Deck 1: Introduction: What Is Economics

Question 1

All of the following are considered natural resources EXCEPT

A) a coral reef.
B) gold.
C) labor.
D) a redwood forest.

Answer 1

labor.

Question 2

The physical and mental effort people use to produce goods and services is a description of which factor of production?

A) physical capital
B) human capital
C) labor
D) entrepreneurship

Answer 2

labor

Question 3

The knowledge and skills acquired by a worker through education and experience is a description of which factor of production?

A) physical capital
B) human capital
C) labor
D) entrepreneurship

Answer 3

human capital

Question 4

The effort used to coordinate the factors of production is a description of

A) physical capital.
B) human capital.
C) labor.
D) entrepreneurship.

Question 5

Because resources are limited

A) only the very wealthy can get everything they want.
B) firms will be forced out of business.
C) the availability of goods will be limited but the availability of services will not.
D) people must make choices.

Question 6

Economics is best defined as the study of

A) financial decision-making.
B) how consumers make purchasing decisions.
C) the choices made by people faced with scarcity.
D) inflation, unemployment, and economic growth.

Question 7

Resources are all of the following EXCEPT

A) unlimited and in abundance.
B) the things we use to produce goods and services.
C) limited in quantity and can be used in different ways.
D) scarce and therefore require choices to be made.

Question 8

An economic model is a

A) realistic version of an economic environment.
B) detailed version of an economic issue.
C) fictional representation of an entire economy.
D) simplified representation of an economic environment.

Question 9

Scarcity can best be defined as a situation in which

A) there are no buyers willing to purchase what sellers have produced.
B) there are not enough goods to satisfy all of the buyers' demand.
C) the resources we use to produce goods and services are limited.
D) there is more than enough money to satisfy consumers' wants.

Question 10

Which of the following is an example of a normative question?

A) How will an increase in the inheritance tax affect tax revenues?
B) What fraction of an income tax cut will be spent on imported goods?
C) Should Florida implement a state income tax to reduce its deficit?
D) How will an increase in unemployment benefits affect the unemployment rate?

Question 11

Normative economics

A) is the focus of most modern economic reasoning.
B) answers the question "What ought to be?"
C) predicts the consequences of alternative actions.
D) answers the question "What is?"

Question 12

Economics is the study of

A) how to invest in the stock market.
B) how society uses limited resources.
C) the role of money in markets.
D) how government officials decide which goods and services are produced.

Question 13

A trade-off refers to

A) allowing the government and other organizations to choose for us.
B) sacrificing one thing for another.
C) deciding who consumes the products produced in an economy.
D) holding other variables fixed.

Question 14

The 3 key economic questions include all of the following EXCEPT

A) "what products do we produce?"
B) "how do we produce these products?"
C) "where should these products be produced?"
D) "who consumes the products?"

Question 15

Which of the following is a question answered with positive economic analysis?

A) Should the college reduce tuition for out-of-state residents?
B) Should the college charge higher tuition for part-time students?
C) If the college increased its eligibility requirements for enrollment, will class sizes decline?
D) Should the college eliminate its athletic program to cut its costs?

Question 16

Deciding if a power company will generate electricity from wind power or coal answers the economic question of

A) who consumes the products produced.
B) what products will be produced.
C) where will the products be consumed.
D) how will the products be produced.

Question 17

An arrangement that allows buyers and sellers to exchange things is called

A) a contract.
B) a market.
C) money.
D) efficient.

Question 18

Deciding if a company will produce automobiles by robotics or manual labor answers the economic question of

A) who consumes the products produced.
B) what products will be produced.
C) where will the products be consumed.
D) how will the products be produced.

Question 19

Deciding how a society's products are distributed among its citizens answers the economic question of

A) who consumes the products produced.
B) what products will be produced.
C) where will the products be consumed.
D) how will the products be produced.

Question 20

Which of the following is a question answered with normative economic reasoning?

A) If the college offers free textbooks for students, will more students read their textbooks?
B) If the college provided less financial aid for out-of-state students, would more in-state students benefit?
C) If the college increased its enrollment requirements, would class size decline?
D) Should the college increase tuition to fund its athletic programs?

Question 21

Economic models are used to

A) explain every detail of an economic theory.
B) explore decision making by individuals, firms and other organizations.
C) build physical renditions of government construction projects.
D) represent the complexities of economic environments.

Question 22

Most modern economic analysis is normative in nature, but involves questions with positive aspects.

Question 23

Positive economics answers the question, "What ought to be?" Normative economics predicts the consequences of alternative actions, answering the questions, "What is?" or "What will be?"

Question 24

Positive economic analysis answers what question?

