What is Economics Test Bank

Answer Key 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) C D A C D B D B B A D B A D A D B D D C A D D B A D C B D C B A A D A C D D A D B D B C B D D C Answer Key 49) 50) 51) 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) A B C C D C D C C C B B B D C C A D D B A D C D B D A D D A A B A D C C D B A B A C C C B D B A Answer Key 97) 98) 99) 100) 101) 102) 103) 104) 105) 106) 107) 108) 109) 110) 111) 112) 113) 114) 115) 116) 117) 118) 119) 120) 121) 122) 123) 124) 125) 126) 127) 128) 129) 130) 131) 132) 133) 134) 135) 136) 137) 138) 139) 140) 141) 142) 143) 144) B A A D C C A B D D C C D C C A C D D D B C D C C B D C D D A D B C A D A B D A C C D A D C B A 145) 146) 147) 148) 149) 150) 151) 152) 153) 154) 155) C B D D C B C C A B D What is Economics? Test bank MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) An incentive A) is the opposite of a tradeoff. y. B) could be a reward but could not be a penalt y. C) could be either a reward or a penalt D) could be a penalt y but could not be a reward. 1) 2) The most fundamental economic problem is A) securit y. B) the fact the United States bu ys more goods from foreigners than we sell to foreigners. C) health. D) scarcit y. 2) 3) Economics is best defined as the stud y of how people, businesses, governments, and societie A) make choices to cope with scarcit y. B) attain wealth. D) use their infinite resources. C) choose abundance over scarcit y. 4) Economists point out that scarcit A) the rich but not the poor. C) both the poor and the rich. 3) 4) y confronts B) the poor but not the rich. D) neither the poor nor the rich. 5) Scarcity requires that people mus t A) trade. B) compete. 6) As an economic concept, scarcit A) neither time nor mone y. C) time but not mone y. s 5) C) cooperate. D) make choices. 6) y applies t o B) both mone y and time. D) mone y but not time. y of economics? Economics is the stud 7) Which is the most accurate definition of the stud A) the distribution of surplus goods to those in need. B) affluence in a morall y bankrupt world. y. C) wa ys to reduce wants to eliminate the problem of scarcit D) the choices we make because of scarcit y. y of 7) 8) Which of the following is a macroeconomic topic? A) wh y plumbers earn more than janitors B) the reasons for the rise in average prices C) whether the arm y should bu y more tanks or more rockets D) the reasons for a rise in the price of orange juice 8) 9) Which of the following is a microeconomic topic? A) the reasons for a decline in average prices B) the reasons wh y Kath y bu ys less orange juice C) the cause of wh y total emplo yment ma y decrease D) the effect of the government budget deficit on inflatio 9) 1 n 10) Microeconomics focuses on all of the following EXCEPT A) the effect of increasing the mone y suppl y on inflation. B) the purchasing decisions that an individual consumer makes. C) the effect of an increase in the tax on cigarettes on cigarette sales. D) the hiring decisions that a business makes. 10) 11) In broad terms the difference between microeconomics and macroeconomics is tha t A) microeconomics studies the effects of government taxes on the national unemplo ymen t rate. B) macroeconomics studies the effects of government regulation and taxes on the price o f individual goods and services whereas microeconomics does not. C) the y use different sets of tools and ideas. D) microeconomics studies decisions of individual people and firms and macroeconomic s studies the entire national economy. 11) 12) Stud ying the determination of prices in individual markets is primaril y a concern o f A) negative economics. B) microeconomics. C) positive economics. D) macroeconomics. 12) 13) The anal ysis of the behavior of individual decision-making units is the definition o A) microeconomics. B) macroeconomics. C) positive economics. D) normative economics. 13) f 14) Which of the following topics would be studied in a microeconomics course? A) how a tax rate increase will impact total productio n B) comparing inflation rates across countries C) how a trade agreement between the United States and Mexico affects both nations' unemployment rates D) how rent ceilings impact the suppl y of apartments 14) 15) Which of the following is a macroeconomic issue? A) how federal government budget deficits affect interest rate B) the cause of a decline in the price of peanut butte r C) what determines the amount a firm will produce D) how a rise in the price of sugar affects the market for sodas 15) 16) Which of the following is an issue in macroeconomics? A) the purchasing decisions that an individual consumer makes B) the effect of an increase in the tax on cigarettes on cigarette sale C) the hiring decisions that a business makes D) the effect of increasing the mone y suppl y on inflatio n s 16) s 17) Macroeconomic topics include A) the impact of government regulation of markets. B) total, nationwide emplo yment. C) stud ying what factors influence the price and quantit y of automobiles. D) stud ying the determination of wages and production costs in the software industr 17) y. 18) Macroeconomics is the branch of economics that studies A) prices of individual goods. B) important, as opposed to trivial, issues. C) the wa y individual markets work. D) the econom y as a whole. 