Introduction to Economics
Chapters 1 & 2
Instructions: The following questions come from material covered in Chapters 1 & 2. Pick the best answer for each question.
1. The study of economics is primarily concerned with:
A.
demonstrating that capitalistic economies are superior to socialistic economies.
B.
determining the most equitable distribution of society's output.
C.
keeping private businesses from losing money.
D.
choices which are made in seeking to use scarce resources efficiently.
E.
None of the above.
2. Microeconomics is concerned with:
A.
the establishing of an overall view of the operation of the economic system.
B.
the concealing of detailed information about specific segments of the economy.
C.
a detailed examination of specific economic units which comprise the economic system.
D.
the aggregate or total levels of income, employment, and output.
E.
All of the above except C.
3. Macroeconomics approaches the study of economics from the viewpoint of:
A.
individual firms.
B.
individual consumers.
C.
government units.
D.
the operation of specific product and resource markets.
E.
the entire economy.
4. The money payments made to owners of land, labor, capital, and entrepreneurial ability are:
A.
rent, wages, profit, and interest respectively.
B.
rent, wages, interest, and profit respectively.
C.
rent, wages, dividends, and interest respectively.
D.
rent, profits, wages, and interest respectively.
E.
interest, wages, rent, and profits respectively.
5. When economists say that people act rationally, they mean that:
A.
once made, decisions change slowly over time.
B.
people rarely make errors when they are permitted to exchange of trade for themselves.
C.
once a pattern of behavior has been established, people tend to become set in their ways.
D.
people respond in predictable ways to changes in costs and benefits.
E.
they gather all relevant information before making their purchases.
6. A positive statement is concerned with:
A.
what should be.
B.
the formulation of economic policy.
C.
some goal which is desirable to society.
D.
what is.
E.
None of the above.
7. A normative economic statement:
A.
is a statement of fact.
B.
is a hypothesis used to test economic theory.
C.
enables economists to test hypotheses.
D.
is a statement of what ought to be, not what is.
E.
is a statement of what will occur if certain assumptions are true.
8. Which of the following is a positive statement?
A.
Unemployment and inflation are equally important problems.
B.
When the national unemployment rate is 7 percent, the unemployment rate for inner-city youth is often close to 40 percent.
C.
Unemployment is less important than inflation.
D.
An inflation rate of 7 percent is too high.
E.
An unemployment rate of 7 percent is a national disgrace.
9. "If you leave a football game at the end of the third quarter, you will avoid traffic and get home more quickly. Therefore, everyone should leave the game early." This illustrates the:
A.
moral hazard problem.
B.
problem of inferring causation from observed correlation.
C.
fallacy of composition.
D.
the error in generalizing from the particular to the general.
E.
Both C and D.
10. Your friend notices that U.S. auto production and U.S. population growth statistically moved together over several decades. He reasons that one way to slow down population growth is for the government to order the auto makers to cut back on production. You gently point out to him that he:
A.
has committed the
post hoc, ergo propter hoc
(i.e., the after this, because of this) fallacy.
B.
has committed the fallacy of composition.
C.
is correct only when the United States enjoys economic growth.
D.
has mistakenly inferred causation from observed correlation.
E.
Both A and D.
Score =
Correct answers: