Question 1

Living in a world of scarcity involves trade-offs.

Accepted Answer

A) True 
 B)False

Question 2

The fallacy of composition is:

Accepted Answer

A)  ​the erroneous view that an economic activity can sometimes exceed the sum of its components.
B)  ​the erroneous view that what is true for the individual will also be true for the group.
C)  ​the view that the aggregation of economic activity will necessarily lead to an outcome that is different than the outcome generated by each individual in the group.
D)  ​the idea that association need not imply causation.E) B) and C)
F) B) and D)

Question 3

An economic hypothesis:

Accepted Answer

A)  ​can be tested using empirical analysis.
B)  ​can be tested using normative analysis.
C)  ​cannot be tested since it is normative in nature.
D)  ​cannot be tested since it is a positive economic statement.E) B) and C)
F) B) and D)

Question 4

Why are graphs such an important tool in economics?

Accepted Answer

Graphs allow us to express a s...

Question 5

"The president of the world's biggest polluter (the United States) needs to do more than propose well-intentioned but insufficient measures that amount to using a squirt gun to quell a raging fire." Is this a positive or a normative economic statement? Explain your answer.

Accepted Answer

This statement is normative. T...

Question 6

Graphs are useful because of the way they:

Accepted Answer

A)  ​facilitate interpretation and analysis of data.
B)  ​clarify interpretation and analysis of ideas.
C)  ​permit a person to more easily see relationships.
D)  ​do all of the above.E) B) and D)
F) B) and C)

Question 7

Which of the following best illustrates the fallacy of composition?

Accepted Answer

A)  ​If I stand up at a baseball game I will be able to see the game better; if all fans stood up at a baseball game they would all be able to see the game better.
B)  ​If I wore a jacket to a baseball game in October, I would be warmer; if all fans wore jackets they would all be warmer.
C)  ​If I purchase fewer concessions at a baseball game, I will save money; if all fans purchase fewer concessions then all can save money.
D)  ​If I yell more during a baseball game it will be louder if all fans yell more during the game it will be much louder.E) B) and D)
F) A) and B)

Question 8

The fallacy of composition is essentially the error of:

Accepted Answer

A)  ​confusing association with causation.
B)  ​confusing normative economics with positive economics.
C)  ​generalizing from the individual to the whole.
D)  ​omitting relevant variables from an economic model.E) B) and C)
F) A) and C)

Question 9

"The hotter it gets, the more water people drink." This statement implies that the relationship between temperature and water consumption must have:

Accepted Answer

A)  ​no relationship.
B)  ​a negative slope.
C)  ​a positive slope.
D)  ​either positive or negative slope.E) A) and B)
F) B) and C)

Question 10

​Exhibit 1-1
​ 
-Exhibit 1-1 demonstrates that:

Accepted Answer

A)  ​price and quantity purchased are positively related.
B)  ​there is an inverse relationship between price and quantity purchased.
C)  ​as the price increases, the quantity purchased increases.
D)  ​price and quantity purchased share a direct relationship.E) A) and D)
F) A) and C)

Question 11

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

Accepted Answer

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 economyE) None of the above
F) A) and B)

Question 12

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

Accepted Answer

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.E) B) and D)
F) None of the above

Question 13

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.

Accepted Answer

A) True 
 B)False

Question 14

Economics is primarily concerned with the study of:

Accepted Answer

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.E) All of the above
F) B) and D)

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

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.E) B) and D)
F) A) and B)

Question 17

Which of the following is false?

Accepted Answer

A)  ​A positive statement must be testable but need not be true.
B)  ​A hypothesis is a normative statement.
C)  ​Normative analysis involves subjective, non-testable statements.
D)  ​The majority of disagreements in economics stem from normative issues.E) A) and B)
F) A) and D)

Question 18

Why is abstraction important in developing economic theories?

Accepted Answer

Economic theories cannot realistically i...

Question 19

Economics is primarily the study of:

Accepted Answer

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.E) A) and B)
F) B) and C)

Question 20

In Europe, birth rates have fallen as the stork population decreased. This is likely

Accepted Answer

A)  ​a normative statement.
B)  ​confusing correlation and causation.
C)  ​the fallacy of composition.
D)  ​all of the aboveE) B) and D)
F) B) and C)

Exam 1: The Role and Method of Economics

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

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Which of the following best illustrates the fallacy of composition?

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An economic hypothesis:

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Economics is primarily concerned with the study of:

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"The hotter it gets, the more water people drink." This statement implies that the relationship between temperature and water consumption must have:

Correct AnswerverifiedShow Answer

In Europe, birth rates have fallen as the stork population decreased. This is likely

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The fallacy of composition is:

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Which of the following is false?

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The fallacy of composition is essentially the error of:

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

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Why are graphs such an important tool in economics?

Correct AnswerverifiedGraphs allow us to express a s...View AnswerShow Answer

"The president of the world's biggest polluter (the United States) needs to do more than propose well-intentioned but insufficient measures that amount to using a squirt gun to quell a raging fire." Is this a positive or a normative economic statement? Explain your answer.

Correct AnswerverifiedThis statement is normative. T...View AnswerShow Answer

Why is abstraction important in developing economic theories?

Correct AnswerverifiedEconomic theories cannot realistically i...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

​Exhibit 1-1 ​ -Exhibit 1-1 demonstrates that:

Correct AnswerverifiedShow Answer

Economics is primarily the study of:

Correct AnswerverifiedShow Answer

Living in a world of scarcity involves trade-offs.

Correct AnswerverifiedShow Answer

Graphs are useful because of the way they:

Correct AnswerverifiedShow Answer

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Graphs allow us to express a s...
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This statement is normative. T...
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Economic theories cannot realistically i...
View Answer

Correct Answer
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Correct Answer
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Exhibit 1-1 -Exhibit 1-1 demonstrates that:

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Correct Answer
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