Question 25

One of the key economic questions is "who consumes the products?"

Question 26

Would an economist consider clean air a scarce resource? Explain.

Question 27

In the past few centuries, choices have led to a substantial decline in the standards of living around the globe.

Question 28

Normative economics answers the question, "What ought to be?" Positive economics predicts the consequences of alternative actions, answering the questions, "What is?" or "What will be?"

Question 29

According to the Texas Transportation Institute, the typical U.S. commuter wastes approximately how much time per year due to traffic congestion?

A) 14 hours
B) 22 hours
C) 47 hours
D) 96 hours

Question 30

List and briefly describe the five factors of production.

Question 31

Economic models explore decision making by individuals, firms and other organizations.

Question 32

Talking about alternatives is the first step in a process that helps us make better choices about how we use our resources.

Question 33

Richard runs a pizza delivery restaurant. List the three basic types of decisions studied in economics and give an example from Richard's restaurant.

Question 34

Economists will always reach the same conclusion in their positive analyses.

Question 35

Give an example of something that is scarce in your life and explain the choices you've made because of scarcity.

Question 36

An economic model is a detailed version of an economic environment.

Question 37

One of the key economic questions is "where should products be produced?"

Question 38

In the final two decades of the twentieth century, average per capita global income

A) increased by approximately 35 percent.
B) remained relatively unchanged.
C) decreased by approximately 6 percent.
D) increased by more than 75 percent.

Question 39

Scarcity is a situation in which resources are unlimited in quantity and can be used in different ways.

Question 40

Normative economic analysis answers what question?

Question 41

Recall the Application about the increase in purchases of hybrid vehicles to answer the following question(s).
According to the Application, one factor which was responsible for roughly one-fifth of hybrid vehicles purchased in 2007 was a federal subsidy of up to $3,400 per hybrid vehicle. The increase in sales due to this subsidy is an example of which element of the economic way of thinking?

A) responding to incentives
B) thinking at the margin
C) isolating variables
D) using assumptions to simplify

Question 42

In the final two decades of the twentieth century, per capita income in sub-Saharan Africa

A) increased by approximately 35 percent.
B) remained relatively unchanged.
C) decreased by approximately 6 percent.
D) increased by more than 75 percent.

Question 43

A variable measures

A) something that always has the same value.
B) something that can take on different values.
C) factors that occur with high degrees of uncertainty.
D) the degree to which something varies over time.

Question 44

To make things simpler and focus attention on what really matters, economists

A) use assumptions.
B) ignore all variables.
C) think at the margin.
D) respond to incentives.

Question 45

Who is associated with the following summary of the economic way of thinking: "The theory of economics does not furnish a body of settled conclusions immediately acceptable to policy. It is a method rather than a doctrine, an apparatus of the mind, a technique of thinking which helps its processer draw correct conclusions."

A) John Maynard Keynes
B) Alfred Marshall
C) Adam Smith
D) President Harry Truman

Question 46

When determining an appropriate congestion tax, economists would use which of the following elements of the economic way of thinking?

A) thinking at the margin
B) isolating variables
C) making assumptions
D) all of the above

Question 47

The Latin phrase ceteris paribus means that when a relationship between two variables is being studied

A) both are treated as unpredictable.
B) neither of those two variables is allowed to change.
C) all other variables are held fixed.
D) we recognize that some factors are unknown.

Question 48

In the 1980s and 1990s, average per capita income increased by a greater percentage in sub-Saharan Africa than it did in the rest of the world.

Question 49

Recall the Application about the increase in purchases of hybrid vehicles to answer the following question(s).
According to the Application, one factor which was responsible for roughly one-third of hybrid vehicles purchased in 2007 was an increase in the price of gasoline. The increase in sales due to higher gasoline prices describes the economic concept of

A) using assumptions to simplify.
B) ceteris paribus.
C) marginal thinking.
D) rational self interest.

Question 50

A small change in a variable is

A) an average change.
B) a ceteris paribus change.
C) an efficient change.
D) a marginal change.

Question 51

Prior to the financial crisis and recession which began in 2007, credit for mortgages was ________, creating a ________.

A) virtually unavailable; housing bubble
B) only available to borrowers with high credit scores; shortage of affordable housing
C) easily obtained; housing boom
D) unavailable to low-income borrowers; large demand for rental properties

Question 52

The financial crisis and recession which began in 2007

A) impacted only high-income countries.
B) was only severe in the United States.
C) had a global impact.
D) impacted only low-income countries.

Question 53

After the implementation of the congestion tax in London, traffic volume was reduced and travel time for cars and buses was cut in half. This is an example of

A) responding to incentives.
B) the role of pricing in allocating resources.
C) caveat emptor.
D) comparative advantage.