2 18) 19) When an econom y produces more houses and fewer t ypewriters, it is answering the _______ question. A) "where" B) "for whom" C) "how" D) "what" 19) _ 20) y are 20) When firms in an econom y start producing more computers and fewer televisions, the answering the ________ question. A) "where" B) "when" C) "what" D) "for whom" 21) U.S. producers decide to produce more compact cars and fewer SUVs as the price of gasolin rises. Producers are answering the ________ question. A) "what" B) "when" C) "how" D) "how man y" 22) e 22) The question "Should movies or compact discs be produced?" is an example of th A) "how" question. B) "who" question. C) "where" question. D) "what" question. 23) Which of the following statements is correct? A) The percentage of people producing goods in the United States has steadil the last 60 years. B) The United States produces an equal amount of goods and services. C) The United States produces more goods than services. D) The United States produces more services than goods. 21) e 23) y increased ove r 24) Which of the following is correct concerning production in the United States? years. A) The percentage of people emplo yed in manufacturing has increased over the last 60 years. B) The percentage of people emplo yed in farming has decreased over the last 60 years. C) The percentage of people emplo yed in services has decreased over the last 60 years. D) The percentage of people emplo yed in construction has increased over the last 60 24) 25) When China builds a dam using few machines and a great deal of labor, it is answering the ________ question. A) "how" B) "what" C) "where" D) "for whom" 25) 26) When a textile compan y keeps track of its inventor y using a computer and its competitor uses spreadsheet and pencil, they are both answering the ________ question. A) "where" B) "what" C) "for whom" D) "how" a 26) 27) Human capital is A) machiner y that meets or exceeds federal safet y standards for use b y humans. y governments. B) all capital owned b y individuals or corporations, but not b C) the skill and knowledge of workers. D) all capital owned b y individuals, but not b y corporations or governments. 27) 28) Entrepreneurs do all of the following EXCEPT A) bear risk from business decisions. B) own all the other resources. C) come up with new ideas about what, how, when and where to produce. D) organize labor, land, and capital. 28) 29) To answer the "for whom" question, we stud A) business c ycles. C) the global econom y. 29) y B) technological change. D) income differences. 3 30) The fact that people with higher incomes get to consume more goods and services addresse the ________ question. A) "how" B) "where" C) "for whom" D) "when" s 30) 31) Which of the following is NOT a factor of production? A) the water used to cool a nuclear power plant. B) the wages paid to workers. C) the effort of farmers raising cattle. D) the management skill of a small business owner. 31) 32) Which of the following is NOT a factor of production? A) a share of stock issued b y a firm. B) a new computer used b y a small business owner. C) a tractor used b y a wheat farmer. D) the time worked b y elementar y school teachers. 32) 33) An autoworker is considered ________ and earns ________. A) labor; wages B) labor; ren t C) capital; ren t D) entrepreneurship; wages 33) 34) Overtime worked b y a JCPenne y associate is considered ________ and earns ________. A) entrepreneurship; profi t B) labor; profi t C) human capital; interes t D) labor; wages 34) 35) When a universit y decides to add to the football stadium instead of adding to the basebal stadium, it faces the A) "what" tradeoff. B) "how" tradeoff. C) macroeconomic question. D) "for whom" tradeoff. 36) When a farmer decides to increase the amount of acreage devoted to wheat and grow fewe acres of soybeans, the farmer is facing the A) "how" tradeoff. B) microeconomic question. C) "what" tradeoff. D) "for whom" tradeoff. l 35) r 36) 37) When a photographer decides to use a digital camera to take shots versus using film, the photographer is facing the A) "what" tradeoff. B) microeconomic question. C) "for whom" tradeoff. D) "how" tradeoff. 37) 38) The "how" tradeoff occurs when A) a firm decides to produce refrigerators instead of dishwashers. B) we answer the macroeconomic question. C) the government increases income taxes paid b y the rich. D) a farm uses machiner y to pick oranges instead of emplo y ing migrant workers. 38) 39) When the government decides to provide tax relief for small businesses while placing highe taxes on large corporations, it is facing the A) "for whom" tradeoff. B) "what" tradeoff. C) "how" tradeoff. D) macroeconomic question. 