Deck 1: Introduction

Question 1

All natural resources are nonrenewable.

Answer 1

False

Question 2

Economics is similar to other social science disciplines in that it examines individual and social behavior.

Answer 2

True

Question 3

Consumer sovereignty refers to a situation in which there is only one "sovereign"consumer deciding what is to be produced in the market.

Answer 3

False

Question 4

In the circular flow model, resources flow from the households to the firms.

Question 5

Economic models are abstractions from reality.

Question 6

The circular flow model shows the government purchasing goods and services with tax dollars.

Question 7

The statement that a monopoly raises the price of its product is an example of positive economics.

Question 8

Economic forecasting has improved tremendously in the last 20 years with the development of computers.

Question 9

Econometrics is the use of statistics to quantify and test economic models.

Question 10

Economic models have become much simpler in recent years.

Question 11

Economic forecasting has proven no better than the flipping of coins.

Question 12

An economic forecast will always yield an accurate forecast.

Question 13

To be useful, a resource must be renewable.

Question 14

Only the very selfish have insatiable wants.

Question 15

We wouldn't have to make choices if wants were not insatiable.

Question 16

Natural resources include both plants and animals.

Question 17

Human societies have typically run out of resources before substitutes have been discovered or developed.

Question 18

Stanley Jevons accurately predicted the inevitable bankruptcy of England's coal industry.

Question 19

Scarcity is a temporary state of insufficiency that ends with new innovation.

Question 20

The circular flow model shows how households and firms compete with each other.

Question 21

The circular flow model shows what households buy and sell in the resource market.

Question 22

Economics is the social science that describes the way individuals and societies allocate resources to satisfy human wants.

Question 23

"The unemployment rate is five percent" is an example of a normative statement.

Question 24

"Unemployment will decrease because the economy is growing" is anexample of a positive statement.

Question 25

To state that the resources of the economy are finite implies that

A) we cannot live without them
B) we always want more of them
C) they are nonrenewable
D) at least some of them are renewable
E) there is a fixed quantity of them at any point in time

Question 26

The finite nature of the economy's resource base

A) is managed by careful planning
B) arises out of people's insatiable appetite for goods
C) is only a problem in developing countries
D) will disappear as technology advances
E) will persist indefinitely

Question 27

If a resource is nonrenewable and we use 2 percent of its supply per year,

A) then the resource is being depleted
B) its supply will be constant regardless of use because of conservation efforts
C) it will become renewable as its supply approaches zero
D) it could never be depleted because 2 percent of a diminishing supply is an increasing amount
E) it will decrease at a diminishing rate so that its supply will approach its initial quantity

Question 28

Which of the following would not be a central issue in economics?

A) Who produces the goods?
B) How is production carried out?
C) Who consumes what?
D) What goods are produced?
E) When are goods consumed and produced?

Question 29

Consumer sovereignty implies that

A) producers determine what goods will be produced and consumers are free to choose from among them
B) consumers choose the composition of our economy's output
C) goods are produced on the basis of need
D) the government directs the production of consumer goods in the economy
E) a committee of consumers determines the key issues in the economy

Question 30

Consumer sovereignty answers which central issue in economics?

A) How will goods be produced?
B) Who will produce the goods?
C) What goods will be produced?
D) For whom will the goods be produced?
E) By what method will the goods be produced?

Question 31

For which of the following questions would consumer sovereignty provide an answer?

A) Will a shovel or bulldozer be used to excavate the ground?
B) Should the government provide trash collection services in the community?
C) Should we have universal health coverage provided by the government?
D) Will large or small cars sell the most this year?
E) Should there be numerous competitors offering long-distance phone service to the consumer?

