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MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) According to the text, the reason to study economics is 1) _______ A) to learn a way of thinking. B) to be an informed voter. C) to understand society and global affairs. D) All of the above 2) Fundamental concepts in economics is(are) A) efficient markets. B) marginalism. C) opportunity cost. D) All of the above 2) _______ 3) One of its most basic economic problems is that society A) has more products available than it needs. B) must decide how to lower a product price. C) must decide how to allocate available resources. D) has more resources available than it needs. 3) _______ 4) Which of the following statements is FALSE? A) If poverty were eliminated there would be no reason to study economics. B) Economic analysis can be used to explain how both individuals and societies make decisions. C) Economics is a behavioral science. D) In large measure, economics is the study of how people make choices. 4) _______ 5) The process of analyzing the additional or incremental costs or benefits arising from a choice or decision is called ________. A) equity B) growth C) marginalism D) efficiency 5) _______ 6) In calculating marginal costs, we ________ costs. A) include sunk and average B) exclude sunk C) include only sunk D) exclude all 6) _______ 7) You purchased a ticket to a concert for $30 a month ago. Last week someone invited you to a party on the same night as the concert. You would much rather go to the party than the concert. You have tried unsuccessfully to sell the concert ticket. Which of the following statements regarding this situation is correct? A) The $30 you paid for the concert ticket is relevant to the decision, as this represents the opportunity cost of attending the party. B) The $30 concert ticket should be irrelevant in your decision making, because it represents the marginal cost of attending the party. C) You should base your decision on whether or not the party will provide you with more than $30 in satisfaction. D) The $30 you paid for the concert ticket should be irrelevant in your decision making, because it is a sunk cost. 7) _______ 8) You spent a total of $5 buying songs for your MP3 player. After you buy one more song, your total cost rises to $6. The marginal cost of the last song that you bought is ________. A) $0.50 B) $1.00 C) $5.00 D) $6.00 8) _______ 9) The concept of opportunity cost A) is relevant only to economics. B) applies to consumers but not to firms. C) refers only to actual payments and incomes. D) can be applied to the analysis of any decision-making process. 9) _______ 10) Opportunity cost is A) the additional cost of buying an additional unit of a product. B) the additional cost of producing an additional unit of output. C) that which we forgo, or give up, when we make a choice or a decision. D) a cost that cannot be avoided, regardless of what is done in the future. 10) ______ 11) You have $100 in savings. You could earn four percent interest if you put the $100 in a bank savings account for a year. What is your opportunity cost if you put the $100 under the pillow of your bed instead? A) $0.00. B) $4.00. C) $100.00. D) $104.00. 11) ______ 12) The ________ is NOT an opportunity cost of attending college. A) income you could have earned if you didnʹt attend college B) tuition you pay C) cost of the food that you consume while you are attending college D) alternative uses of the time you spend studying 12) ______ 13) If you own a building and you decide to use that building to open a restaurant, A) the only cost relevant to this decision is the price you paid for the building. B) there is no opportunity cost of using this building for a restaurant because you own it. C) there are no sunk costs involved in this decision. D) there is an opportunity cost of using this building for a restaurant because it could have been used in other ways. 13) ______ 14) You own The Wizard of Oz on DVD. The opportunity cost of watching this DVD for the second time A) is zero. B) is the value of the alternative use of the time you spend watching the DVD. C) cannot be calculated. D) is one-half the cost of the DVD, as this is the second time you have watched it. 14) ______ 15) That which we forgo, or give up, when we make a choice or decision is called the ________ cost of that decision. 15) ______ A) sunk C) opportunity B) marginal D) fixed 16) Regardless of what I do in the future, I cannot avoid ________ costs because I have already incurred them. A) allocative B) marginal C) total D) sunk 16) ______ 17) A market in which profit opportunities are eliminated almost instantaneously is a(n) ________ market. A) capitalist B) laissez-faire C) socialist D) efficient 17) ______ 18) When information is less costly and more easily available to all participants of a market, this should A) make markets less efficient. B) make markets more efficient. C) increase the opportunity cost of acquiring more information. D) increase profit opportunities. 18) ______ 19) In an efficient market A) equilibrium happens more frequently than disequilibrium. B) opportunity costs are zero. C) profit opportunities are eliminated almost instantaneously. D) profits are always very high and persistent. 