4 r 39) 40) Because we face scarcit y, ever y choice involve s A) the question "what." B) mone y C) giving up something for nothing. D) an opportunit 40) y cost 41) The term used to emphasize that making choices in the face of scarcit y involves a cost i s A) utilit y cost. B) opportunit y cost. C) accounting cost. D) substitution cost. 41) 42) The loss of the highest-valued alternative defines the concept o f A) entrepreneurship. B) scarcit y . C) marginal benefit. D) opportunit y cost. 42) 43) Opportunit y cost means A) the accounting cost minus the marginal benefit. B) the highest-valued alternative forgone. C) the monetar y costs of an activit y. D) the accounting cost minus the marginal cost. 43) 44) The opportunit y cost of an y action is A) the time required but not the monetar y cost. B) all the possible alternatives forgone. C) the highest-valued alternative forgone. D) the monetar y cost but not the time required. 44) 45) The opportunit y cost of something you decide to get is A) the amount of mone y you pa y to get it. B) the highest valued alternative you give up to get it. C) the lowest valued alternative you give up to get it. D) all possible alternatives that you give up to get it. 45) 46) The ultimate cost of an y choice is A) the dollars expended. B) what someone else would be willing to pa C) the after-tax cost. D) the highest-valued alternative forgone. 46) y. 47) During the summer y ou have made the decision to attend summer school, which precludes you from working at your usual summer job in which you normally earn $6,000 for the summer. Your tuition cost is $3,000, books and supplies cost $300, and room and board cost $1,000. The opportunity cost of attending summer school is A) $3,300. B) $4,300. C) $6,000. D) $10,300. 47) 48) On Saturda y morning, you rank your choices for activities in the following order: go to the library, work out at the gym, have breakfast with friends, and sleep late. Suppose you decide to go to the library. Your opportunity cost is A) working out at the g ym, having breakfast with friends, and sleeping late. B) zero because you do not have to pa y mone y to use the librar y. C) working out at the g ym. D) not clear because not enough information is given. 48) 5 49) You decide to take a vacation and the trip costs you $2,000. While you are on vacation, you do not report to work where you could have earned $750. The opportunity cost of the vacation is A) $2,750. B) $2,000. C) $750. D) $1,250 49) 50) When an action is chosen, the highest-valued alternative NOT chosen is called the A) accounting cost. B) opportunit y cost. C) implicit cost. D) explicit cost. 50) 51) The term "opportunit y cost" points out tha t A) there ma y be such a thing as a free lunch. B) executives do not alwa ys recognize opportunities for profit as quickl y as the y should. C) an y decision regarding the use of a resource involves a costl y choice. D) not all individuals will make the most of life's opportunities because some will fail t o achieve their goals. 51) 52) During the next hour John can pla y basketball, watch television, or read a book. The opportunity cost of reading a book A) equals how much John enjo y s the book. B) is the value of pla ying basketball and the value of watching television. C) is the value of pla ying basketball if John prefers that to watching television. D) is how much the book cost when it was purchased. 52) 53) Misty has the option of purchasing one of three products: Brand A, Brand B, or Brand C. Each costs ten dollars. If she decides that Brand A meets her needs best, then the opportunity cost of this decision is A) twent y dollars. B) Brand A. C) Brand B plus Brand C. D) Brand B or Brand C, depending on which is considered the highest-value alternativ forgone. 53) 54) Which of the following is NOT an example of an opportunit y cost? A) Because David used all of his vacation time to paint his house, he was unable to visit th Caribbean last year. B) By choosing to attend college, Jean was not able to continue working as an electrician; as result, she gave up more than $85,000 in earnings while she was in college. C) Because Mar y is now being paid a higher wage, she can afford to bu y a new car even though she is moving into a bigger apartment. D) By spending Thursda y night stud ying for an economics exam, a student was unable to complete a homework assignment for calculus class. e 54) e a 55) From 8 to 11 p.m., Sam can either attend a basketball game, a hocke y match or the s y mphon y. Suppose that Sam decides to attend the hockey match and thinks to herself that if she did not go to the match she would go to the symphony. Then the opportunity cost of attending the hockey match is A) going to the basketball game. B) going to the s ymphon y and the basketball game. C) three hours of time. D) going to the s ymphon y. 6 55) 56) When the government chooses to use resources to build a dam, these sources are no longe available to build a highway. This choice illustrates the concept of A) a market mechanism. B) a fallac y of composition. D) macroeconomics. C) opportunit y cost. 56) r 57) 57) Marginal benefit is the benefi t A) that arises from the secondar y effects of an activit y. B) of an activit y that exceeds its cost. y. C) that arises from an increase in an activit D) that your activit y provides to someone else. 58) The benefit that arises from an increase in an activit A) an incentive. C) the marginal benefit. 