Deck 1: What Is Economics

Question 1

Both parties gain in a voluntary exchange.

Answer 1

True

Question 2

Even though international trade is undertaken voluntarily, a country that engages in trade may not benefit from it.

Answer 2

False

Question 3

The marginal cost of an airline ticket is the total cost of operating a flight divided by the number of passengers who buy tickets.

Answer 3

False

Question 4

It is impossible for both nations to gain when trading with one other.

Question 5

In economics, the true cost of making a choice is the value of what must be given up.

Question 6

There are never any adverse consequences of government attempts to modify the laws of supply and demand.

Question 7

In the calculation of the cost of going to college, an economist would always include the cost of room and board.

Question 8

If you go to the movies on Thursday night, the only cost to you is the price you pay for the movie ticket.

Question 9

When nations trade based upon comparative advantage, only one side of the transaction will benefit.

Question 10

In her calculation of the cost of going to college, an economist would include the amount of forgone earnings over the years spent at college.

Question 11

Government controls over market prices frequently "backfire."

Question 12

It is not possible for both parties to gain in a voluntary trade.

Question 13

Opportunity cost is the highest possible price you can receive when you sell an object.

Question 14

When controls over market prices are enacted, the consequences are always clear.

Question 15

Opportunity cost is the value of the next best alternative to a given choice.

Question 16

Government controls over market prices are often enacted to benefit a specific group.

Question 17

Comparative advantage explains how two nations can benefit from trade.

Question 18

As a student, one of the costs of sleeping in rather than going to class is likely to be a lower grade in the class.

Question 19

In international trade, one country's gain is another country's loss.

Question 20

If Japan is twice as good at producing cameras and three times as good at producing TV sets as the United States, Japan is said to have a comparative advantage in TV sets and the United States has a comparative advantage in cameras.

Question 21

Externalities can only involve the imposition of harm on a party not directly involved in an economic transaction.

Question 22

The achievement of greater efficiency in the United States has been at the expense of growing inequality.

Question 23

The high unemployment of 2008-2010 caused a substantial decrease in inflation, which created fears of deflation.

Question 24

Greater economic efficiency often leads to greater economic inequality.

Question 25

In both the 1970s and the 1990s, extreme economic events caused unemployment to move in the same direction as inflation.

Question 26

The market price of a transaction always includes all of the costs and benefits associated with the transaction.

Question 27

The relatively low rate of inflation coupled with a low unemployment rate that occurred in the 1990s represented a "normal" economic situation.

Question 28

Marginal analysis involves looking at the extra costs involved in a decision.

Question 29

The concept of economic efficiency refers to the size of the "economic pie" whereas the concept of equality refers to how the "pie" is distributed.

Question 30

There is no trade-off between efficiency and equality.

Question 31

One problem with the European Union's choice regarding equality versus efficiency is that it may inadvertently shrink the size of its "economic pie."

Question 32

Airlines can use marginal analysis to set ticket prices, which can increase profits for the company.

Question 33

Externalities are costs to society, which have an impact on parties not directly involved into a particular economic transaction.

Question 34

Market-based policies are effective methods that the government can use to address externality problems.

Question 35

All economic transactions involve only buyers and sellers; no third parties are involved.

Question 36

The market mechanism provides a financial incentive for firms to minimize the pollution they create.

Question 37

A small increase in productivity growth can have a huge impact on a country's standard of living.

Question 38

Externalities are created when parties not involved in an economic transaction are affected by it.

Question 39

The United States has chosen to balance the competing claims of efficiency versus equality by emphasizing greater efficiency over greater equality.

Question 40

Externalities affect only the buyer and seller involved in an exchange.

Question 41

In economics, abstraction from reality is necessary because of the complexity of the real world.

Question 42

Lower inflation rates are usually correlated with lower unemployment rates.

Question 43

One of the consequences of allowing wages to fall in the United States has been growing wage inequality.

Question 44

Unemployment and inflation are important determinants of short-run material welfare, whereas productivity growth is an important determinant of long-run material well-being.

Question 45

Economic analysis requires both mathematical reasoning and historical study.

Question 46

Abstraction ignores many details in order to focus on the most important elements of a problem.

Question 47

Attempts by the government to reduce the rate of inflation often result in higher unemployment in the short run.

Question 48

With the technological developments in the twenty-first century, productivity growth is no longer an important factor in economic well-being.

Question 49

Productivity growth is the main cause of rising living standards.

Question 50

The use of abstraction in economic analysis is one of its primary weaknesses.

Question 51

Abstraction can lead to gross distortions of pertinent facts.

Question 52

The United States has been willing to trade-off greater efficiency for greater wage equality.

Question 53

Abstraction is unnecessary when economic analysis is done properly.

Question 54

The growth rate of productivity is the most important determinant of material well-being in the short run.

Question 55

The Phillips curve illustrates the trade-off between inflation and economic growth.

Question 56

Greater economic efficiency and income equality can usually both be achieved in an economy simultaneously.

Question 57

Economic efficiency and income equality are often conflicting goals in an economy.

Question 58

Economists are often required to make unrealistic assumptions concerning the problems they are investigating.

Question 59

One of the consequences of preventing wages from falling in the European Union has been growing unemployment.

Question 60

Over the past century, the main factor responsible for rising living standards in the United States has been productivity growth.

Question 61

The statement "saccharine causes cancer" is not a theory; it is a hypothesis.

Question 62

A theory is an explanation of the causal mechanism behind observed phenomena.

Question 63

"Correlation" is a measure of how one variable causes another to change.

Question 64

Models are used to describe cause-and-effect relationships.

Question 65

Abstraction is used in economics to omit unnecessary details and focus on the essence of the problem being studied.

Question 66

A theory is an untested assertion of alleged fact.

Question 67

Inaccurate prediction generally invalidates the use of theory in economics.

Question 68

Economic theory is necessary and extremely important because of its relationship to economic policy.

Question 69

Eliminating important details in economic analysis is necessary to understand the complexity of the economy.

Question 70

A model that is an oversimplification for one purpose will likely be an oversimplification for other purposes as well.

Question 71

In scientific language, a theory is an untested assertion of alleged fact.

Question 72

Economic problems are made manageable by stripping away some of the unnecessary details.

Question 73

The word "theory" means the same to the scientist as it does to the man on the street.

Question 74

Two variables that systematically change together are correlated.

Question 75

The optimal degree of abstraction depends on the objective of the analysis.

Question 76

The terms "correlation" and "causation" are synonymous.

Question 77

A theory is a deliberate simplification or abstraction of factual relationships.

Question 78

Models are simplifications that are used to observe the workings of a system.

Question 79

Economic theory simplifies relationships to explain how the relationships interact.

Question 80

The use of abstraction in economics is analogous to the use of a road map providing directions to a location.