19) ______ 20) The economics discipline began to take shape during A) ancient Roman times. B) biblical times. C) the late eighteenth and early nineteenth centuries. D) the latter half of the twentieth century. 20) ______ 21) The rise of the modern factory system in England during the late eighteenth and early nineteenth centuries is known as the A) Wealth of Nations. B) First Economic Revolution. C) Industrial Revolution. D) Great Migration. 21) ______ TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 22) Economics and physics are physical sciences. 22) ______ 23) The value of the best alternative foregone is the opportunity cost of making a decision. 23) ______ 24) Scarcity is the reason that opportunity costs arise. 24) ______ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 25) The branch of economics that examines the functioning of individual 25) ______ industries and the behavior of individual decision-making units is A) normative economics. B) macroeconomics. C) microeconomics. D) positive economics. 26) Studying how the management of US Steel, a large steel-producing company, decides how many tons of steel to produce and the price to charge for its steel would be considered A) descriptive economics. B) macroeconomics. C) microeconomics. D) empirical economics. 26) ______ 27) Studying how Bob's firm decides to produce one more unit of output is an example of A) industrial organization. B) macroeconomics. C) microeconomics. D) descriptive economics. 27) ______ 28) ________ focuses on the prices of individual goods and services and ________ focuses on the rate of inflation. A) Microeconomics; macroeconomics B) Microeconomics; microeconomics C) Macroeconomics; microeconomics D) Macroeconomics; macroeconomics 28) ______ 29) One topic that microeconomics focuses on is A) national income. B) total corporate profits. C) the minimum wage. D) total wages and salaries. 29) ______ 30) Positive economics is an approach to economics that A) analyzes outcomes of economic behavior, evaluates them as good or bad, and may prescribe preferred courses of action. B) seeks to understand behavior and the operation of systems while making judgments about their usefulness to society. C) prescribes roles for government in an economy. D) describes the economy and how it works. 30) ______ 31) Normative economics is an approach to economics that A) seeks to understand behavior and the operation of systems without making judgments. B) would never prescribe a role for government in the economy. C) describes the economy and how it works. D) analyzes outcomes of economic behavior, evaluates them as good or bad, and may prescribe preferred courses of action. 31) ______ 32) "High taxes reduce the incentive of workers to work" is best described as a ________ statement. A) descriptive economics B) Marxist ideology C) normative D) positive 32) ______ 33) If the price of a product falls, then the quantity demanded of that product will rise. This is best described as a ________ statement. A) descriptive economics B) positive C) normative D) Marxist ideology 33) ______ 34) Scientists should not create life in a laboratory is an example of a ________ statement. A) descriptive B) Marxist ideology C) normative D) positive. 34) ______ 35) Which of the following is a normative question? A) To reduce the regressive nature of the gasoline excise tax, should a portion of the gasoline excise tax paid by low-income individuals be refunded to them? B) How will oil exploration be affected if the government imposes price controls on gasoline? C) Why do gasoline prices increase before holiday weekends? D) What will happen to gasoline consumption if excise taxes on gasoline are increased? 35) ______ 36) Which of the following is a positive question? A) Wouldnʹt it be better to try to increase peopleʹs wages through job-training programs than by requiring employers to pay minimum wages? B) Wouldnʹt it be more equitable if the minimum wage increased automatically with the cost of living? C) Will the level of teenage unemployment increase if the minimum wage is increased? D) Should the minimum wage be set at one-half the average manufacturing wage to guarantee individuals a decent standard of living? 36) ______ 37) "A poor nation like Haiti should tolerate its wealthy citizens" is best described as a ________ statement. A) normative B) descriptive economics C) positive D) nonjudgmental 37) ______ 38) ________ economics describes what exists and ________ economics prescribes courses of action. A) Positive; normative B) Descriptive; positive C) Normative; descriptive D) Normative; positive 38) ______ 39) Descriptive economics A) requires model building. B) mainly involves the compilation of data that describe phenomena and facts. C) involves mathematical statements of presumed relationships among variables. D) looks at the outcomes of economic behavior and asks if they are good or bad. 39) ______ 40) The Commerce Department announced that economic growth rose by one-half of a percentage point. This is best described as A) descriptive economics. B) a microeconomic statement. C) an economic model. D) a normative statement. 