Question 32

To be valid, an economic model must

A) include every activity that occurs in the real world
B) include every economic activity that occurs in the real world
C) be useful in explaining cause-and-effect relationships in the real world
D) exclude any link to the real world
E) not be based on an abstraction of the real world

Question 33

The term ceteris paribus means that

A) all important variables in the real world are considered
B) all factors that influence the event are changing at the same time
C) everything else is being held constant
D) everything, except one influence, is changing
E) the consumer is king

Question 34

Resources are scarce

A) because there is always a greater demand for them than there is a supply of them
B) only if the resources are nonrenewable
C) only if the resources are renewable
D) because all resources are nonrenewable
E) because all resources are renewable

Question 35

Scarcity is a problem in economics because it means that

A) all economies will be poor
B) we cannot produce all the goods we want
C) consumers will not be able to consume all of the goods that producers have the capacity to produce
D) we cannot produce all the food we would want
E) the economy cannot improve its peoples' standard of living

Question 36

"John buys more of good X as his income increases, ceteris paribus," means

A) there is no cause-and-effect relationship between John's income and the quantity of good X he purchases if ceteris paribus applies
B) John's demand for good X depends exclusively on income
C) John's income and purchases of this good are being held constant
D) the change in John's income is the only factor being considered in explaining the change in his purchase of good X
E) the price of this good must have decreased in order for John to buy more of the good, regardless of changes in his income

Question 37

If all prices fall and it is observed that Betty purchases more bananas, which of thefollowing statements can be made?

A) Betty purchases more bananas as the price of bananas falls, ceteris paribus.
B) Betty purchases more of all goods as their prices fall, ceteris paribus.
C) Betty prefers bananas to all other fruits, ceteris paribus.
D) There is no ceteris paribus condition in this statement.
E) Betty will always buy more bananas when all prices fall, ceteris paribus.

Question 38

The circular flow model of the economy shows

A) the flow of money, goods, and services between households and firms
B) why specific flows occur
C) the relationship between money and goods within households
D) the relationship between resources and the prices of resources
E) the flow of resources from households to firms

Question 39

In the circular flow model of the economy, the resource market is where

A) consumers purchase consumer goods and services
B) firms purchase goods and services
C) consumers supply goods and services
D) firms purchase labor, land, and capital
E) consumers purchase labor and capital

Question 40

Which of the following activities would occur in a resource market?

A) Reesa buys a new computer to help balance her personal checkbook.
B) Randy pays a speeding ticket.
C) Ian mows his grass.
D) Pam buys a ticket to the ball game.
E) General Motors hires additional workers to run a third shift at its Flint, Michigan, factory.

Question 41

Which of the following activities would occur in the product market?

A) Harry mows his grass.
B) General Motors hires additional workers to run a third shift at the factory.
C) Sam pays a speeding ticket.
D) Dolly buys a ticket to the ball game.
E) Jane bakes a pie for Thanksgiving dinner.

Question 42

The four sources of income for the household are

A) taxes, subsidies, imports, interest
B) taxes, interest, rent, rebates
C) interest, rebates, rent, taxes
D) wages, taxes, imports, interest
E) wages, rent, interest, profits

Question 43

Which of the following correctly matches the income payment with the resource?

A) rent-land; wages-labor; interest-capital; profits-entrepreneurship
B) profits-land; wages-labor; rent-capital; interest-entrepreneurship
C) taxes-land; interest-labor; rent-capital; profits-entrepreneurship
D) interest-land; taxes-labor; interest-capital; rent-entrepreneurship
E) rent-capital; profits-labor; wages-land; interest-entrepreneurship

Question 44

Households purchase goods and services in the

A) market resource
B) labor market
C) capital market
D) product market
E) circular market

Question 45

A firm is an organization that produces

A) only goods for sale to households
B) only services for sale to households
C) goods and services for sale to households and businesses
D) only goods for sale to other businesses
E) only resources

Question 46

The basic difference between microeconomics and macroeconomics is that

A) microeconomics is concerned with the domestic economy, while macroeconomics is concerned only with the international economy
B) microeconomics examines the individual units of the economy, while macroeconomics studies the whole economy
C) microeconomics studies the actions of households, while macroeconomics studies the actions of business firms
D) microeconomics studies the economy in terms of private individuals and firms, while macroeconomics includes the effect of government
E) microeconomics examines the whole economy, while macroeconomics studies the individual units of the economy