58) y is called B) the marginal cost. y cost. D) opportunit 59) Marginal cost is the cos t A) of an activit y that exceeds its benefit. y. B) that arises from an increase in an activit C) that your activit y imposes on someone else. D) that arises from the secondar y effects of an activit y. 59) 60) Laura is a manager for HP. When Laura must decide whether to produce a few additional printers, she is choosing at the margin when she compares A) the total revenue from sales of printers to the total cost of producing all the printers. B) the extra revenue from selling a few additional printers to the extra costs of producing th printers. C) HP's printers to printers from competing companies, such as Lexmark. D) the extra revenue from selling a few additional printers to the average cost of producin the additional printers. 60) 61) In economics, positive statements are abou A) macroeconomics, not microeconomics. C) the wa y things ought to be. e g 61) t B) the wa y things are. D) microeconomics, not macroeconomics. 62) A positive statement is A) valid onl y in the context of a model with simple assumptions. B) the result of a model's normative assumptions. C) about what ought to be. D) about what is. 62) 63) A positive statement is A) alwa y s true. B) one that does not use the ceteris C) about what is. D) about what ought to be. 63) paribus clause. 64) A positive statemen t A) is an affirming statement that is strongl y worded. B) cannot be tested b y checking it against the facts. C) is a statement of what is. D) is a statement of what ought to be. 7 64) 65) Which of the following are true regarding "positive" statements? I. They describe what "ought to be." II. They describe what is believed about how the world appears. III. They can be tested as to their truthfulness. A) II and III B) I and II C) I and III 65) D) I, II and III 66) Positive and normative statements differ in tha t A) normative statements depict "what is" and positive statements depict "what ought to be. B) positive statements can be graphed, whereas normative statements cannot. C) normative statements can be tested, whereas positive statements cannot. D) positive statements can be tested, whereas normative statements cannot. 66) " 67) Which of the following is an example of a positive statement? A) Business firms ought to contribute more to charities. B) Government should not redistribute income. C) The foreign sector should be more tightl y controlled. D) Households are the primar y source of saving. 67) 68) Which of the following is an example of a positive statement? A) The Federal Reserve ought to cut the interest rate. B) Increasing the minimum wage results in more unemplo yment. C) We should cut back on our use of carbon-based fuels such as coal and oil. D) Every American should have equal access to health care. 68) 69) Which of the following is a positive statement? A) A 10 percent increase in income leads to a 4 percent increase in the consumption of beef. B) My economics class should last for two terms because it is m y favorite class. C) Given their negative impact on productivit y, the government should eliminate labo r unions. D) Taxes should be lower because then people get to keep more of what the y earn, so the y will work more. 69) 70) When Al makes the statement, "The cost of living has increased 10 percent over the past 1 years," he is A) making a normative statement. B) facing the standard of living tradeoff. C) testing an economic model. D) making a positive statement. 70) 0 71) Which of the following is a positive statement? A) State lotteries are good methods to use for raising revenues. B) Increased prison sentences are the best wa y to reduce the crime rate. C) Inflation is a more serious problem than is deflation. D) An increase in gas prices leads people to carpool more. 72) The statement "Managers with a college education earn $18 an hour while ski instructors wh did not complete college earn $10" is A) an ethical statement. B) a political statement. C) a normative statement. D) a positive statement. 8 71) o 72) 73) The statement "An increase in the price of gasoline will lead to a decrease in the amoun purchased" is A) a political statement. B) a positive statement. C) a scientific statement. D) a normative statement. t 73) 74) Which of the following is a positive statement? A) My economics class should last for two terms because it is m y favorite class. B) The government must lower the price of a pizza so that more students can afford to bu y it. C) The best level of taxation is zero percent because then people get to keep ever ything the y earn. D) An increase in tuition will cause fewer students to appl y to college. 74) 75) Which of the following is a positive statement? A) Low rents will restrict the suppl y of housing. B) Housing costs too much. C) Low rents are good because the y make apartments more affordable. D) Owners of apartment buildings ought to be free to charge whatever rent the 75) 76) The statement "The unemplo A) a normative statement. C) an ethical statement. yment rate for teens is higher than that for adults" i B) a political statement. D) a positive statement. y want. s 76) 77) The statement "Prices rise more in countries with rapid growth in the mone y suppl y" is A) an ethical statement. B) a normative statement. C) a political statement. D) a positive statement. 