40) ______ 41) An example of descriptive economics is when an economist A) collects data on the wage rates and employment levels in the steel industry. B) tries to determine if there are any regular patterns in the 41) ______ employment steel industry and then makes generalizations from these patterns. levels in the C) tries to understand the relationship between the price of imported steel and the level of employment in the U.S. steel industry. D) tries to develop a model to explain the changes in employment and wages in the steel industry. Refer to the information provided in Scenario 1 below to answer the questions that follow. SCENARIO 1: An economist wants to understand the relationship between minimum wages and the level of teenage unemployment. The economist collects data on the values of the minimum wage and the levels of teenage unemployment over time. The economist concludes that a 1% increase in the minimum wage causes a 0.2% increase in teenage unemployment. From this information he concludes that the minimum wage is harmful to teenagers and should be reduced or eliminated to increase employment among teenagers. 42) Refer to Scenario 1. The statement that a 1% increase in the minimum wage causes a 0.2% increase in teenage unemployment is an example of ________ economics. A) non‐empirical B) normative C) policy D) positive 42) ______ 43) Refer to Scenario 1. The statement,ʺthe minimum wage is harmful to teenagers and should be reduced or eliminated to increase employment among teenagers,ʺis most likely an example of ________ economics. A) positive B) normative C) microeconomic D) descriptive 43) ______ 44) Refer to Scenario 1. The process of collecting data on minimum wage and teenage unemployment levels is an example of A) economic history. B) law and economics. C) descriptive economics. D) econometrics. 44) ______ 45) Refer to Scenario 1. The statement that an increase in the minimum wage causes an increase in teenage unemployment is an example of A) normative economics. B) descriptive reasoning. C) economic theory. D) deductive reasoning. 45) ______ 46) Refer to Scenario 1. A graph of the value of the minimum wage on one axis and the level of teenage unemployment on the other axis is an example of A) a variable theory. B) inductive reasoning. C) an economic model. D) an economic theory. 46) ______ 47) A measure that can change from time to time or from observation to observation is a A) theory. B) parameter. C) model. D) variable. 47) ______ 48) To isolate the impact of one single factor, economists invoke the assumption of A) ceteris paribus. B) post hoc, ergo propter hoc. C) Ockhamʹs razor. D) inductive reasoning. 48) ______ 49) The principle that irrelevant detail should not be included in a model is known as A) Sayʹs Identity. B) Ockhamʹs razor. C) Hobsonʹs choice. D) ceteris paribus. 49) ______ 50) Economists use the phraseʺceteris paribusʺ to express the assumption, A) ʺscarcity is a fact of life.ʺ B) ʺthere is no such thing as a free lunch.ʺ C) ʺall else equal.ʺ D) ʺeverything affects everything else.ʺ 50) ______ 51) Labor economics deals with the. A) economic function of legal rules and institutions. B) structure and performance of industries and firms within an economy. C) way alternative economic systems function. D) factors that determine wage rates, employment, and unemployment. 51) ______ 52) Jim states that the melting of the polar icecap will cause prices in the stock market to increase. He is committing the A) fallacy of composition. B) fallacy of inductive reasoning. C) ceteris paribus fallacy. D) post hoc, ergo propter hoc fallacy. 52) ______ 53) Since Becky plays basketball well, therefore the other members of her team must also play basketball well. This statement is an example of the fallacy of A) composition. B) post hoc, ergo propter hoc. C) ceteris paribus. D) inductive reasoning. 53) ______ 54) The economy expanded during all of the years that James was a student, but as soon as he graduated, the economy contracted. Therefore, the labor market waited until James started looking for a job to contract. This statement is an example of the fallacy of A) inductive reasoning. B) post hoc, ergo propter hoc. C) composition. D) ceteris paribus. 54) ______ 55) You know that traffic gets very congested about 7:45 a.m. To avoid this congestion, you start leaving for school 15 minutes earlier every day. But many students make the same decision, and now traffic becomes very congested at 7:30 a.m. This is an example of the fallacy of A) ceteris paribus. B) division. C) post hoc, ergo propter hoc. D) composition. 55) ______ 56) It always rains about an hour after you finish washing your car. Concluding that washing your car caused rain to fall is an example of the fallacy of A) ceteris paribus. B) inductive reasoning. C) post hoc, ergo propter hoc. D) composition. 56) ______ 57) At a very exciting ballgame, you stand up to see better. Everyone else stands up, as well. This is an example of the fallacy of A) ceteris paribus. B) Ockhamʹs razor. C) post hoc, ergo propter hoc. D) composition. 