Question 47

A positive economic statement concerns

A) an opinion on an economic issue that should be taken
B) an economic activity that has a positive effect on the economy
C) a statement of fact
D) a macroeconomic issue or position
E) a microeconomic issue or position

Question 48

If John says the price of gasoline is too high and Paul says prices are determined by the action of the marketplace, then John has made a(n):

A) positive economic statement, and Paul has made a normative economic statement
B) positive economic statement, and Paul has made a positive economic statement
C) normative economic statement, and Paul has made a normative economic statement
D) normative economic statement, and Paul has made a positive economic statement
E) improper economic statement, and Paul has made a proper economic statement

Question 49

Which of the following questions would not be posed in the context of microeconomics?

A) Why do national economies grow?
B) What percentage of consumer income is spent on entertainment?
C) Why do workers prefer the 4-day workweek?
D) What happens to worker productivity when the job shifts to a 4-day workweek?
E) How is the electric industry harmed by the passage of new clean air legislation?

Question 50

The circular flow diagram is

A) an accurate description of reality
B) an economic model
C) not expected to explain reality
D) a road map explaining all money flows in the economy
E) a road map explaining all product flows in the economy

Question 51

Most economic forecasts

A) are accurate
B) are more reliable than weather forecasts
C) rely on mathematical models
D) are totally unreliable because economic changes upset outcomes
E) are based on ceteris paribus assumptions

Question 52

Finite resources

A) must be renewable
B) must be nonrenewable
C) can be renewable or nonrenewable
D) are only nature-made resources
E) can be expanded in a short period of time

Question 53

An example of a nonrenewable resource is

A) labor
B) capital
C) entrepreneurship
D) iron ore
E) automobiles

Question 54

Gold is

A) not a resource in the economy
B) an example of a renewable resource for the economy
C) an example of a nonrenewable resource for the economy
D) part of the capital resources of the economy
E) part of the entrepreneurial resources of the economy

Question 55

Economics is considered to be one of ______________ disciplines.

A) natural science
B) mathematical
C) hard science
D) social science
E) graphical

Question 56

Land, water, metals, and minerals are considered to be

A) non-scarce resources because they are "gifts of nature"
B) free resources because they are "gifts of nature"
C) manufactured resources because no resource is useable without labor
D) natural resources that are "gifts of nature"
E) renewable resources that are "gifts of nature"

Question 57

Which of the following is an example of a renewable resource?

A) gold
B) forests
C) minerals
D) coal
E) land

Question 58

Which of the following is an example of a nonrenewable resource?

A) iron
B) cotton
C) labor
D) fish
E) electricity

Question 59

Which of the following statements is true with respect to renewable natural resources?

A) There are infinite quantities of renewable resources.
B) Proper management can only protect, not increase, the supply.
C) Conservation and proper use can protect and even increase the supply of renewable resources.
D) They cannot be completely destroyed since they can always regenerate.
E) They cannot exist since this would violate the scarcity principle.

Question 60

Which of the following statements is true regarding nonrenewable natural resources?

A) With proper management, more natural resources can be created.
B) The economy will never run out of the resource since it can always find new supplies as the price rises.
C) Economists can predict with reasonable accuracy when the supply will be depleted.
D) Before the last unit is taken from the earth, the economy is likely to already have abandoned it and switched to another.
E) Water is an example of a nonrenewable natural resource.

