Question 1

Efforts to reduce the unemployment rate are likely, in the short run, to lead to

Accepted Answer

Efforts to reduce the unemployment rate, such as increasing government spending or lowering interest rates, can lead to an increase in the demand for goods and services. This increased demand can lead to a rise in prices and, therefore, inflation.

Question 2

Which of the following statements is true?

Accepted Answer

Abstraction, or simplification of real-world concepts and variables, is a crucial aspect of economic analysis as it allows for the formulation of models that can be easily analyzed and tested. A) is false as economic theory often relies on assumptions that may not hold true in real-world situations. B) is also false as economists often use simplifications and assumptions to focus on the most important aspects of complex problems. D) is false as the meaning of theory may differ between economists and laymen.

Question 3

A price floor on the sale of wheat would be likely to benefit

Accepted Answer

A price floor on wheat would mean that the price of wheat cannot fall below a certain level. This would benefit wheat farmers as they would be guaranteed a higher price for their crop, which would increase their revenue. This would not necessarily benefit bread buyers or flour mills, as the increased price of wheat would likely lead to higher prices for bread and flour. Bread producers could potentially benefit if they were also wheat farmers and could sell their crop at the higher price floor.

Question 4

Economics is a social science rather than a "hard" science like physics because

Accepted Answer

Economics studies human behavior, which is influenced by a wide range of factors that are not always predictable or easily measurable. This makes it a social science, rather than a "hard" science like physics, which deals with more quantifiable, predictable phenomena.

Question 5

To an economist, theory can be thought of as

Accepted Answer

To an economist, theory is an explanation of the underlying mechanisms behind observed phenomena.

Question 6

Abstraction can be thought of as

Accepted Answer

Abstraction involves focusing on the important aspects of a complex phenomenon while omitting the less important details. This allows for a better understanding of the underlying principles or concepts. It is not about avoiding reality or relying on absurdity, but rather simplifying reality to gain a deeper understanding of it. Therefore, B is the best choice.

Question 7

If a rent control policy is enacted to protect apartment renters, this is likely to lead to

Accepted Answer

While rent control policies may protect current apartment renters, they may also discourage landlords from investing in new rental properties or maintaining current ones, leading to a decrease in the supply of available units. This decrease in supply can lead to a rise in the number of households looking for rental units, making it harder for people to find a place to live. Additionally, some landlords may choose to convert their rental properties into condos or other types of buildings, or may decide to convert office buildings into rental apartments, in order to avoid rent control regulations. Overall, while there may be some benefits to rent control policies, they can have unintended consequences that impact the availability and quality of rental housing.

Question 8

The dramatic increase in the standard of living since the Industrial Revolution

Accepted Answer

While the standard of living has dramatically increased since the Industrial Revolution, this does not mean that societies or individuals have unlimited abundance. There are still limitations and trade-offs to consider, making the concept of "opportunity cost" relevant.

Question 9

An introductory course in economics should allow a student to

Accepted Answer

An introductory course in economics can provide a student with the tools and knowledge necessary to make more informed and rational decisions in many areas of life, but it does not necessarily enable them to become economists, solve all social problems, or answer all complex social questions.

Question 10

Which of the following statements is NOT true?

Accepted Answer

Abstraction is a crucial part of economic analysis. Economists simplify complex real-world phenomena into abstract models and theories to facilitate understanding and prediction.

Question 11

Economics is a social science in the sense that it

Accepted Answer

Economics is a social science because it studies human behavior and the way people make choices. It rigorously examines the behavior of individuals, firms, and governments in the context of economic decisions.

Question 12

In 1971, a bank worker could process 265 checks in 1 hour.Currently, computers with built-in reader-sorter processing capacity have pushed that number above 100,000 checks per hour.Economists describe this type of activity as

Accepted Answer

The increase in the number of checks processed per hour due to the use of computers and reader-sorters represents an increase in labor productivity, as it allows workers to accomplish more in the same amount of time.

Question 13

The process of focusing on only the most important factors to explain a phenomenon is called

Accepted Answer

Abstraction is the process of simplifying complex phenomena by focusing only on the most important factors. It allows economists to create models and make predictions based on a manageable set of variables.

Question 14

A theory can best be defined as

Accepted Answer

A theory is a deliberate simplification of factual relationships that attempts to explain how those relationships work. It is different from an untested assertion of facts or assumptions that simplify the real world. It is also not just the opinion of a reliable person or the accumulation of verified knowledge, although those may be factors that contribute to the development of a theory.

Question 15

If a government enacts a price floor on agricultural products to protect wheat farmers, the result is likely going to be

Accepted Answer

A price floor set above the equilibrium price causes an increase in price and results in a surplus of the product, in this case, wheat, because the quantity supplied exceeds the quantity demanded at the higher price.

Question 16

Arguably, the most important factor affecting economic well-being is

Accepted Answer

The growth in productivity is crucial for economic well-being as it directly affects the potential output of an economy, leading to higher standards of living, higher wages and profits, and overall economic growth. Increases in productivity allow for more efficient production processes, more rapid technological advancements, and greater innovation. In contrast, inflation, unemployment, budget deficits, and monopoly power can all hinder economic growth and well-being.

Question 17

"Assume that all individuals have perfect information about prices now and in the future, that they have identical tastes, that all markets are competitive, and that there is no government." This statement is an example of how economists

Accepted Answer

The statement is an example of how economists use unrealistic assumptions to develop theory. By assuming perfect information, identical tastes, competitive markets, and no government intervention, economists can simplify complex economic systems to build theoretical models and analyze the effects of changes in variables. However, in the real world, these assumptions do not hold, so the models may not always accurately predict real-world outcomes.

Question 18

Tools used by economists include

Accepted Answer

Economists use all of these tools to analyze economic phenomena. Historical study is important for understanding past economic events and trends. Mathematical reasoning allows economists to make precise predictions and models of economic behavior. Statistical inference allows economists to test hypotheses and draw conclusions from data.

Question 19

When voluntary trade takes place,

Accepted Answer

Voluntary trade occurs when two parties willingly exchange goods or services without any external force. In this situation, both parties engage in the transaction because they believe that they will gain from it. Therefore, both parties can benefit from the trade, and neither is at the expense of the other. This mutual benefit is the basis of free market economics, where individuals are free to engage in voluntary trade without any external force regulating the transaction.

Question 20

Economists make assumptions because

Accepted Answer

Economists make assumptions because it allows them to analyze complex situations in a simplified way. This simplification makes economic modeling more manageable and practical.

Quiz 1: What Is Economics