77) 78) Statements about what ought to be are called A) normative statements. C) assumptions. 78) 79) Normative statements are statements abou A) what ought to be. C) what is. 80) A normative statement is A) one that does not use the ceteris B) about what ought to be. C) alwa y s true. D) about what is. B) implications. D) positive statements. t 79) B) quantities. D) prices. 80) paribus clause. 81) In economics, normative statements are abou A) the wa y things ought to be. C) marginal costs, not marginal benefits. t 81) B) the wa y things are. D) marginal benefits, not marginal costs. 82) Which of the following is a normative statement? A) The price of cand y bars is $1.25 each. B) Popcorn and cand y are sold in movie theaters. C) Cand y bars are more expensive than newspapers. D) You should eat less cand y. 9 82) 83) Which of the following is a normative statement? A) Fort y percent of the public believes that the unemplo B) The unemplo yment rate rose last month. C) The unemplo yment rate is too high. D) all of the above 83) yment rate is too high. 84) "Government should act to reduce povert y levels." A) This statement is an example of the fallac y of composition. B) This statement is an example of the post hoc fallacy. C) This statement is a normative statement. D) This statement is a positive statement. 84) 85) When Susan makes the statement, "The government should spend less mone y to take care o f national parks," she is A) facing the standard of living tradeoff. B) testing an economic model. C) making a positive statement. D) making a normative statement. 85) 86) "All children should have health insurance" is A) post hoc fallacy. C) fallac y of composition. 86) a B) normative statement. D) positive statement. 87) "The rich should pa y higher income tax rates than the poor" is an example of a A) normative statement. B) theoretical statement. C) positive statement. D) descriptive statement. 87) 88) Which of the following is a normative statement? A) Taking extra vitamin C prevents catching a cold. B) States should require all motorc ycle riders to wear helmets to reduce the number of rider killed. C) Stud y ing more hours leads to an increase in your GPA. D) An increase in tax rates means people work fewer hours. 88) 89) Which of the following is a normative statement? A) Low rents are good because the y make apartments more affordable. B) Low rents will restrict the suppl y of housing. C) Owners of apartment buildings are free to charge whatever rent the D) Housing costs are rising. s 89) y want. 90) Which of the following is an example of a normative statement? A) Government spending rose in the 1990s. B) Household consumption is the largest component of spending. C) Households should save more. D) The business sector is the primar y source of jobs. 90) 91) Which of the following is a normative statement? A) The current butter surplus is the result of federal policies. B) Next y ear's inflation rate will be under 4 percent. C) The government's cuts in welfare spending impose an unfair hardship on the poor. D) Consumers will bu y more gasoline over the Christmas holida y even if the price of gas is 10 cents higher than it was during the Thanksgiving holiday. 91) 10 92) Suppose that an economist tells y ou that people in the United States do not save enough out o their incomes. This is an example of ________ statement. A) a ceteris paribus B) a positive C) a normative D) an autonomous f 92) 93) The task of economic science is to discover ________ that are consistent with ________. A) positive statements; normative statement s B) positive statements; what we observe C) normative statements; positive statement s D) wa ys to make mone y; the law 93) 94) Economic models A) are essentiall y different from those used in other sciences. B) include all relevant facts. C) alwa y s use graphs. D) simplif y realit y. 94) 95) Economic models A) are better if the y include most of the detail of the real econom B) rely on simplification. C) do not address questions about the econom y. D) make no assumptions that have not been proved. 95) y. 96) An economic theor y is A) a generalization that summarizes what we understand about economic choices. B) a positive statement that cannot use the ceteris paribus clause. C) usuall y more complex than the real world. D) alwa y s a mathematical, or nonverbal, model. 97) Three steps that economists take to discover how the economic world works ar A) model building; speculation; and, revision. B) observation and measurement; model building; and, testing models. C) data mining; data testing; and, drawing conclusions. D) speculation; observation and measurement; and, drawing conclusions. 98) The birth of economics as an intellectual discipline can be dated fairl eighteenth century with A) the publication of the book, The Wealth o f Nations. B) the opening of the London stock exchange. C) the development of the factor y system. D) the introduction of paper currenc y. 99) Who wrote The Wealth o f Nations? A) Adam Smith C) Thomas Jefferson 96) e y precisel y in th e 97) 98) 99) B) Michael Parki D) Karl Marx 100) Adam Smith wrote the boo k A) Poverty and Progress. C) First Principles o f Economics. n 100) B) The Dismal Science. D) The Wealth of Nations. 