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ULM / Macro Economics / Econ 2001 / the economic way of thinking will help you

the economic way of thinking will help you

the economic way of thinking will help you

Description

School: University of Louisiana at Monroe
Department: Macro Economics
Course: Macroeconomic Principles
Professor: .tammy johnston
Term: Spring 2017
Tags:
Cost: 50
Description: Economics Today, 17e (Miller) Chapter 1 The Nature of Economics 1
Uploaded: 05/30/2017
117 Pages 740 Views 0 Unlocks
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6) What is economics and what does it try to explain?




5) What does scarcity have to do with the fact that people must make choices?




4) What is the purpose of knowing "the economic way of thinking"?



Economics Today, 17e (Miller) Chapter 1 The Nature of Economics 1.1 The Power of Economic Analysis 1) The economic way of thinking will help you A) make decisions in financing your home. B) decide whether the U.S. government should encourage or discourage immigration.If you want to learn more check out variable cost ratio
If you want to learn more check out a wimba wep
If you want to learn more check out a school newspaper reporter decides to randomly survey
We also discuss several other topics like express the equilibrium constant for the following reaction
We also discuss several other topics like the law of demand implies, holding everything else constant, that as the price of yogurt
If you want to learn more check out derive an expression for a "1/3-life" for a first-order reaction.
C) make better decisions concerning your education. D) all of the above Answer: D Diff: 1 Topic: 1.1 The Power of Economic Analysis Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 2) Economic analysis is used A) only in economics classrooms. B) only by business people. C) only by policy makers. D) in all decision making. Answer: D Diff: 1 Topic: 1.1 The Power of Economic Analysis Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 3) Economic analysis is a tool that A) aids all decision making. B) helps us understand why people make mistakes. C) helps us forgive selfish people. D) complicates decision making. Answer: A Diff: 1 Topic: 1.1 The Power of Economic Analysis Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Revised 1 ScholarStock4) What is the purpose of knowing "the economic way of thinking"? Answer: The economic way of thinking provides a framework for analyzing solutions to  economic problems. Since economic problems confront all of us much of the time, knowledge of economics will enable one to arrive at better decisions, and enable one to evaluate many public  policy questions in a systematic manner. Diff: 1 Topic: 1.1 The Power of Economic Analysis Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 5) What does scarcity have to do with the fact that people must make choices? Answer: Scarcity implies that people cannot have everything they want. This implies that ways  must be found to determine which of the many goods that people want will actually be produced. Further, since any person cannot have everything he or she wants, the person must decide which  specific things to acquire. That is, the person must make choices. Diff: 2 Topic: 1.1 The Power of Economic Analysis Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 6) What is economics and what does it try to explain? Answer: Economics is the study of how people allocate their limited resources in an attempt to  satisfy their unlimited wants. Therefore, it is the study of how people make choices. Economics  tries to explain real-world behavior, especially as it relates to interactions of people confronting  scarcity. Diff: 1 Topic: 1.1 The Power of Economic Analysis Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 2 ScholarStock1.2 Defining Economics 1) Economics is best defined as the A) study of how people make choices to satisfy their wants. B) study of individual self-interests. C) study of how government can most efficiently raise funds by taxation. D) process by which goods are sold in free markets. Answer: A Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 2) Economics can be described as the study of how people use ________ resources to satisfy  ________ wants. A) unlimited; unlimited B) unlimited; limited C) limited; unlimited D) limited; limited Answer: C Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 3) Which statement most accurately defines economics? A) Economics is the study of how people make money. B) Economics is the study of how people make choices to satisfy their wants. C) Economics is the study of values a society should choose. D) Economics is the study of how to eliminate scarcity. Answer: B Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 3 ScholarStock4) In economic analysis, people's resources are A) limited and their wants are unlimited. B) unlimited and their wants are also unlimited. C) limited and their wants are also limited. D) unlimited and their wants are limited. Answer: A Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 5) In economics, items that are used to produce goods and services are known as A) wants. B) aggregates. C) factors of need. D) resources. Answer: D Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 6) In economics, all the items that people would consume if they had unlimited income are  known as A) wants. B) aggregates. C) outputs. D) needs. Answer: A Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 4 ScholarStock7) In economics, ________ are limited but ________ are unlimited. A) wants; resources B) resources; wants C) money; ideas D) ideas; money Answer: B Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 8) Economics is the study of how  A) people make money. B) preferences are determined. C) psychology influences preferences. D) people make choices. Answer: D Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 9) A fundamental aspect of economics is to A) ensure that every firm makes a profit. B) analyze how choices are made. C) satisfy all our wants. D) make sure that our resources will always be unlimited. Answer: B Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 5 ScholarStock10) Economics is the study of A) how to get rich.  B) how people allocate their limited resources to satisfy their unlimited wants.  C) how people spend their income.  