57) ______ 58) A student observes that every time he eats an apple before taking an exam he gets an F. He, therefore, concludes that to pass an exam, he only needs to avoid eating an apple before he takes the exam. He has committed the fallacy of A) post hoc, ergo propter hoc. B) division. C) inductive reasoning. D) composition. 58) ______ 59) If you observe that Event A happens before Event B, and you conclude that Event A caused Event B, you may be guilty of an error called the fallacy of A) inductive reasoning. B) ceteris paribus. C) post hoc, ergo propter hoc. D) composition. 59) ______ 60) The fallacy of composition is the belief that A) what is true for the whole is necessarily true of the parts. B) if Event A happens before Event B, then Event A causes Event B to occur. C) what is true for a part is necessarily true for the whole. D) it is impossible to draw generalizations about cause and effect. 60) ______ 61) Two variables are ________ if one variable changes when the other variable changes. A) independent of each other B) causally related C) unrelated D) correlated 61) ______ 62) Empirical economists A) collect and use data to test economic theories. B) impose ceteris paribus conditions to conduct controlled experiments. C) reason inductively to develop economic models. D) reason deductively to develop economic theories. 62) ______ 63) The collection and use of data to test economic theories is ________ economics. A) empirical B) normative C) policy D) descriptive 63) ______ 64) City officials may impose rent controls when they believe landlords are exploiting tenants. The officials use the ________ criteria to justify their actions. A) equity B) stability C) efficiency D) growth 64) ______ 65) A government policy that tries to minimize variations in aggregate output can best be described as trying to achieve economic A) efficiency. B) growth. 65) ______ C) stability. D) equity. 66) Governments redistribute income from the rich to the poor with a tax system that requires taxes to rise with income. Which of the following criteria best explains the reason for this tax system? A) Efficiency B) Growth C) Equity D) Stability 66) ______ 67) Voluntary exchange is efficient when the two trading parties are ________ the exchange than they were ________ the exchange. A) better off after; before B) worse off after; before C) no better off after; before D) better off before; after 67) ______ 68) In an efficient economy A) output is steady or growing and there is low inflation. B) what consumers want is produced at the least possible cost. C) the distribution of wealth is fair. D) output is distributed equally among all consumers. 68) ______ 69) Allocative efficiency means A) an economy distributes income and wealth fairly. B) opportunity costs are high. C) an economy produces what people want at the least possible cost. D) the ratio of economic output to inputs is as low as possible. 69) ______ 70) The four criteria that are frequently used in judging the outcome of economic policy are A) efficiency, equity, stability, and economic growth. B) efficiency, equality, stability, and economic growth. C) efficiency, equity, profitability, and stability. D) efficiency, equality, profitability, and stability. 70) ______ 71) You have noticed that there is an increase in the number of homeless people in your city. At the same time you observe that there are also a number of vacant apartments. You believe that the government could reduce the number of homeless people if landlords were required to rent their apartments for less than they are currently charging. This policy recommendation would be motivated by concerns over A) increased production. B) economic growth. C) equity. D) stability. 71) ______ 72) There is a possibility that a national sales tax will be implemented. Many economists argue that items such as food and clothing should be exempt from such a tax because low-income people spend a greater percentage of their income on these goods than high-income individuals. This argument is motivated by concerns over A) equity. B) economic growth. C) economic stability. D) efficiency. 72) ______ 73) A(n) ________ economy produces increasing total output. A) growing B) equitable C) efficient D) stable 73) ______ TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 74) Normative economics looks at outcomes of economic behavior and evaluates them as good or bad. 74) ______ 75) Positive economics looks at outcomes of economic behavior and evaluates them as good or bad. 75) ______ 76) Standards of living increase if output grows faster than population. 76) ______ 77) ʺCeteris Paribusʺ literally translated means,ʺbuyer beware.ʺ 77) ______ 78) Positive economics seeks to understand behavior, but not make judgments. 78) ______ 79) Descriptive economics involves a mathematical statement of a presumed relationship between two or more variables. 79) ______ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Refer to the information provided in Figure 1.1 below to answer the questions that follow. Figure 1.1 80) Refer to Figure 1.1. There is ________ relationship between the daily temperature and the number of gallons of ice cream purchased. A) either a negative or a positive B) a positive C) an inverse D) a negative 80) ______ Refer to the information provided in Figure 1.2 below to answer the questions that follow. Figure 1.2 81) Refer to Figure 1.2. The slope of the line between Points A and B is A) 3.3. B) 2.3. C) .3. D) indeterminate from this information. 