages.
E)  the psychological aspect of economic decision making.F) B) and E)
G) A) and C)

Question 11

Which of the following forces us to choose among alternatives?

Accepted Answer

A)  Marginal utility
B)  Scarcity
C)  Deflation
D)  Rational ignorance
E)  The fallacy of compositionF) B) and D)
G) B) and C)

Question 12

Which of the following statements best illustrates the fallacy of composition?

Accepted Answer

A)  If I stand up at a baseball game, I will be able to see the game better; if everybody stands up, everyone will be able to see the game better
B)  If I stand up at a baseball game, I will be able to see the game better; if everybody stands up, everyone will be able to see the game better.
C)  If I purchase fewer tickets at a baseball game, I will save money; if everybody purchases fewer tickets, they can all save money.
D)  If I yell more during a baseball game, it will be loud; if everybody yells more during the game, it will be much louder
E)  If I support the Red Sox, the team will win; if everybody in Boston supports the Red Sox, the team will win all the matchesF) B) and D)
G) A) and B)

Question 13

Economists believe that individuals:

Accepted Answer

A)  are motivated primarily by the opinions of their peers.
B)  can eradicate scarcity by acting rationally
C)  respond in predictable ways to changing circumstances.
D)  are concerned only about the welfare of the community and ignore their self-interest.
E)  can eradicate scarcity by limiting their demands. ​F) B) and C)
G) A) and B)

Question 14

A reduction in the rate at which dividends are taxed will lead to greater investment in the stock market. This is an example of:

Accepted Answer

A)  a positive economic statement.
B)  a negative economic statement.
C)  the fallacy of composition
D)  a normative economic statement.
E)  the ceteris paribus assumption.F) D) and E)
G) None of the above

Question 15

Economists prefer:

Accepted Answer

A)  measuring declared preferences for forecasting because participants in a survey always declare the truth.
B)  measuring revealed preferences because it gives more accurate results.
C)  predicting individual behavior as it is easy to collect data from individuals.
D)  predicting individual behavior as it is easy to draw inferences from such data.
E)  measuring revealed preferences because cost-benefit analysis can be conducted with such dataF) A) and E)
G) A) and D)

Question 16

Economists believe that human behavior cannot be explained and predicted by assuming that most people act as if they are motivated by their own self-interest.

Accepted Answer

A) True 
 B)False

Question 17

Normative statements are:

Accepted Answer

A)  Normative statements are
B)  descriptive, making claims about how the world is.
C)  optimistic, putting the best possible interpretation on things.
D)  statements that establish the production goals for an economy.
E)  statements that establish the pattern for the distribution of income in an economy.F) D) and E)
G) B) and C)

Question 18

Tractors, shovels, copy machines, and computer programming expertise are all examples of scarce resources.

Accepted Answer

A) True 
 B)False

Question 19

Suppose senators, members of Congress, and other experts made the following five statements in a congressional debate about agricultural price supports. Which of these is a normative statement?

Accepted Answer

A)  Price supports are important because America should preserve small family farms.
B)  Without price supports, the price of wheat and corn will decrease by over twenty percent.
C)  The decrease in commodity prices caused by the removal of price supports will result in fewer but larger farms
D)  The decrease in commodity prices caused by the removal of price supports will reduce the number of tractors sold in the United States.
E)  The decrease in commodity prices caused by the removal of price supports will decrease the demand for fertilizers in the United States.F) C) and D)
G) None of the above

Question 20

The fallacy of composition is essentially the error of:

Accepted Answer

A)  confusing association with causation
B)  confusing normative economics with positive economics.
C)  generalizing from the individual to the whole.
D)  omitting relevant variables from an economic model
E)  ignoring the effects of secondary variables on a primary variableF) A) and B)
G) B) and E)

Exam 1: The Role and Method of Economics

Normative statements are:

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Which of the following statements best illustrates the fallacy of composition?

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Economists believe that individuals:

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It is possible to completely eliminate scarcity.

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Economists presume that while making a decision, individuals consider both the current action and the expected future consequences of that action.

Correct AnswerverifiedShow Answer

Economics is the study of:​

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Suppose senators, members of Congress, and other experts made the following five statements in a congressional debate about agricultural price supports. Which of these is a normative statement?

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Economists believe that individuals:

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When economists speak of markets, they primarily refer to:

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Tractors, shovels, copy machines, and computer programming expertise are all examples of scarce resources.

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An economic study concludes that an investment tax credit would increase business investment next year. This is an example of:​

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In a market system, one symptom of market failure is:

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If a university begins a policy of permanently expelling any student caught cheating in any way, you would expect that:

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"The government should do all it can to slow the process of global warming." Is this a positive or a normative statement? Explain your answer.

Correct AnswerverifiedAnswers will vary. This is a normative s...View AnswerShow Answer

The problem of scarcity:

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Economists believe that human behavior cannot be explained and predicted by assuming that most people act as if they are motivated by their own self-interest.

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Which of the following forces us to choose among alternatives?

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A reduction in the rate at which dividends are taxed will lead to greater investment in the stock market. This is an example of:

Correct AnswerverifiedShow Answer

The fallacy of composition is essentially the error of:

Correct AnswerverifiedShow Answer

Economists prefer:

Correct AnswerverifiedShow Answer

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Economics is the study of:

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An economic study concludes that an investment tax credit would increase business investment next year. This is an example of:

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Answers will vary. This is a normative s...
View Answer

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