D) why people want certain goods and services rather than other goods and services.  Answer: B Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 11) Economics is the study of A) nonhuman phenomena. B) the determinants of preferences. C) scarce resources and unlimited wants. D) the physical sciences. Answer: C Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 12) Economics deals with A) how to profit from the stock market. B) how to satisfy limited human wants. C) how society allocates unlimited resources. D) how individuals allocate scarce resources to satisfy unlimited human wants. Answer: D Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 6 ScholarStock13) Economics is the study of A) how to own as many resources as possible. B) ceteris paribus. C) the way people think rather than the way they act. D) how people allocate their limited resources to satisfy their unlimited wants. Answer: D Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 14) Economic resources are A) all the items that people would purchase if they had limited wants. B) all the unlimited items that people would purchase with limited income. C) items of value that are used to make other things that satisfy people's wants. D) the total planned expenditures throughout the nation. Answer: C Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 15) Economics is concerned with choices A) that involve the wants of individuals.  B) that involve the political goals of professional associations.  C) made by individuals only when they are consuming goods or services.  D) that involve making money.  Answer: A Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 7 ScholarStock16) Economics is a social science that involves the study of how individuals A) develop their tastes and preferences.  B) maximize their wealth.  C) define happiness.  D) choose among alternatives to satisfy their unlimited wants.  Answer: D Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 17) Economics is a part of the A) social sciences. B) natural sciences.  C) biological sciences. D) organizational sciences.  Answer: A Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist Question Status: Previous Edition 18) Wants are A) another term for needs.  B) the things people would consume if they had unlimited incomes.  C) the things people consume with their income.  D) all the things people really need in order to live comfortably.  Answer: B Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 8 ScholarStock19) The primary purpose of economics is to understand how people make A) money. B) goods and services.  C) choices. D) a comfortable living. Answer: C Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 20) The primary objective of economics is  A) to learn how to create more resources. B) to study how people make choices with limited resources.  C) to learn how to make the most profits with a given amount of resources. D) to study why some people are never happy with the resources they have. Answer: B Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 21) The basic economic problem is a situation of A) limited resources and unlimited wants. B) both limited resources and limited wants. C) limited incomes and unlimited choices. D) unlimited incomes and limited choices. Answer: A Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 9 ScholarStock22) Economics is the study of how people make A) judgments.  B) investments.  C) money.  D) choices. Answer: D Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 23) Economics is a A) hard science. B) physical science. C) natural science. D) social science. Answer: D Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist Question Status: Previous Edition 24) Economics is a study of A) how to make money in the stock market. B) how to run a business successfully. C) the allocation of scarce resources. D) personal finance. Answer: C Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 10 ScholarStock25) Economics is the study of A) the allocation of scarce resources to satisfy unlimited wants. B) why some people want certain goods and services. C) earning the most income. D) ways to use fewer resources. Answer: A Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 26) Resources are A) unlimited. B) able to be replicated in large quantities. C) what people would buy if their income was unlimited. D) used to produce goods and services to satisfy people's wants. Answer: D Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 27) ________ are the things that are used to produce items that satisfy people's wants. A) Concepts B) Production possibilities curves C) Resources D) Costs Answer: C Diff: 2 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 11 ScholarStock28) Economics is most precisely defined as A) a study of what people need to survive. B) a study of how culture evolves in different geographic areas. C) the same as the study of finance and management. D) the study of how people make choices. Answer: D Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Revised 29) Economics A) is a social science. B) is concerned with limited resources. C) is concerned with unlimited wants. D) All of the above are correct. Answer: D Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 30) Which of the following is NOT a focus of the study of economics? A) how individual preferences are formed B) unemployment C) inflation D) prices in particular markets Answer: A Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 12 ScholarStock31) Because resources are scarce relative to wants, the study of economics concerns A) how money is important to people. B) how individuals, businesses, and governments make choices. C) how money is used to buy what people want. D) None of the above are correct. Answer: B Diff: 2 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 32) In the definition of economics, A) both resources and wants are limited. B) both resources and wants are unlimited. C) resources are limited and wants are unlimited. D) resources are unlimited and wants are limited. Answer: C Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 33) Microeconomics is defined as that part of economic analysis that A) studies the behavior of the economy as a whole. B) includes the problems of inflation and unemployment. C) studies individual decision making by households and firms. D) concerns aggregate production and consumption. Answer: C Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 13 ScholarStock34) Macroeconomics is the study of A) aggregate economic variables. B) output in particular industries. C) prices in particular industries. D) all of the above. Answer: A Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Macro-1: Define macroeconomics and identify its basic concerns AACSB: Analytic skills Question Status: Previous Edition 35) Microeconomics is the study of A) the behavior of the economy as a whole. B) how rising prices affect the level of employment in the economy. C) how individuals and firms make decisions. D) the effect that money has in the economic system. Answer: C Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 36) Macroeconomics is best defined by which of the following statements? A) Macroeconomics is the study of how firms strive to maximize their profits. B) Macroeconomics is the study of the behavior of the economy as a whole. C) Macroeconomics is the study of individual economic units. D) Macroeconomics is the study of how the prices of individual goods are determined. Answer: B Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Macro-1: Define macroeconomics and identify its basic concerns AACSB: Analytic skills Question Status: Previous Edition 14 ScholarStock37) Macroeconomics deals with ________ while microeconomics deals with ________. A) choices important to people; choices not important to people B) economywide choices; choices of individuals C) choices that involve money; choices that does not involve money D) choices of rich people; choices of poor people Answer: B Diff: 2 Topic: 1.2 Defining Economics Learning Outcome: Macro-1: Define macroeconomics and identify its basic concerns AACSB: Analytic skills Question Status: Previous Edition 38) Macroeconomics deals with A) aggregates within the economy. B) specific sectors within the economy. C) the retail industry only. D) decisions made by firms. Answer: A Diff: 2 Topic: 1.2 Defining Economics Learning Outcome: Macro-1: Define macroeconomics and identify its basic concerns AACSB: Analytic skills Question Status: Previous Edition 39) Which of the following would most likely NOT be taught in a microeconomics course? A) changes in prices of automobiles B) the effects of a gas tax on gas purchases C) the effect of an increase in wheat prices on farmers' behavior D) the unemployment rate Answer: D Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Revised 15 ScholarStock40) Which of the following would most likely NOT be taught in a macroeconomics course? A) changes in the health care industry B) factors leading to different economic growth rates among countries C) government actions in response to a slowdown in the economy D) the relationship between the inflation rate and the unemployment rate Answer: A Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Macro-1: Define macroeconomics and identify its basic concerns AACSB: Analytic skills Question Status: New 41) A macroeconomist would study A) the price changes at K-Mart. B) the cost problems at several airlines. C) the economy's unemployment level. D) none of the above. Answer: C Diff: 2 Topic: 1.2 Defining Economics Learning Outcome: Macro-1: Define macroeconomics and identify its basic concerns AACSB: Analytic skills Question Status: Previous Edition 42) A microeconomist would study all of the following issues EXCEPT A) the impact of a change in consumer income on the sales of corn. B) the impact of a snowstorm on the sales of snow shovels. C) the most efficient means for General Motors to produce an automobile. D) the effect of a change in income taxes on the nation's rate of unemployment. Answer: D Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 16 ScholarStock43) The macroeconomist would most likely study A) the effects of changing apple prices on the market for oranges. B) the effects of an increase in wage rates on a woman's decision to enter the labor force. C) the effects of a lower income tax rates on the nation's total production of goods and services. D) the effect of increased union wages on the cost of producing automobiles. Answer: C Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Macro-1: Define macroeconomics and identify its basic concerns AACSB: Analytic skills Question Status: Previous Edition 44) The impact of higher taxes would be examined by A) a microeconomist. B) a macroeconomist. C) both a macroeconomist and a microeconomist. D) neither a macroeconomist nor a microeconomist. Answer: C Diff: 2 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 45) One topic of study for a microeconomist would be the A) causes of inflation. B) causes of aggregate unemployment. C) effects of a gasoline price increase on consumer behavior. D) effects of an increase in government spending on overall economic activity. Answer: C Diff: 2 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 17 ScholarStock46) A friend wants to learn how the unemployment rate is calculated and how inflation is  measured. He asks you which economics course to take and you advise him to enroll in A) macroeconomics. B) microeconomics. C) either micro- or macroeconomics. They both concentrate equally on those issues. D) financial accounting because economics doesn't address those topics in its courses. Answer: A Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Macro-1: Define macroeconomics and identify its basic concerns AACSB: Analytic skills Question Status: Previous Edition 47) Which of the following would likely be studied in a macroeconomics course? A) the unemployment rate B) total output for an economy C) the inflation rate D) all of the above Answer: D Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Macro-1: Define macroeconomics and identify its basic concerns AACSB: Analytic skills Question Status: Previous Edition 48) Macroeconomics is concerned with A) individual consumers. B) government decision making concerning farm price supports. C) aggregates. D) the effects on a corporation of a strike by the United Auto Workers. Answer: C Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Macro-1: Define macroeconomics and identify its basic concerns AACSB: Analytic skills Question Status: Previous Edition 18 ScholarStock49) Macroeconomics often relies on microeconomic analysis because A) microeconomics is older than macroeconomics. B) microeconomic theory can be tested and macroeconomic theory cannot be tested. C) all aggregates are made up of individuals and firms. D) the effects of macroeconomic subjects such as inflation and unemployment are independent  of individual consumers and firms. Answer: C Diff: 2 Topic: 1.2 Defining Economics Learning Outcome: Macro-1: Define macroeconomics and identify its basic concerns AACSB: Analytic skills Question Status: Previous Edition 50) Microeconomics is concerned with studying which of the following? A) the determinants of national unemployment B) the effects of monetary policy C) the study of individual markets D) all of the above Answer: C Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 51) Microeconomics is concerned with the study of  A) the effects of inflation.  