11 101) The author of the book The Wealth o A) James Madison. C) Adam Smith. f Nations is 101) B) Thomas Carl yle. D) John Pierpont Morgan. 102) Allowing onl y one factor to var y at an y given time, keeping all other factors constant, is usin the technique of A) post hoc. B) compensation. C) ceteris paribus. D) composition. 103) Holding all variables except one constant and assessing the impact of the one variable whic has changed is an example of using A) the ceteris paribus assumption. B) a flawed economic model. C) an untestable proposition. D) normative economic anal y sis. 104) Ceteris paribus is the Latin expression for A) a statement about the wa y the economic world ought to be. B) an expression that means "other things being equal." C) the (false) statement that what is true of the parts is true of the whole or what is true of th whole is true of the parts. D) the error of reasoning that a first event causes a second event because the first even occurred before the second event. g 102) h 103) 104) e t 105) The expression that means "other things being equal" is A) the post hoc fallacy . B) The fallac y of composition. C) normative economics. D) ceteris paribus. 105) 106) The Latin term "ceteris paribus" means A) "what is true of the whole is not necessaril B) "false unless proven true." C) "after this, therefore because of this." D) "other things being equal." 106) 107) "Ceteris paribus" means A) what is. C) other things being equal. y true of the parts." 107) B) that which will be. D) what ought to be. 108) The term "ceteris paribus" means A) using market mechanisms. B) the stud y of scarcit y and choice. C) all other things remaining constant or equal. D) value free and testable. 109) "Ceteris paribus" means A) let the bu yer beware. C) making all the necessar 108) 109) y changes. B) for certain parameters. D) other things being equal. 12 110) When economists stud y the effects of unemplo yment insurance on the unemplo yment rate b y comparing the United States with Canada, they assume that other conditions in the two economies do not differ significantly. This procedure is an example of A) the post hoc fallac y . B) the fallac y of composition. C) appl ying the ceteris paribus principle. D) falling pre y to the post composition fallac y. 110) 111) The fallac y of composition is evident in which of the following statements? A) "What is bad for the Joneses is bad for the Smiths." B) "X and Y go together, therefore X has caused Y." C) "If each farmer works harder, all farmers will be richer." D) "Technological progress helps ever ybod y." 111) 112) The fallac y of composition is the false belief tha t A) what is true for the parts is also true for the whole. B) the ceteris paribus condition does not appl y. C) because event A occurred before event B, event A caused event B. D) because event A occurred after event B, event A caused event B. 112) 113) The fallac y of composition is the (false) statement tha t A) models can be positive without being normative. B) theories bridge models and the real world. C) what is true of the parts is true of the whole. D) experiments can be designed to anal yze human behavior. 113) 114) The fallac y of composition is the A) use of ceteris paribus in order to stud y the impact of one factor. B) claim that the timing of two events has nothing to do with which event caused the other. C) claim that one event caused another because the first event came first. D) assertion that what is true for the parts of the whole must be true for the whole. 114) 115) A farmer grazes two cows on one acre of land. To increase total milk yield, he purchases tw o more cows and allows all four cows to graze on his land. Unfortunately the cows overgraze on his land and the food supply to the cows is reduced, which causes the total milk yield of the four cows to fall below that achieved when only two cows were grazed. The farmer has fallen prey to A) the post hoc fallacy . B) the ceteris paribus normative fallac y . C) the marginal benefit/marginal cost fallac y. D) the fallac y of composition. 115) 116) Because total income in the United States has increased over time, ever yone's total income ha s increased as well. This incorrect argument is an example of A) opportunit y cost. B) voluntar y exchange. C) the post hoc fallacy . D) the fallac y of composition. 116) 13 117) The fallac y of composition is A) an expression that means "other things being equal." B) the (false) statement that what is true of the parts is true of the whole or what is true of th whole is true of the parts. C) the error of reasoning that a first event causes a second event because the first even occurred before the second event. D) a statement about the wa y the economic world ought to be. 118) "Hunting limits on deer help ensure a constant population. Therefore, if I onl there will be sufficient deer for all." This statement is an example of a possible A) ceteris paribus fallac y. B) post hoc fallacy . C) fallac y of composition. D) normative statement. 