Economics 252
Review Questions Chapter 1 -
The Nature and Method of Economics
(1) 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 the context of limited economic wants.
(2) 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.
(3) You should decide to go to a movie:
(a) if
the marginal cost of the movie exceeds its marginal benefits.
(b) if
the marginal benefit of the movie exceeds its marginal costs.
(c) because
movies are inherently good products.
(d) none
of the above.
(4) A well-tested economic theory is often called:
(a) a
hypothesis.
(b) a
prototype.
(c) a
principle.
(d) an
opinion held by influential people.
(5) The term “ceteris paribus” means:
(a) that
if event A precedes event B, then A has caused B.
(b) other
things being equal.
(c) a
hypothesis.
(d) that
an economic model is a duplicate of the real world.
(6) An hypothesis is:
(a) a
fundamental truth that all economists accept.
(b) a
tentative, untested statement of possible cause and effect.
(c) the
same as “ceteris paribus”.
(d) also
known as a principle or law.
(7) If there is a tradeoff between goals A and B:
(a) greater
fulfillment of A means lesser fulfillment of B.
(b) goals
A and B can be pursued at the same time.
(c) causation
exists between the two goals.
(d) greater
fulfillment of A means greater fulfillment of B.
(8) Which of the following is associated with macroeconomics?
(a) An
examination of the rates of pay for
(b) A
study of the downsizing of the steel industry in the
(c) A
review of the soybean business in the
(d) A
study of consumer price levels and unemployment in the
(9) Which of the following is a positive statement?
(a) The
rates of pay for teachers should be higher to attract more highly qualified
people into the profession.
(b) The
rates of pay for teachers in Northwest Indiana are lower than
(c) The
price of cigarettes should be higher to reflect the cost of second hand smoke.
(d) There
is a need to reduce congestion on the highways.
(10) “If you find that the price of soybeans is high this year and
plant more next season, you will benefit by increasing farm revenues next
season. Therefore, all farmers should
plant more soybeans”. This illustrates
the:
(a) fallacy
of limited decisions.
(b) power
of positive thinking.
(c) law
of averages.
(d) fallacy
of composition.