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Chapter 1 Macroeconomics Test

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   Page 1   CHAPTER 1   The Nature and Method of Economics   Topic Question numbers    ___________________________________________________________________________________________________    1. Economics; economic perspective 1-17   2. Benefits of studying economics 18-27   3. Methodology; induction and deduction 28-37   4. Economic policy and goals 38-43   5. Macroeconomics and microeconomics 44-52   6. Positive and normative statements 53-62   7. Logical pitfalls 63-74   Last Word 75-77   True-False 78-90   Appendix   8. Construction and interpretation of graphs 91-145    ___________________________________________________________________________________________________    Multiple Choice Questions   Economics; economic perspective   1. According to Emerson: Want is a growing giant whom the coat of Have was never large enough to cover. According to economists, Want exceeds Have because:   A) people are greedy.   B) productive resources are limited.   C) human beings are inherently insecure.   D) people are irrational.   2. According to economists, economic self-interest:   A) is a reality that underlies economic behavior.   B) has the same meaning as selfishness.   C) is more characteristic of men than of women.   D) is usually self-defeating.   3. When entering a building, Sam diverts his path to go through an open door rather than make the physical effort to open the closed door that is directly in his path. This is an example of:   A) irrational behavior.   B) a lazy person.   C) marginal benefit-marginal cost analysis.   D) programmed learning.   4. Joe sold gold coins for $1000 that he bought a year ago for $1000. He says, At least I didn't lose any money on my financial investment. His economist friend points out that in effect he did lose money, because he could have received a 5 percent return on the $1000 if he had bought a bank certificate of deposit instead of the coins. The economist's analysis incorporates the idea of:   A) opportunity costs   B) marginal benefits that exceed marginal costs.     Page 2   C) imperfect information.   D) normative economics.   5. There is too little of a good thing when its marginal:   A) benefit exceeds its marginal cost.   B) cost exceeds its marginal benefit.   C) cost equals its marginal benefit.   D) benefit is still positive.   6. Economics may best be defined as: A) the interaction between macro and micro considerations. B) the social science concerned with the efficient use of scarce resources to achieve maximum satisfaction of economic wants.   C) the empirical testing of value judgments through the use of logic. D) the use of policy to refute facts and hypotheses. 7. The study of economics is primarily concerned with: A) keeping private businesses from losing money. B) demonstrating that capitalistic economies are superior to socialistic economies. C) choices that are made in seeking to use scarce resources efficiently. D) determining the most equitable distribution of society's output. 8. The economic perspective refers to: A) macroeconomic phenomena, but not microeconomic phenomena. B) microeconomic phenomena, but not macroeconomic phenomena. C) the making of rational decisions in a context of marginal costs and marginal benefits. D) unlimited resources in a context of limited economic wants. 9. The economic perspective entails: A) irrational behavior by individuals and institutions. B) a comparison of marginal benefits and marginal costs in decision making. C) short-term but not long-term thinking.   D) rejection of the scientific method.   10. Rational behavior suggests that: A) everyone will make identical choices. B) resource availability exceeds economic wants. C) individuals will make different choices because their preferences and circumstances differ. D) an individual's economic goals cannot involve tradeoffs. 11. Economics involves marginal analysis because: A) most decisions involve changes in the status quo. B) marginal benefits always exceed marginal costs. C) marginal costs always exceed marginal benefits. D) much economic behavior is irrational. 12. You should decide to go to a movie: A) if the marginal cost of the movie exceeds its marginal benefit. B) if the marginal benefit of the movie exceeds its marginal cost.   Page 3   C) if your income will allow you to buy a ticket. D) because movies are inherently good products. 13. Marginal costs exist because: A) the decision to produce more of some product means the sacrifice of other products. B) wants are scarce relative to resources. C) households and businesses make rational decisions. D) most decisions do not involve sacrifices or tradeoffs. 14. The assertion that There is no free lunch means that: A) there are always tradeoffs between economic goals. B) all production involves the use of scarce resources and thus the sacrifice of alternative goods. C) marginal analysis is not used in economic reasoning. D) choices need not be made if behavior is rational. 15. Consumers spend their incomes to get the maximum benefit or satisfaction from the goods and services they purchase. This is a reflection of: A) resource scarcity and the necessity of choice. B) rational behavior. C) marginal costs that exceed marginal benefits. D) the tradeoff problem that exists between competing goals. 16. There can  be too much of a good thing. This statement suggests that: A) rational choice cannot be applied to many economic decisions. B) a good may be produced to the point where its marginal cost exceeds its marginal benefit. C) certain goods and services such as education and health care are inherently desirable and should be produced regardless of costs and benefits. D) a good may be produced to the point where its marginal benefit exceeds its marginal cost. 17. Even though local newspapers are very inexpensive, people rarely buy more than one of them each day. This fact:   A) is an example of irrational behavior.   B) implies that reading should be taught through phonics rather than the whole language method.   C) contradicts the economic perspective.   D) implies that, for most people, the marginal benefit of reading a second newspaper is less than the marginal cost.   Methodology; scientific method   18. Studying economics:   A) helps one become a better-informed citizen and voter.   B) is detrimental to good citizenship because economics emphasizes individualism.   C) is a waste of time since we all participate in the economy whether we understand it or not.   D) is important because economics is the science of earning money.   19. Learning economics:   A) is detrimental to good citizenship because economics emphasizes individualism.   B) is helpful to employers, but not to workers and consumers.   C) is important because economics is the science of earning money.   D) helps students improve analytical skills that are in great demand in the workplace.     Page 4   20. The study of economics:   A) is similar to management, marketing, and finance since it emphasizes how to make money.   B) is helpful to businesses, but not particularly helpful in making personal buying decisions.   C) is mainly an academic, not a vocational subject.   D) looks at the economy from the viewpoint of one's own pocketbook, not from the standpoint of society's interest.   21. An economic hypothesis:   A) has the same meaning as an economic principal or economic law.   B) is usually a normative statement.   C) is a possible explanation of cause and effect.   D) is a stronger generalization than an economic law.   22. Which of the following terms implies the least   degree of confidence in an economic generalization?   A) a hypothesis   B) a theory   C) a principle   D) a law   23. Which of the following terms implies the  greatest   degree of confidence in an economic generalization?   A) a hypothesis   B) a theory   C) a principle   D) an anomaly   24. A well-tested economic theory is often called:   A) a hypothesis.   B) a prototype.   C) a principle.   D) an anomaly.   25. Economists:   A) use both the economic perspective and the scientific method.   B) use the economic perspective but not the scientific method.   C) make positive economic statements, but not normative economic statements.   D) reject theorizing as being impractical.   26. The scientific method is:   A) not applicable to economics, because economics deals with human beings.   B) also known as the economic perspective.   C) analysis that moves from broad generalizations called laws to theories and then to hypotheses.   D) used by economists and other social scientists, as well as by physical scientists and life scientists.   27. The process by which economists test hypotheses against facts to develop theories, principles, and models is called:   A) the economic perspective.   B) the scientific method.   C) policy economics.   D) microeconomcis.  

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Jul 23, 2017
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