117) e t y hunt to m y limit, 118) 119) To better see a football game, one spectator stands. Assuming that ever yone tr ying to get a good view of the game can also stand represents an example of the A) opportunit y cost fallacy. B) fallac y of truth. C) post hoc fallac y. D) fallac y of composition. 119) 120) The post hoc fallac y is the error of reasoning A) from models to predictions. C) from timing to cause and effect. 120) B) from predictions to theories. D) from cause and effect to models. 121) You are not surprised that it has started to rain. After all, a hour ago your car. Your reasoning is an example of A) the ceteris paribus assumption. B) the distinction between positive and normative statements. C) the post hoc fallacy . D) the fallac y of composition. you just finished washin 122) The post hoc, ergo propter hoc fallac y is A) a statement about the wa y the economic world ought to be. B) the error of reasoning that a first event causes a second event because the first even occurred before the second event. C) an expression that means "other things being equal." D) the (false) statement that what is true of the parts is true of the whole or what is true of th whole is true of the parts. 14 121) 122) t e 123) A rooster crows and then the sun rises. The rooster thinks that the sun rises because he crows. And he is very proud of it. The rooster falls prey to A) the fallac y of composition. B) his self interest. C) marginal thinking. D) the post hoc fallac y. 124) "Every time I go to a basketball game, our team wins." This statement is an example o A) a normative economic statement. B) fallac y of composition. C) post hoc fallac y. D) ceteris paribus fallac y. g 123) f 124) 125) An economic expansion follows a stock market boom. A cautious economist would not clai that the stock market caused the expansion because the economist wants to avoid A) the fallac y of composition, which states that what is true of the parts is true of the whole. B) the post hoc fallacy , which states that what is true of the parts is true of the whole. C) the fallac y of composition, which is an error in reasoning from timing to cause and effect. D) the post hoc fallacy , which is an error in reasoning from timing to cause and effect. m 125) 126) Most economists agree tha t A) rent ceilings cut the availabilit y of housing. B) tariffs and import restrictions make most people worse off. C) a minimum wage increases unemplo yment among young workers and low-skilled workers. D) all of the above 127) The fact that wants cannot be full A) scarcit y. C) the what tradeoff. 126) y satisfied with available resources reflects the definition o B) the big tradeoff. D) for whom to produce. 128) Stud ying the effects choices have on the individual markets within the econom A) microeconomics. B) scarcit y. C) incentives. D) macroeconomics. f 127) y is part o f 128) 129) Which of the following is NOT part of the first big economic question? A) How are goods and services produced? B) Wh y do incentives affect onl y marginal costs? C) What goods and services are produced? D) For whom are goods and services produced? 129) 130) The question, "Should Taco Bell produce more tacos or more burritos?" is an example of th A) "for whom" question. B) "how" question. C) "what" question. D) "where" question. 131) The fact that KFC decides to produce chicken rather than meatloaf best reflects _______ tradeoff. A) a what B) an incentive C) a for whom D) a how 132) From 8 p.m. to 10 p.m. , Susan can attend a movie, stud y , or talk with friends. Suppose tha Susan decides to go to the movie but thinks that, if she hadn't, she would otherwise have talked with friends. The opportunity cost of attending the movie is A) two hours of time. B) stud ying. C) talking with friends and stud ying. D) talking with friends. e _ 131) t 133) When the government hires people to serve in the arm y, these people are no longer available t do other work. This choice illustrates the concept of A) opportunit y cost. B) a social interest/private interest conflict. C) marginal benefit. D) an incentive. 15 130) 132) o 133) 134) A normative statement is A) about what is. B) about what ought to be. C) one that does not use the ceteris paribus clause. D) alwa y s true. 134) 135) Which of the following is a positive statement? A) My favorite dinner is pizza and soda. B) The government must provide health insurance so that the poor can obtain decent medica treatment. C) The government should spend more on education. y pizza. D) An increase in the price of pizza will lead fewer students to bu 135) l 136) 136) An economic model includes A) only details considered essential. B) all known details in order to increase its accurac C) no use of ceteris paribus. D) post hoc statements. y. 137) 137) The Latin term ceteris paribus means A) "false for the whole, false for the parts." B) "bu yer beware." C) "other things the same." D) "true for the parts not necessaril y true for the whole." 