B) the effects of government spending.  C) the effects on individual producers of higher wages paid to workers.  D) aggregates.  Answer: C Diff: 2 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 19 ScholarStock52) Microeconomics focuses on A) individual decision makers within the economy. B) the large parts of the economy. C) changes in national income. D) satisfying the needs of the economy. Answer: A Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 53) Macroeconomics is concerned with A) individual business firms. B) specific industries.  C) individual consumers. D) a nation's entire economy. Answer: D Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Macro-1: Define macroeconomics and identify its basic concerns AACSB: Analytic skills Question Status: Previous Edition 54) Microeconomics examines the A) total household expenditures. B) behavior of the economy as a whole. C) aggregate business spending. D) decision making undertaken by individual households. Answer: D Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 20 ScholarStock55) Macroeconomics is concerned with studying the A) behavior of individual decision makers. B) behavior of the economy as a whole. C) prices of specific companies' stocks. D) wants of individuals. Answer: B Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Macro-1: Define macroeconomics and identify its basic concerns AACSB: Analytic skills Question Status: Previous Edition 56) Macroeconomics would be concerned with A) implications of changes in unemployment and inflation. B) the effects on individual consumers of changes in the price of gasoline for a business.  C) the effects of a tax on beer. D) the effects of wage increases on steel manufacturers. Answer: A Diff: 2 Topic: 1.2 Defining Economics Learning Outcome: Macro-1: Define macroeconomics and identify its basic concerns AACSB: Analytic skills Question Status: Previous Edition 57) The study of an individual's choice about what type of computer to buy is a subject of A) macroeconomics. B) microeconomics. C) an aggregate concept. D) not a concern for economic analysis. Answer: B Diff: 2 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 21 ScholarStock58) The study of the aggregate economic variables is A) macroeconomics. B) microeconomics. C) positive economics. D) normative economics. Answer: A Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Macro-1: Define macroeconomics and identify its basic concerns AACSB: Analytic skills Question Status: Previous Edition 59) Another word for "aggregate" is A) government. B) partial. C) public. D) total.  Answer: D Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Macro-1: Define macroeconomics and identify its basic concerns Question Status: Previous Edition 60) The distinction between microeconomics and macroeconomics is A) clearly drawn, and there is no overlap between them.  B) determined by economists in a clear and concise manner.  C) narrowly drawn, and microeconomic analysis often relies on macroeconomic tools.  D) often blurred because aggregates are made up of individuals and firms. Answer: D Diff: 2 Topic: 1.2 Defining Economics Learning Outcome: Macro-1: Define macroeconomics and identify its basic concerns AACSB: Analytic skills Question Status: Previous Edition 22 ScholarStock61) Modern economists are increasingly using microeconomic analysis in macroeconomics  because A) microeconomic theory is more scientific.  B) aggregate outcomes stem from decisions made by individuals, business firms and  government. C) macroeconomic subjects such as inflation affect all individuals.  D) macroeconomics is older and more outdated.  Answer: B Diff: 2 Topic: 1.2 Defining Economics Learning Outcome: Macro-1: Define macroeconomics and identify its basic concerns AACSB: Analytic skills Question Status: Previous Edition 62) Which of the following is NOT studied in microeconomics? A) the effect of an increase in gasoline taxes on the purchase of gasoline B) the impact of an increase in the unemployment rate on economic production C) the impact of firms' collective hiring choices on the aggregate unemployment rate D) the impact of higher fuel prices on the cost of airline tickets Answer: B Diff: 2 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 63) All of the following are examples of macroeconomic problems EXCEPT A) inflationary pressures caused by an increase in the cost of petroleum. B) unemployment caused by a fall off in the level of residential construction. C) a decline in the rate of overall economic growth. D) consumers deciding to buy more fish and less beef because of concerns about a healthier diet. Answer: D Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Macro-1: Define macroeconomics and identify its basic concerns AACSB: Analytic skills Question Status: Previous Edition 23 ScholarStock64) Macroeconomics is concerned primarily with A) positive economics. B) production and prices in particular markets. C) aggregate economic variables. D) normative issues. Answer: C Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Macro-1: Define macroeconomics and identify its basic concerns AACSB: Analytic skills Question Status: Previous Edition 65) Microeconomics studies  A) decisions made by individual consumers and firms.  B) the changes in economic theory brought about by real-world events.  C) how small changes in the unemployment rate can have far-reaching effects.  