Question 54

Adam Smith

A) is considered the founder of economics.
B) introduced the concept of ceteris paribus to the discussion of supply and demand.
C) is responsible for refining the model of supply and demand.
D) is the author of this text.

Question 55

Jerome has a "C" average in his philosophy course and a "B" average in his economics course. He decides to study an extra hour for his philosophy exam. This is an example of

A) thinking at the margin.
B) using assumptions to simplify.
C) ceteris paribus.
D) caveat emptor.

Question 56

Congestion taxes tend to cause an increase in traffic volume during rush hours.

Question 57

To think at the margin means to consider

A) how nothing remains constant over time.
B) how a small change in one variable affects another variable.
C) how people behave in their own self-interest.
D) how people will decide what to purchase.

Question 58

Recall the Application about the increase in purchases of hybrid vehicles to answer the following question(s).
According to the Application, the average cost of abating one ton of CO2 emissions through the hybrid subsidy is $177, but a switch from coal to natural gas in power plants would reduce CO2 emissions at less than one-third the cost of the hybrid subsidy. The increase in cost associated with the reduction of one ton of CO2 emissions (assuming that each unit of CO2 emissions is measured in tons) describes the economic concept of

A) using assumptions to simplify.
B) ceteris paribus.
C) marginal thinking.
D) rational self interest.

Question 59

When economists assume that people are rational and respond to incentives, they mean

A) people act with kindness.
B) people are altruistic.
C) people act in their own self-interest.
D) people are selfish.

Question 60

When deciding to implement a congestion tax, economists and the government would use the elements of the economic way of thinking to primarily determine

A) if the tax would be allocated equitably.
B) what tax amount should be charged.
C) who should be exempt from the tax.
D) how much revenue will the tax generate.

Question 61

Recent housing reforms in Cuba should give homeowners ________ incentives to repair their homes and therefore ________ construction of new homes.

A) more; decrease
B) more; increase
C) fewer; decrease
D) fewer; increase

Question 62

Macroeconomics involves the study of the decision-making of individual firms or individuals.

Question 63

A key assumption of most economic analysis is that people are altruistic, meaning that they act in their own self-interest.

Question 64

Describe the field of economics known as macroeconomics.

Question 65

Macroeconomics helps explain economic fluctuations, why the economy shrinks and expands and why some of the economy's resources are idle.

Question 66

We can use macroeconomic analysis to

A) learn how to balance a checkbook.
B) study the choices made by households.
C) understand marginal changes in the macroeconomy.
D) understand why economies grow.

Question 67

Macroeconomics is best described as the study of

A) very large issues.
B) the choices made by individual households, firms, and governments.
C) the nation's economy as a whole.
D) the relationship between inflation and wage inequality.

Question 68

What is meant by the term "marginal change"?

Question 69

Which of the following is a macroeconomic question?

A) Should we have a constitutional amendment requiring the government to implement a national consumption tax to replace the current income tax?
B) Why did a leading computer manufacturer establish call centers in India?
C) Why does a pharmaceutical manufacturer try to lower its production costs?
D) Should the government put a tax on alcohol in an attempt to assist in the funding of support groups like Alcoholics Anonymous?

Question 70

Ceteris paribus means "Let the buyer beware."

Question 71

A small, one-unit change in value is called a marginal change.

Question 72

A key assumption of most economic analysis is that people act rationally, meaning they respond to incentives.

Question 73

The congestion tax implemented in London reduced traffic volume and cut travel time for cars and buses in half.

Question 74

Ceteris paribus is the same as rise / run.

Question 75

Which of the following is NOT a macroeconomic question?

A) Should we have a constitutional amendment requiring the federal government to balance the budget each year?
B) Should restaurants be required to list the number of calories for each product on their menus?
C) How does a fiscal stimulus package affect gross domestic product?
D) Should Congress enact tougher immigration laws to reduce unemployment?

Question 76

Using assumptions to make things simpler and focus attention on what really matters is like using a road map to plan a trip.

Question 77

To determine an appropriate congestion tax, an economist has to assume that people respond to incentives.

Question 78

Economists assume that individuals make informed decisions and act in their own self-interest.

Question 79

Recall the Application about housing prices in Cuba to answer the following question(s).
According to the Application, in 1960 the Cuban government

A) confiscated most housing in the country.
B) did not allow people to sell or rent their homes.
C) caused a large shortage of housing as a result of its policies.
D) all of the above

Question 80

Recall the Application about housing prices in Cuba to answer the following question(s).
According to the Application, recent reforms in Cuba have relied less on the free market in determining prices in the housing market.