Deck 1: What Is Economics

Question 1

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

Answer 1

True

Question 2

Government controls over market prices frequently "backfire."

Answer 2

True

Question 3

The marginal cost of an airline ticket is the total cost of flying the plane divided by the number of passengers.

Answer 3

False

Question 4

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

Question 5

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

Question 6

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 7

Externalities are social costs that affect parties external to a particular economic transaction.

Question 8

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

Question 9

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 10

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

Question 11

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

Question 12

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

Question 13

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

Question 14

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

Question 15

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

Question 16

Comparative advantage explains how two nations can benefit from trade.

Question 17

There are frequently market solutions that the government can use to deal with externalities.

Question 18

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

Question 19

Both parties gain in a voluntary exchange.

Question 20

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 21

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

Question 22

Greater economic efficiency often leads to greater economic inequality.

Question 23

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

Question 24

Productivity growth is the main cause of rising living standards.

Question 25

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

Question 26

There is no trade-off between efficiency and equality.

Question 27

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

Question 28

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

Question 29

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

Question 30

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 31

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

Question 32

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

Question 33

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

Question 34

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

Question 35

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

Question 36

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 37

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

Question 38

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

Question 39

Lower inflation rates are usually correlated with lower unemployment rates.

Question 40

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

Question 41

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

Question 42

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

Question 43

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

Question 44

Inaccurate prediction generally invalidates the use of theory in economics.

Question 45

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

Question 46

Economic analysis requires both mathematical reasoning and historical study.

Question 47

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

Question 48

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

Question 49

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

Question 50

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

Question 51

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 52

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

Question 53

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

Question 54

A theory is an untested assertion of alleged fact.

Question 55

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

Question 56

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

Question 57

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

Question 58

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

Question 59

Abstraction can lead to gross distortions of pertinent facts.

Question 60

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

Question 61

Individuals will have different value judgments about the appropriate rate of unemployment and the appropriate rate of inflation.

Question 62

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

Question 63

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

Question 64

A horizontal line always has a slope of one.

Question 65

All two-dimensional graphs must have an origin, a horizontal axis, and a vertical axis.

Question 66

Only economists and other "social" scientists have areas of dispute within their disciplines.

Question 67

A graph conveys information about a cause-and-effect relationship.

Question 68

The lower left-hand corner of a graph where the two axes meet is called the graph's origin.

Question 69

A graph's origin is the point of intersection of all lines or curves in the graph.

Question 70

Two variables that systematically change together are correlated.

Question 71

Economists probably agree more often than they disagree.

Question 72

In economic theorizing, common sense will always lead to the correct answer.

Question 73

Value judgments are based on people's tastes, preferences, and ethical opinions.

Question 74

Economic theory simplifies relationships to explain how the relationships interact.

Question 75

An economic model is a realistic depiction of the operation of the economy.

Question 76

Graphs are valuable because they facilitate interpretation of data.

Question 77

A vertical line always has a slope of one.

Question 78

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

Question 79

Economists disagree on most economic issues facing an economy.

Question 80

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