D) how small changes in the money supply can have far-reaching effects. Answer: A Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 66) Which of the following terms identifies something that macroeconomists would study but  that microeconomists would NOT? A) incentives B) resources C) rationality D) aggregates Answer: D Diff: 2 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 24 ScholarStock67) Which of the following is a characteristic or focus of economics? A) allocation of limited resources in an effort to satisfy potentially unlimited wants B) positive economic analysis C) empirical analysis D) all of the above Answer: D Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 68) Which of the following would likely be considered as falling into the domain of  microeconomics? A) the U.S. unemployment rate B) the Gross Domestic Product C) the price of apples D) the effects of fiscal policy on the U.S. economy Answer: C Diff: 2 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 69) Macroeconomics might study which of the following? A) the causes of domestic unemployment B) decision making undertaken by firms C) decision making undertaken by households D) determinants of the prices of rare goods (e.g., diamonds) Answer: A Diff: 2 Topic: 1.2 Defining Economics Learning Outcome: Macro-1: Define macroeconomics and identify its basic concerns AACSB: Analytic skills Question Status: Previous Edition 25 ScholarStock70) Which of the following is NOT a characteristic or focus of microeconomics? A) normative analysis. B) analysis of aggregate economic variables. C) empirical analysis. D) empirical analysis Answer: B Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 71) Which of the following is a microeconomic concern? A) the rate of economic growth in the United States B) the current unemployment rate in the United States C) consumer behavior D) national output of the United States Answer: C Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 72) Which of the following is a macroeconomic concern? A) the unemployment rate in a specific industry B) the national output of the United States C) wage levels in specific industries D) the operation of an individual firm Answer: B Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Macro-1: Define macroeconomics and identify its basic concerns AACSB: Analytic skills Question Status: Previous Edition 26 ScholarStock73) The study of how a particular firm might choose to maximize its profits would fall into what  type of analysis? A) macroeconomics B) microeconomics C) labor economics D) aggregate economics Answer: B Diff: 2 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 74) What type of economics would most typically deal with aggregates? A) macroeconomics B) microeconomics C) labor economics D) environmental economics Answer: A Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Macro-1: Define macroeconomics and identify its basic concerns AACSB: Analytic skills Question Status: Previous Edition 75) Which of the following is a microeconomic topic? A) the unemployment rate of the United States economy as a whole B) the rate at which prices increase in Brazil C) the advertising strategy of a particular company D) the increase in the national income of the United States over the past three months Answer: C Diff: 2 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 27 ScholarStock76) Which of the following topics is a macroeconomic subject? A) a proposed merger between two companies B) the level of Christmas sales at a particular department store C) the unemployment rate of the United States economy as a whole D) the advertising strategy of a particular automobile firm Answer: C Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Macro-1: Define macroeconomics and identify its basic concerns AACSB: Analytic skills Question Status: Previous Edition 77) Which of the following is an aggregate? A) the number of shoes in one man's closet B) the bushels of apples one farmer sells C) the price of a particular textbook D) the total production of all goods and services Answer: D Diff: 2 Topic: 1.2 Defining Economics Learning Outcome: Macro-1: Define macroeconomics and identify its basic concerns AACSB: Analytic skills Question Status: Previous Edition 78) All of the following are aspects of microeconomics EXCEPT A) monopolies. B) a firm maximizing profit. C) a worker choosing one job over another. D) the average level of prices of all goods and services produced in a country in a year. Answer: D Diff: 2 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 28 ScholarStock79) The impact of an increase in the gasoline tax on SUV sales is A) a macroeconomics topic because it deals with taxes. B) a microeconomics topic because it deals with one industry. C) not an economic issue, but rather a political issue. D) insignificant. Answer: B Diff: 2 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 80) Which of the following would most likely be part of the study of microeconomics? A) how General Motors makes decisions regarding its production goals B) national income C) the total economic output of our domestic economy D) overall price stability in the United States Answer: A Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 81) All of the following are aspects of macroeconomics EXCEPT A) the U.S. unemployment rate. B) the production decisions of a pharmaceutical firm. C) the budget deficit of the United States. D) foreign trade. Answer: B Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Macro-1: Define macroeconomics and identify its basic concerns AACSB: Analytic skills Question Status: Previous Edition 29 ScholarStock82) Individual decision making by consumers and producers is the focus of A) macroeconomics. B) microeconomics. C) aggregate measures. D) any economic model. Answer: B Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 83) Aggregate measures are A) anything to do with economics. B) a total measure of a variable across the economy. C) used only in microeconomics. D) determined by the Bureau of Labor Statistics. Answer: B Diff: 2 Topic: 1.2 Defining Economics Learning Outcome: Macro-1: Define macroeconomics and identify its basic concerns AACSB: Analytic skills Question Status: Previous Edition 84) Microeconomics is the study of A) aggregate measures of the economy. B) foreign policy economic issues. C) federal budget details. D) individual decision making. Answer: D Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 30 ScholarStock85) An example of a microeconomic decision is a situation in which A) the Federal Reserve considers how much to increase the money supply during the coming  month in an effort to constrain the rate of inflation. B) Congress and the president seek to reach a compromise on how much to increase government  spending in an effort to influence national expenditures. C) a firm evaluates how much to reduce the price of its product in an effort to influence sales and boost its profits. D) the U.S. Treasury contemplates buying foreign currencies in an effort to influence exchange  rates with an aim to boosting demand for U.S. goods and services. Answer: C Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 86) Explain the study of economics. Answer: Economics is the study of how people allocate their limited resources in an attempt to  satisfy their unlimited wants. Because of this contrast between limited resources and unlimited  wants, economics is the study of how people make choices. Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Communication abilities Question Status: Previous Edition 87) Is inflation a macroeconomic or a microeconomic question? Why? Answer: Inflation is a macroeconomic question because it deals with an economy-wide  phenomenon. The price increase of a specific product, such as gasoline, would be a  microeconomic matter. Since inflation deals with prices in the economy as a whole, it is a  macroeconomic concern. Diff: 2 Topic: 1.2 Defining Economics Learning Outcome: Macro-1: Define macroeconomics and identify its basic concerns AACSB: Analytic skills Question Status: Previous Edition 31 ScholarStock88) Distinguish between macroeconomics and microeconomics. Answer: Macroeconomics is concerned with the behavior of the economy as a whole, while  microeconomics is concerned with the choices of individual decision-makers, such as households and firms. Macroeconomics deals with aggregates, such as the total output of the economy or  unemployment, while microeconomics deals with how many hours a person chooses to work or  how many people a firm decides to hire. Diff: 1 Topic: 1.2 Defining Economics Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 1.3 The Three Basic Economic Questions and Two Opposing Answers 1) An economic system is A) the universe of all resources. B) a way to create new resources. C) a mechanism to allocate scarce resources. D) an organization that generates profits. Answer: C Diff: 1 Topic: 1.3 The Three Basic Economic Questions and Two Opposing Answers Learning Outcome: Micro-3: Discuss different types of market systems and the gains that can be made from trade AACSB: Analytic skills Question Status: Previous Edition 2) The way that a society uses to allocate resources to satisfy human wants is called  A) an economic system. B) an assumption. C) realism. D) a physical science. Answer: A Diff: 1 Topic: 1.3 The Three Basic Economic Questions and Two Opposing Answers Learning Outcome: Micro-3: Discuss different types of market systems and the gains that can be made from trade AACSB: Analytic skills Question Status: Previous Edition 32 ScholarStock3) The issues that an economic system attempts to solve include: A) what to produce. B) how to produce items. C) for whom items are produced. D) all of the above. Answer: D Diff: 1 Topic: 1.3 The Three Basic Economic Questions and Two Opposing Answers Learning Outcome: Micro-3: Discuss different types of market systems and the gains that can be made from trade AACSB: Analytic skills Question Status: Previous Edition 4) Which of the following is NOT one of the basic questions that an economic system attempts to answer? A) How to eliminate choices? B) What to produce? C) How much will goods and services be produced? D) For whom will goods and services be produced? Answer: A Diff: 1 Topic: 1.3 The Three Basic Economic Questions and Two Opposing Answers Learning Outcome: Micro-3: Discuss different types of market systems and the gains that can be made from trade AACSB: Analytic skills Question Status: Previous Edition 5) What is the type of economic system that relies on one central authority to make economic  decisions? A) Free market B) Price system C) Command and control D) Mixed economic system Answer: C Diff: 1 Topic: 1.3 The Three Basic Economic Questions and Two Opposing Answers Learning Outcome: Micro-3: Discuss different types of market systems and the gains that can be made from trade AACSB: Analytic skills Question Status: Previous Edition 33 ScholarStock6) What is the type of mechanism that answers the basic economic questions through a  decentralized decision making process? A) Market system B) Dictatorship C) Command and control D) Mixed economic system Answer: A Diff: 1 Topic: 1.3 The Three Basic Economic Questions and Two Opposing Answers Learning Outcome: Micro-3: Discuss different types of market systems and the gains that can be made from trade AACSB: Analytic skills Question Status: Previous Edition 7) Central planning is a key characteristic of which economic system? A) Free market B) Price system C) Command and control D) Mixed economic system Answer: C Diff: 1 Topic: 1.3 The Three Basic Economic Questions and Two Opposing Answers Learning Outcome: Micro-3: Discuss different types of market systems and the gains that can be made from trade AACSB: Analytic skills Question Status: Previous Edition 8) Under a pure price system, the decision of resource allocation is made by A) the head of the government. B) a queen or king. C) individuals who own the resources. D) no one. Answer: C Diff: 1 Topic: 1.3 The Three Basic Economic Questions and Two Opposing Answers Learning Outcome: Micro-3: Discuss different types of market systems and the gains that can be made from trade AACSB: Analytic skills Question Status: Previous Edition 34 ScholarStock9) In a market system, the what, how and for whom questions in economics are determined by A) those who are not in the market. B) buyers and sellers together. C) the central authority. D) no one. Answer: B Diff: 1 Topic: 1.3 The Three Basic Economic Questions and Two Opposing Answers Learning Outcome: Micro-3: Discuss different types of market systems and the gains that can be made from trade AACSB: Analytic skills Question Status: Previous Edition 10) In a market system, ________ provide signals about whether resources are relatively scarce  or abundant. A) prices B) economists