81) ______ 82) If a straight line has slope, a(n) ________ in X ________ Y. A) increase; increases B) decrease; doesn't change C) increase; lowers D) decrease; lowers 82) ______ Refer to the information provided in Figure 1.3 below to answer the questions that follow. Figure 1.3 83) Refer to Figure 1.3. The slope of the line is A) increasing at an increasing rate. B) positive. C) negative. D) decreasing at an increasing rate. 83) ______ 84) Refer to Figure 1.3. The slope of the line between the origin and Point B is A) -2. B) 0.5. C) 5. D) 2. 84) ______ 85) Refer to Figure 1.3. If a 45 degree line were also graphed, the line shown would ________ it. A) lie above B) cross 85) ______ C) lie below D) indeterminant from this information. 86) Refer to Figure 1.3. At Point A, what is the value of Y? A) 12. B) 7. C) 8. D) indeterminate from this information. 86) ______ 87) Refer to Figure 1.3. At Point A the slope of the line is 2, so at Point D the slope would be A) less than 2. B) equal to 2. C) greater than 2. D) indeterminate from this information. 87) ______ Refer to the information provided in Figure 1.4 below to answer the questions that follow. Figure 1.4 88) Refer to Figure 1.4. Which of the curves or lines has a slope that is first positive and then negative? A) A B) B C) C D) D 88) ______ 89) Refer to Figure 1.4. Which of the curves or lines has a slope that is negative and then positive? A) A B) B C) C D) D 89) ______ 90) Refer to Figure 1.4. Which of the following curves or lines has a zero slope throughout? A) A B) B C) C D) D 90) ______ 91) Refer to Figure 1.4. Which of the curves or lines has an infinite slope throughout ? 91) A) A ___ ___ B) B C) C D) D 92) Refer to Figure 1.4. At Point E in panel A, the slope is A) infinite. B) negative. C) zero. D) indeterminate from this information. 92) ______ 93) The slope of a curve A) is always positive. B) is not constant. C) is constant. D) must first increase then decrease. 93) ______ 94) The slope of a horizontal line is A) infinite. C) continually changing. 94) ______ B) zero. D) negative. 95) If the slope of a straight line is 5 and if X (the variable on the horizontal axis) increases by 10, then Y (the variable on the vertical axis) will A) increase by 0.5. B) increase by 50. C) decrease by .5. D) decrease by 50. 95) ______ 96) If the slope of a straight line is 10 and if Y (the variable on the vertical axis) decreases by 20, then X (the variable on the horizontal axis) A) decreases by 2. B) decreases by 200. C) increases by 2. D) increases by 200. 96) ______ 97) The slope of a vertical line is A) zero. C) negative. 97) ______ B) infinite. D) continually changing. Refer to the information provided in Figure 1.5 below to answer the questions that follow. Figure 1.5 98) Refer to Figure 1.5. Which of the curves has a slope that is positive and decreasing? A) A B) B C) C D) D 98) ______ 99) Refer to Figure 1.5. Which of the curves has a slope that is positive and increasing? A) A B) B C) C D) D 99) ______ 100) Refer to Figure 1.5. Which of the curves has a slope that is negative and decreasing? A) A B) B C) C D) D 100) _____ 101) Refer to Figure 1.5. Which of the curves has a slope that is negative and increasing? A) A B) B C) C D) D 101) _____ 102) Refer to Figure 1.5. As income increases, consumption increases, but for each additional increase in income, consumption increases by a smaller and smaller amount. If consumption is graphed on the vertical axis and income is graphed on the horizontal axis, the relationship between consumption and income would look like which of the following panels? A) A B) B C) C D) D 102) _____ 103) Refer to Figure 1.5. In many industries, as firms produce additional units, average costs of production decline but continue to fall by a smaller and smaller amount. If output is graphed on the horizontal axis and average costs are graphed on the vertical axis, the relationship between average costs and output would be like which of the following panels? A) A B) B C) C D) D 103) _____ TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 104) Each Y value equals the corresponding X value on a 45 ° line. 105) A graph illustrating how one variable changes over time is a Cartesian coordinate system. 104) _____ 105) _____ 1) 2) 3) 4) 5) 6) 7) 8) 9) 10) 11) 12) 13) 14) 15) 16) 17) 18) 19) 20) 21) 22) 23) 24) 25) 26) 27) 28) 29) 30) 31) 32) 33) 34) 35) 36) 37) 38) 39) 40) 41) 42) 43) 44) 45) 46) 47) 48) 49) 50) 51) D D C A C B D B D C B C D B C D D B C C C FALSE TRUE TRUE C C C A C D D D B C A C A A B A A D B C C C D A B C D 52) 53) 54) 55) 56) 57) 58) 59) 60) 61) 62) 63) 64) 65) 66) 67) 68) 69) 70) 71) 72) 73) 74) 75) 76) 77) 78) 79) 80) 81) 82) 83) 84) 85) 86) 87) 88) 89) 90) 91) 92) 93) 94) 95) 96) 97) 98) 99) 100) 101) 102) 103) D A B D C D A C C D A A A C C A B C A C A A TRUE FALSE TRUE FALSE TRUE FALSE B C C B D A C B B A C D C B B B A B B A C D B C 104) TRUE 105) FALSE