Deck 1: The Role and Method of Economics

Question 1

Living in a world of scarcity involves trade-offs.

Answer 1

True

Question 2

Microeconomics explores the allocation of scarce resources from the perspective of small economic units such as consumers and firms.

Answer 2

True

Question 3

When people make choices they typically know with certainty which choice is best.

Answer 3

False

Question 4

Economists believe that most people's actions are rational and purposeful, not random and chaotic.

Question 5

Economists believe that only a small part of human behavior can be explained and predicted by assuming that most people act as if they are motivated by their own self-interest in an effort to increase their expected personal satisfaction.

Question 6

Scarcity applies to decision makers in macroeconomics but not in microeconomics.

Question 7

Self-interest could never include benevolence.

Question 8

Scarcity forces us to choose, and choices are costly because we must give up other opportunities that we value.

Question 9

Since resources are abundant, we do not have to make choices about their use.

Question 10

A good economic theory is always more useful when it includes detailed facts, even if the facts are not relevant to the questions being investigated.

Question 11

Wealthy consumers do not have to make decisions on what to buy or how much to save.

Question 12

Microeconomics is the branch of economics in which you study inflation and unemployment in the economy.

Question 13

Economics is the study of choices we make among our many wants and desires.

Question 14

Economists prefer to look at declared preferences (how they say they behave) rather than revealed preferences (how people actually behave).

Question 15

It is possible to completely eliminate scarcity.

Question 16

To an economist, rational self-interest means that individuals try to weigh the expected marginal (additional) benefits and marginal (additional) costs of their decisions.

Question 17

If we choose more work we sacrifice leisure.

Question 18

To an economist, individuals are acting "rationally" if they are striving to do their best to achieve their goals.

Question 19

One topic that microeconomics explores is how prices are determined in individual markets, while macroeconomics is concerned with issues such as the economy's overall rate of inflation, economic growth and unemployment.

Question 20

Economists assume that most individuals act as if they are motivated by self-interest and respond in predictable ways to changing circumstances.

Question 21

A testable proposition that predicts how people will react to changed circumstances is called a hypothesis.

Question 22

Theories and models are explanations of how things work that help us understand and predict how and why economic agents like consumers, producers, firms, government, etc. behave they way they do.

Question 23

A positive statement is prescriptive-it prescribes what should be done.

Question 24

Normative analysis focuses on statements that can be tested against real-world data.

Question 25

Which of the following forces us to choose among alternatives?

A)​Value
B)​Scarcity
C)​Rarity
D)​Market mechanism

Question 26

Scarcity exists for those with

A)​lower incomes.
B)​average incomes.
C)​higher incomes.
D)​all of the above.

Question 27

Most disagreements among economists stem from normative issues.

Question 28

A good economic theory, or model, weeds out the irrelevant facts from the relevant ones.

Question 29

When two variables repeatedly change at the same time, there must be a causal relationship between them.

Question 30

Scarcity is the result of:

A)​government decision making.
B)​inappropriate normative judgments.
C)​positive economics.
D)​wants that exceed the resources necessary to provide them.

Question 31

The fallacy of composition states that even if something is true for an individual, it is not necessarily true for many individuals as a group.

Question 32

A hypothesis is a normative statement.

Question 33

To be a positive economic statement, an assertion must be true.

Question 34

Economic models are of limited use since they cannot be tested empirically.

Question 35

The problem of scarcity:

A)​exists because resources are limited relative to wants.
B)​exists because resources are unlimited relative to wants.
C)​can be eliminated through appropriate government intervention into markets.
D)​does not exist in communist societies.

Question 36

The central question in economics is how to:

A)​regulate the supply of money.
B)​make the best use of scarce resources to satisfy our unlimited wants.
C)​reduce the wants of individuals, businesses and government.
D)find more resources to satisfy everyone's wants.​

Question 37

"A tax cut will lead to higher inflation" is an example of a positive economic statement.

Question 38

Economics is most importantly concerned with:

A)​how to profit from trading in the stock market.
B)​government taxation and spending.
C)​studying how we allocate scarce resources to satisfy unlimited wants.
D)​how to successfully launch a business.

Question 39

A normative statement is descriptive-it describes what happens and why it happens.

Question 40

"Ceteris paribus" is a Latin expression that means "holding everything else constant."

Question 41

Economics is primarily the study of:

A)​human greed.
B)​how firms compete for profits in the marketplace.
C)​how limited resources are allocated to satisfy unlimited wants.
D)​how successful investors make money in the stock market.

Question 42

When society can not produce all the goods and services people want, it is faced with

A)​scarcity.
B)​surpluses.
C)​inefficiencies.
D)​inequalities.