C) government officials D) scientists and engineers Answer: A Diff: 1 Topic: 1.3 The Three Basic Economic Questions and Two Opposing Answers Learning Outcome: Micro-3: Discuss different types of market systems and the gains that can be made from trade AACSB: Analytic skills Question Status: Previous Edition 11) The United States is best known as a A) pure price system. B) dictatorship. C) command and control system. D) mixed economic system. Answer: D Diff: 1 Topic: 1.3 The Three Basic Economic Questions and Two Opposing Answers Learning Outcome: Micro-3: Discuss different types of market systems and the gains that can be made from trade AACSB: Analytic skills Question Status: Previous Edition 35 ScholarStock12) A mixed economic system is best described an economy with a mix of A) state and federal governments. B) domestic and foreign buyers. C) free markets and government control. D) for-profit organizations and not-for-profit organizations. Answer: C Diff: 1 Topic: 1.3 The Three Basic Economic Questions and Two Opposing Answers Learning Outcome: Micro-3: Discuss different types of market systems and the gains that can be made from trade AACSB: Analytic skills Question Status: Previous Edition 13) Distinguish between a command-and-control economic system and a price system. Answer: In a command-and-control economic system, economic decisions about resource  allocation are made by a central authority, such as a central government or a king or queen.  Under command and control, this central authority decides what items will be produced, how  will the items be produced, and who will obtain those items. In a price or market system, the  what, how and for whom issues are determined via decentralized decision making among buyers  and sellers in the market. Diff: 1 Topic: 1.3 The Three Basic Economic Questions and Two Opposing Answers Learning Outcome: Micro-3: Discuss different types of market systems and the gains that can be made from trade AACSB: Analytic skills Question Status: Previous Edition 36 ScholarStock1.4 The Economic Approach: Systematic Decisions 1) In his book, An Inquiry into the Nature and Causes of the Wealth of Nations, economist Adam  Smith argued that individuals A) always tend to act in an altruistic manner. B) always consider the impact of their actions on the welfare of others. C) are motivated by self-interest. D) are generally not concerned with economic questions. Answer: C Diff: 1 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 2) Economists assume that people are motivated by A) benevolence. B) altruism. C) greed. D) rational self-interest. Answer: D Diff: 1 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 3) One major assumption of economics is that people A) act as if they systematically pursue self-interest. B) behave randomly without any predictable pattern. C) are sometimes rational and sometimes irrational. D) always pursue the interests of others. Answer: A Diff: 1 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 37 ScholarStock4) If people act as if they systematically pursue their own self-interest, then they will most likely A) respond irrationally to any incentive. B) respond to a given incentive in a random manner. C) respond predictably to a given incentive. D) not respond to any incentive. Answer: C Diff: 2 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 5) When studying individuals' economic behavior, economists assume that A) individuals understand the rationale for all their actions. B) individuals act as if they were rational. C) only educated people act as if they were rational. D) self-interest is of limited relevance in predicting an individual's actions. Answer: B Diff: 1 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 6) The assumption that people do not intentionally make decisions that would leave them worse  off is known as A) the rationality assumption. B) the microeconomic assumption. C) the ceteris paribus assumption. D) the normative assumption. Answer: A Diff: 1 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 38 ScholarStock7) When the text refers to rational self-interest, it means A) your looking out for what is best for you as an individual. B) your focus on your own contributions to society. C) behavior that makes society better off. D) behavior that helps your employer earn higher profits. Answer: A Diff: 2 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 8) In economics, the concept that individuals are motivated by self-interest and respond  predictably to opportunities for gain is known as A) rational self-interest. B) altruism. C) sufficiency. D) empiricism. Answer: A Diff: 1 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 9) Economists assume people behave rationally, which means that people A) never make a mistake. B) do not intentionally make decisions that make themselves worse off. C) have the necessary information to always make correct decisions. D) always understand the consequences of their decisions. Answer: B Diff: 2 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 39 ScholarStock10) Sara looks into her closet and discovers a pair of like-new shoes she no longer wears because they give her blisters. From the economist's perspective, was Sara behaving rationally when she  bought those shoes? A) No. If any of a person's decisions have poor results, that person is irrational.  B) Yes, as long as Sara didn't intentionally purchase blister-causing shoes. C) No. The rationality assumption states that rational people never make mistakes. D) It's not clear because psychology, not economics, deals with the rationality assumption. Answer: B Diff: 2 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 11) Do economists analyze people's thought processes or do they look at what people actually  do? A) Economists focus only on people's thought processes. B) Economists focus on what people do, not their thought processes. C) An economist's focus is about half-and-half between actions and thought processes. D) Macroeconomists focus on thought processes while microeconomists focus on actions. Answer: B Diff: 1 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 12) When people donate money to a charity, they behave A) rationally if the act gives them satisfaction. B) irrationally because the act does not benefit anyone. C) in an unpredictable manner because the act