Question 61

In 1865 Jevons wrote a book, The Coal Question, in which he predicted that England would soon

A) switch from coal to alternative sources of energy
B) discover new sources of coal that would create a glut
C) go to war with Spain over access to coal deposits
D) increase its productivity and become a greater economic power
E) run out of coal

Question 62

Economists believe that people's wants are

A) limited by their incomes
B) insatiable
C) scarce
D) mostly irrational
E) mostly psychological

Question 63

The perpetual state of insufficiency of resources to satisfy people's unlimited wants is

A) apparent only in poor countries
B) a contradiction that cannot be resolved
C) completely unrealistic
D) present in modern economies, but not in the past
E) the definition of scarcity

Question 64

The study of how people work together to transform resources into goods and services to satisfy their most pressing wants is

A) sociology
B) economics
C) psychology
D) anthropology
E) management

Question 65

Economics is considered to be part of the field of

A) management science
B) mathematical sciences
C) actuarial science
D) social sciences
E) natural sciences

Question 66

The four central issues in economics include all of the following questions except

A) who produces what
B) how are goods produced
C) when are goods produced
D) who consumes what
E) who decides about production and consumption

Question 67

When consumers decide what goods and services the economy produces, they are said to exercise

A) control over production of resources
B) control over all economic activity
C) the direction of the circular flow
D) consumer sovereignty
E) control over nonrenewable resources

Question 68

Because consumers want more Baby Bigfeet dolls, more Baby Bigfeet dolls will be produced and brought to the market. This is an example of

A) consumer sovereignty
B) resources not being scarce
C) ceteris paribus
D) a natural resource
E) macroeconomic activity

Question 69

When consumers decide that they do not want virtual pets anymore, and this drives all the virtual pet producers out of business, this is a reflection of

A) an outrage
B) not related to issues of freedom
C) consumer sovereignty
D) an inefficient use of resources
E) a circular flow model

Question 70

Most economic model builders would claim that their models

A) include all real-world economic activities
B) portray how the real economy works
C) take into account all the complexities of how people behave
D) contradict the ceteris paribus assumption
E) consider all the important pressing issues people confront

Question 71

The Latin expression ceteris paribus means

A) everything else being equal
B) economic model
C) partially correct
D) certainty
E) certain particulars

Question 72

When economists hold factors other than the one they are analyzing constant, they are demonstrating the principle of

A) circular flow analysis
B) consumer sovereignty
C) ceteris paribus
D) normative economics
E) scarcity modification

Question 73

Economists argue that when the price of a textbook rises, students reduce their quantity demanded of textbooks. This cause-and-effect relationship holds only under conditions of

A) moderate price increases
B) market flexibility
C) complete information
D) ceteris paribus
E) consumer sovereignty

Question 74

A simple model used in your textbook to show how an economy works is the

A) renewable resources model
B) normative economic model
C) insatiable wants model
D) econometric model
E) circular flow model

Question 75

In the circular flow model, households provide all of the following resources to firmsexcept

A) labor
B) money
C) capital
D) entrepreneurship
E) land

Question 76

In the circular flow model, for every flow of goods, services, and resources there is acounter-flow of

A) more goods, services, and resources
B) people from firms to households
C) people from households to firms
D) money
E) land, labor, capital, and entrepreneurship

Question 77

In what market are goods and services sold?

A) money market
B) household market
C) product market
D) resource market
E) consumer market

Question 78

Are we running out of natural resources?

A) No, because we may abandon the use of a particular resource before we exhaust its supply.
B) Yes, because some resources are nonrenewable.
C) Yes, because all resources are eventually nonrenewable.
D) Yes, because we live in a finite world.
E) No, because all resources are in infinite supply.

Question 79

According to the textbook, what was Adam and Eve's economy like?

A) primitive, because technology in the Garden of Eden was non-existent
B) wasteful, because Adam and Eve did not know how to use the abundant resources available
C) underemployed, because there were only two workers
D) there was no economy because there was no reason to economize
E) the same as ours because the law of scarcity is universal

Question 80

In the circular flow model, households derive income from all of the following categories except

A) wages earned by labor
B) revenue earned by firms
C) profit earned by entrepreneurs
D) rent earned by people providing land resources
E) interest earned by people providing capital resources