Econ Exam 1 - ch. 1

Which of the following is not an essential component of an economic model?

a. assumptions

b. hypotheses

c. variables

d. normative statements

d. normative statements

Which of the following covers the study of topics such as inflation and unemployment?

a. microeconomics

b. macroeconomics

c. Both microeconomics and macroeconomics d. give equal emphasis to these problems.

none of the above

b. macroeconomics

Which of the following statements best defines scarcity?

a. Scarcity studies the choices people make to attain their goals.

b. Scarcity is a situation in which unlimited wants exceed the limited resources available to fulfill those wants.

c. Scarcity is an imbalance between buyers and sellers in a specific market.

d. Scarcity refers to a lack of trade-offs.

b. Scarcity is a situation in which unlimited wants exceed the limited resources available to fulfill those wants

Fill in the blank:is the study of how households and businesses make choices, how they interact in markets, and how the government influences their choices.

a. Microeconomics

b. Macroeconomics

c. A market mechanism

d. Marginal analysis

a. Microeconomics

When you think of an arrangement or institution that brings buyers and sellers of a good or service together, what are you thinking of?

a. marginal analysis

b. a market

c. scarcity

d. rational behavior

b. a market

What is the name given to the practical application of an invention?

a. a model

b. an innovation

c. voluntary exchange

d. capital

b. an innovation

Which of the following terms best refers to a fair distribution of economic benefits?

a. productive efficiency

b. allocative efficiency

c. voluntary exchange

d. equity

d. equity

What is the name given to the development of a new good or a new process for making a good?

a. an invention

b. an innovation

c. entrepreneurship

d. capital

a. an invention

Fill in the blanks. In economics, as well as in life, optimal decisions are made.

a. once all costs have been considered

b. only when all benefits have been considered

c. in their totality

d. at the margin

d. at the margin

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

a. Should the university offer free parking to students?

b. Should the university provide more financial aid assistance to students?

c. If the college increased tuition, would class sizes decline?

d. Should the college cut tuition to increase enrollments?

c. If the college increased tuition, would class sizes decline?

In what type of economy does the government decide how economic resources will be allocated?

a. a market economy.

b. a mixed economy

c. a centrally planned economy

d. none of the above

c. a centrally planned economy

Which of the following best describes the characteristics of models used in economics?

a. Models are approximations to reality that capture as many details as possible.

b. Models are usually complex abstractions of reality that simulate practical problems.

c. Models are concerned with what economic policies ought to be.

d. Models are simplifications of reality that include only essential elements and exclude less relevant details.

d. Models are simplifications of reality that include only essential elements and exclude less relevant details.

Which of the following terms summarizes the situation in which a buyer and a seller exchange a product in a market and, as a result, both are made better off by the transaction?

a. productive efficiency

b. allocative efficiency

c. voluntary exchange

d. equity

c. voluntary exchange

Which of the following questions can be answered using normative economic reasoning?

a. If a college offers free parking, will more students drive to campus?

b. If a college provided more financial aid, would more students go to college?

c. If a college hires better qualified instructors, will more students attend?

d. Should a college cut tuition to stimulate enrollments?

d. Should a college cut tuition to stimulate enrollments?

Which of the following is not among the fundamental economic questions that every society must solve?

a. What goods and services will be produced?

b. How will the goods and services be produced?

c. What goods and services will be exchanged?

d. Who will receive the goods and services produce

c. What goods and services will be exchanged?

Which of the following is the best classification for the economies of the United States, Canada, Japan, and Western Europe?

a. pure market economies

b. mixed economies

c. centrally planned economies

d. none of the above

b. mixed economies

Which of the following is achieved when a good or service is produced up to the point where the marginal benefit to consumers is equal to the marginal cost of producing it?

a. productive efficiency

b. allocative efficiency

c. equality

d. equity

b. allocative efficiency

Human capital is:

a. physical capital produced by human resources.

b. stocks and bonds that are owned by humans rather than corporations.

c. the accumulated training and skills that workers possess.

d. physical capital owned by humans rather than corporations.

c. the accumulated training and skills that workers possess.

What type of statement would “A minimum wage actually reduces employment” be considered?

a. a positive statement

b. a marginal statement

c. a normative statement

d. an irrational conclusion

a. a positive statement

What is the stock of computers, factory buildings, and machine tools used to produce goods better known as?

a. physical capital

b. technology

c. innovation

d. goods and services

a. physical capital

What is the purpose of an economic hypothesis?

a. to establish a behavioral assumption

b. to establish a causal relationship

c. to make a statement based on fact

d. to determine the validity of statistical analyses used in testing a model

b. to establish a causal relationship

In Solved Problem 1-1: “Orasure Makes a Decision” which of the concepts below is most applicable in solving the problem?

a. the concept of what a market is

b. rational behavior and how people respond to economic incentives

c. marginal analysis

d. the concept of scarcity and trade-offs

c. marginal analysis

Which of the following involves an estimation of the what the benefits and costs of a particular action are?

a. positive analysis

b. normative analysis

c. the market mechanism

d. an irrational conclusion

a. positive analysis

What type of assessment is one in which a person’s values and political views form part of that assessment?

a. a positive assessment

b. a normative assessment

c. a microeconomic assessment

d. a macroeconomic assessment

b. a normative assessment

What type of economic analysis is concerned with the way things ought to be?

a. positive analysis

b. marginal analysis

c. normative analysis

d. rational behavior

c. normative analysis

What types of economies require that answers be given to the following questions: what goods and services will be produced, how will the goods and services be produced, and who will receive the goods and services produced?

a. market economies

b. centrally planned economies

c. mixed economies

d. all types of economies

d. all types of economies

What does an economy achieve by producing a good or service at the least possible cost?

a. productive efficiency

b. allocative efficiency

c. voluntary exchange

d. equity

a. productive efficiency

Which of the following questions could be answered using economics?

a. “How are the prices of goods and services determined?”

b. “How does pollution affect the economy, and how should government policy deal with these effects?”

c. “Why do firms engage in international trade, and how do government policies affect international trade?”

d. All of these are economic questions.

d. All of these are economic questions.