Question 43

Economics is concerned with:

A)​the choices people must make because resources are scarce.
B)​human decision makers and the factors that influence their choices.
C)​the allocation of limited resources to satisfy unlimited wants.
D)​all of the above.

Question 44

The fundamental economic problem is:

A)​poverty.
B)​unemployment.
C)​scarcity.
D)​inflation.

Question 45

If oil is considered a non-renewable resource, than oil is

A)​an unlimited resource.
B)​a scarce resource.
C)​not a productive resource.
D)​has no opportunity cost.

Question 46

Which of the following goods would be considered scarce?

A)​iPods
B)​crude oil
C)​tax preparation services
D)​all of the above

Question 47

By the study of "scarcity," an economist means how we best utilize our:

A)​limited resources in order to promote full employment and price stability.
B)​unlimited desires in order to best use our unlimited resources.
C)​unlimited resources to best satisfy our unlimited desires.
D)​limited resources in order to best satisfy our unlimited desires.

Question 48

Which of the following statements are true?

A)​Wealthy people face scarcity.
B)​As a result of scarcity, individuals must make choices and face trade-offs.
C)​It is impossible to satisfy unlimited human wants with limited resources.
D)​All of the above are true statements.

Question 49

Economics is a social science that primarily explores how:

A)​businesses market products under competitive conditions.
B)​stock and bond prices fluctuate when there are changes in demand or supply.
C)​the government allocates its budget among competing political interests.
D)​goods and services are consumed, produced and distributed in a world with limited resources.

Question 50

Scarcity would cease to exist as an economic problem if:

A)​we learned to cooperate and not compete with each other.
B)​there were new discoveries of an abundance of natural resources.
C)​output per worker increased.
D)​none of the above.

Question 51

Fundamentally, economics is concerned with:

A)​how scarce resources are allocated to satisfy limited wants.
B)​how limited resources are allocated to satisfy scarce wants.
C)​how limited resources are allocated to satisfy unlimited wants.
D)​how limited wants can be used to satisfy limited resources.

Question 52

Scarcity:

A)​occurs only in centrally planned economies.
B)​will likely be eliminated by technological progress.
C)​exists only in poor nations.
D)​occurs if there are insufficient resources to provide for human wants.

Question 53

Scarcity means that:

A)​resources are unlimited.
B)​human wants are limited.
C)​limited resources cannot satisfy all of our unlimited human wants.
D)​choices are unnecessary.

Question 54

What are the two parts of the economic problem?

A)​economics explains many things, but only things that are related directly to money.
B)​natural resources are scarce but human-made resources are not.
C)​scarcity forces us to choose and choices are costly because we must give up other opportunities that we value.
D)​we have unlimited wants and unlimited resources.

Question 55

Scarcity exists because of:

A)​the allocation of goods by prices.
B)​specialization and division of labor.
C)​the market mechanism.
D)​unlimited wants and limited resources.

Question 56

Economics is primarily the study of:

A)​how choices are made in a world of scarcity.
B)​corporate balance sheets and income statements.
C)​how to operate a business.
D)​how to make money in the stock market.

Question 57

Which of the following is an example of an individual motivated by self-interest?

A)​a student volunteering at a soup kitchen
B)​an attorney providing free legal service to low income families
C)​a man buying a new Camaro
D)​all of the above

Question 58

Scarcity is:

A)​only a problem in modern industrialized economies.
B)​only a problem in impoverished economies.
C)​only a problem in centrally planned economies.
D)​a problem that necessitates making choices and tradeoffs.

Question 59

In order to determine if a hypothesis is valid we must utilize

A)​qualitative analysis.
B)​empirical analysis.
C)​marginal analysis.
D)​average analysis.

Question 60

Economics is the study of how people cope with:

A)​fluctuations in stock prices.
B)​greed.
C)​limited human wants.
D)​limited resources.

Question 61

Which of the following is an example of microeconomic analysis?

A)​impact of taxation on national income
B)​rate of increase in the national debt
C)​relationship between inflation and interest rates set by the Federal Reserve
D)​none of the above

Question 62

The basic difference between macroeconomics and microeconomics is that:

A)​microeconomics looks at aggregate markets while macroeconomics is concerned with individual markets.
B)​macroeconomics is concerned with policy decisions while microeconomics applies only to theory.
C)​microeconomics is concerned with individual markets while macroeconomics is concerned with aggregate markets.
D)​macroeconomics is concerned with positive economics while microeconomics is concerned with normative economics.

Question 63

Economics is a science that:

A)​typically uses controlled experiments to learn about consumer and firm behavior.
B)​uses models that cannot be tested empirically due to the complex nature of the economy.
C)​explores how choices are made between conflicting wants and desires in a world of scarcity.
D)​relies entirely upon normative analysis.