138) One student in a football stadium with 30,000 students can see the game better if he or sh stands up. Assuming that all 30,000 students can each see the game better if they all stand is an example of the B) post hoc fallacy . A) fallac y of large numbers. D) fallac y of ceteris paribus. C) fallac y of composition. e 138) 139) The post hoc fallac y is the A) assertion that what is true for parts of the whole must be true for the whole. B) incorrect use of ceteris paribus in order to stud y the impact of one factor. C) claim that normative statements are less important than positive statements. D) claim that one event caused another because the one event came first. 139) 140) Economics can be defined as the social science that explains the ________. y A) choices that we make as we cope with scarcit B) choices made b y households C) choices made b y politicians D) choices we make when we trade in markets 140) 141) Scarcit y is a situation in which ________. A) something is being wasted C) some people are poor and others are ric 141) h B) long lines form at gas stations D) we are unable to satisf y all our wants 16 142) Microeconomics is the stud y of ________. A) the global econom y B) the choices that individuals and businesses make C) the national econom y D) all aspects of scarcit y 142) 143) Factors of production include all of the following EXCEPT ________. B) mone y A) machines made in past years C) an wheat field that is not irrigated D) entrepreneurship 143) 144) The income earned b y the people who sell the services of the factor of production ________ i called ________. B) entrepreneurship; wages A) entrepreneurship; profi t C) land; profit D) capital; ren t 145) When the government chooses to spend the tax dollars that it collects on homeland securit choice ________. A) illustrates that scarcit y does not alwa ys exis t B) involves no tradeoff because the defense is necessar y C) involves a tradeoff of other goods and services such as education for more homeland security D) primaril y affects who gets the goods and services produced 146) Making a choice at the margin means ________. A) making a choice b y comparing the total benefit and the total cos B) deciding to do a little bit more or a little bit less of an activit y C) waiting until the last minute to make a choice D) letting someone else choose for you s 144) y , it s 145) 146) t you have studied economics one hour a da y. You now 147) Suppose that for the past two months, decide to study economics two hours a day. For the past two months, ________. A) your marginal cost of stud ying economics for an hour must have exceeded its marginal benefit B) the opportunit y cost of stud y ing economics must have risen. C) the marginal cost of stud ying economics must have falle n D) your marginal benefit from stud ying economics an hour must have been greater than its marginal cost 147) 148) If the cost of a computer falls b y a large amount, you have an incentive to ________. y one yourself A) use your friend's computer rather than bu B) avoid bu y ing anew computer because it is now less valuable C) take a shorter vacatio n D) buy a new computer 148) 149) The statement that ________ is a positive statement. A) the price of gasoline is too hig h B) too man y people in the United States have no health care insuranc e C) the price of sugar in the United States is higher than the price in Australi D) more students should stud y economics 149) 17 a 150) The task of economic science is to ________. A) tell us what is good for us B) help us understand how the economic world works C) make moral choices about things like drugs D) save the earth from the overuse of natural resources 150) 151) Economists make progress b y ________. A) asking people whether the y are better off or worse of f B) concentrating on clarif ying all normative statements while disregarding positiv statements C) building and testing economic models D) discarding normative statements that do not pass extensive testin g 151) 152) The term ceteris paribus means ________. A) when other things all change C) other things being equal e 152) B) equal access to public transportatio D) for better or worse n 153) Which statement is an example of the post hoc fallacy? A) Fans crowding into a college football stadium cause the football game to be pla yed. B) The reason cows are not an endangered species is because man y people eat beef. C) Hold ever ything constant except the price of juice. D) There should be equal access to public transportation. 153) 154) The statement that ________ is an example of the fallac y of composition. A) all children should have equal access to good public transportatio n B) if one fan at a football can see better b y standing, then all fans can see better if the stand C) the ceteris paribus fallacy cannot lead to the post hoc fallacy D) end-of the- year holida y season shopping causes the holida y seaso n 154) 155) Economists generall y agree that ________. A) minimum wages increase the emplo y ment of low-skilled workers B) a large budget deficit makes no significant difference C) tariffs make people better of f D) rent ceilings cut the availabilit y of housin g 18 y all 155)