Question 64

Economics is primarily concerned with the study of:

A)​problems such as poverty and unemployment.
B)​limited desires pursuing unlimited resources.
C)​production and distribution of goods in a world of unlimited resources.
D)​production and distribution of goods in a world of limited resources.

Question 65

In economic terms, religious and spiritual services are treated as:

A)​goods that people desire.
B)​resources or inputs.
C)​marginal benefits.
D)​priceless commodities.

Question 66

The real core of the economic problem is to:

A)​increase the amount of leisure time available to people.
B)​guarantee everyone on the planet a minimum level of food, shelter and clean water.
C)​allocate limited resources among competing uses.
D)​eliminate scarcity.

Question 67

Which of the following are likely to be studied in a microeconomics course?

A)​choices made by individual consumers
B)​the causes of inflation
C)​how the economy's total output is measured
D)​how an increase in government spending affects the level of unemployment

Question 68

Economics can be divided into two main branches of study:

A)​capitalism and communism.
B)​capitalism and socialism.
C)​demand and supply.
D)​microeconomics and macroeconomics.

Question 69

Economics:

A)​is a natural science like biology and chemistry.
B)​is a science built on survey data and declared preferences (what people say they are going to do) not on revealed preferences (how people actually behave).
C)​is a science concerned with reaching generalizations about human behavior, not unlike sociology or psychology.
D)​is concerned with predicting business conditions in the future, not with the current state of the stock market.

Question 70

Which of the following statements most likely lies within the realm of microeconomics?

A)​Unemployment rises during a recession and falls during an expansion.
B)​A rapid acceleration of the supply of money may create inflation.
C)​An increase in government spending will increase the aggregate demand for goods and services in the economy.
D)​An increase in labor costs will increase the additional cost of producing another airplane.

Question 71

The basic difference between macroeconomics and microeconomics is:

A)​microeconomics concentrates on individual markets while macroeconomics focuses primarily on international trade.
B)​microeconomics concentrates on the behavior of individual consumers while macroeconomics focuses on the behavior of firms.
C)​microeconomics concentrates on the behavior of individual consumers and firms while macroeconomics focuses on the performance of the entire economy.
D)​microeconomics explores the causes of inflation while macroeconomics focuses on the causes of unemployment.

Question 72

Macroeconomic topics do not usually include:

A)​the rate of inflation.
B)​the rate of unemployment.
C)​economic growth.
D)​the profit maximizing decisions of an individual firm.

Question 73

Economics:

A)​is a narrowly focused discipline.
B)​is a broad-ranging, problem-solving discipline.
C)​concerns itself only with monetary decisions.
D)​says very little about "everyday life."

Question 74

Which of the following lies primarily within the realm of macroeconomics?

A)​a study of the elasticity of demand for gasoline
B)​a study of how tax cuts stimulate aggregate production
C)​an analysis of supply and demand conditions in the electricity market
D)​a study of the impact of "mad cow" disease on the price of beef worldwide

Question 75

The branch of economics that studies the aggregate decisions of all households and all firms is called:

A)​positive economics.
B)​normative economics.
C)​microeconomics.
D)​macroeconomics.

Question 76

Which of the following is most likely a topic of discussion in macroeconomics?

A)​an increase in the price of a pizza
B)​a decrease in the production of DVD players by a consumer electronics company
C)​an increase in the wage rate paid to automobile workers
D)​a decrease in the unemployment rate

Question 77

Which of the following is most likely a topic of discussion in a microeconomics course?

A)​a decrease in the share of national income paid to the government in taxes
B)​an increase in the price of lumber used to construct houses
C)​an increase in the rate of inflation
D)​an increase in the number of jobless individuals filing unemployment claims

Question 78

Understanding economics would be helpful to which of the following individuals?

A)​a college student planning her next semester courses
B)​a fashion designer selecting fabric for a new spring collection
C)​a restaurant owner deciding whether to expand his establishment's hours of operation
D)​All of the above

Question 79

Which of the following statements most likely lies within the realm of macroeconomics?

A)​An increase in the price of automobiles will lead to a decrease in the quantity of automobiles demanded.
B)​Due to process innovations in computer chip manufacturing, the market supply of computers increased.
C)​Due to an economic recession, manufacturing firms began implementing layoffs of their workforces.
D)​Anticipating that the benefits would outweigh costs involved, an undergraduate student purchases the course textbook.

Question 80

Which of the following lies primarily within the realm of microeconomics?

A)​an empirical analysis of the relationship between the growth of the money supply and the rate of inflation
B)​an economic model forecasting the impact of a tax increase on consumer spending and national output
C)​a study of supply and demand conditions in the market for orange juice
D)​a model forecasting the impact of a change in interest rates on the level of investment in the economy