involves no incentive. D) in a way that only makes themselves worse off. Answer: A Diff: 2 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 40 ScholarStock13) The potential rewards that are available to an individual if a particular activity is undertaken  are known as A) premiums. B) gifts. C) incentives. D) intrinsic values. Answer: C Diff: 1 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 14) Father says, "Earn a B-average on your next report card and I'll help you buy a car." An  economist would say that this parent is providing his child a(n) A) study disincentive. B) reason to slack off and not worry about her grades. C) bribe. D) incentive. Answer: D Diff: 2 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 15) Some pet owners are using an "invisible fence" to keep their animals from straying. Every  time the animal steps over the edge of the property, it gets a mild shock. A social scientist would  call the shock A) a bribe. B) a reward. C) a disincentive. D) a normative incentive. Answer: C Diff: 2 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 41 ScholarStock16) Which of the following is true of incentives? A) Different people are motivated by different incentives. B) Money is the only measure of incentives. C) All of the people in a particular nation are motivated by the same incentives. D) In economics, people are assumed to respond to disincentives instead of incentives. Answer: A Diff: 1 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 17) Economists assume people are motivated by A) unlimited resources. B) pride. C) self-interest. D) social justice. Answer: C Diff: 1 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 18) Self-interest relates to A) only monetary objectives. B) both monetary and nonmonetary objectives. C) the ceteris paribus assumption. D) normative economic analysis and not positive economic analysis. Answer: B Diff: 2 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 42 ScholarStock19) Economists assume people behave A) instinctively. B) rationally. C) irrationally. D) greedily.  Answer: B Diff: 1 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 20) Which of the following is always true of rational behavior? A) It always entails pursuing one's own best interest. B) It always yields the best possible outcome for all individuals. C) It never involves the pursuit of greedy self-interest. D) It never involves taking into account the interests of others. Answer: A Diff: 1 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 21) John has an economics test tomorrow. He must study and has planned the rest of his day so  that he can fit some study time in. He has decided to go to the gym and then study for several  hours. Which of the following statements is true? A) John did not use the economic way of thinking because his decision on how to allocate his  time did not involve money. B) John's decision on how to allocate his time is inconsistent with the rationality assumption  since he has decided to go to the gym. C) John's decision on how to allocate his time is consistent with the rationality assumption since  the decision is intended to make him better off. D) John's decision does not involve his pursuit of self-interest. Answer: C Diff: 3 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 43 ScholarStock22) People behave rationally when they A) follow the advice of government leaders.  B) never have regrets about their decisions.  C) make decisions they think will make themselves better off.  D) make decisions solely based on financial outcomes. Answer: C Diff: 2 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 23) Which of the following is a true statement about the economic assumption of rationality? A) Individuals who are rational necessarily ignore the interests of others.  B) Individuals generally act as though they are rational.  C) Individual behavior may be irrational but group behavior is always rational.  D) People make decisions as if they are omniscient. Answer: B Diff: 1 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 24) A decision made by a rational person A) is intended to make the person worse off. B) would always make the person wealthier.  C) is identical to a decision that would be made by any other person facing the same choices.  D) is intended to make the person better off.  Answer: D Diff: 2 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 44 ScholarStock25) The assumption that individuals will not intentionally make decisions that will leave them  worse off is known as A) microeconomic analysis. B) macroeconomic analysis. C) a model or theory. D) the rationality assumption. Answer: D Diff: 2 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 26) The rationality assumption says that A) people do not intentionally make decisions that would leave them worse off. B) people never make decisions that would leave them worse off. C) people do not respond to incentives since incentives require scarce resources. D) all economic analysis must be normative. Answer: A Diff: 2 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 27) Jose is rational if he A) does not intentionally make decisions that would leave him worse off. B) never makes a mistake in his life. C) only responds to rewards that involve money. D) always uses a model or mathematical formula to help him make a decision. Answer: A Diff: 2 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 45 ScholarStock28) A possible rational reason why older people, on average, show less interest in learning how  to use new technologies is because A) older people are not as smart as (today's) young people.  B) they are acting irrationally.  C) they have fewer years to gain a return from learning how to use new technologies.  D) the financial cost for older people is greater than the cost to younger people.  Answer: C Diff: 1 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 29) Incentives are A) potential rewards available if a particular activity is undertaken.  B) ineffective as a device to get people to behave in a certain fashion.  C) inappropriate ways to obtain a certain kind of behavior.  D) useless when people behave rationally. Answer: A Diff: 1 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 30) Which of the following would NOT provide an incentive to reduce the amount of beef  consumed? A) An increase in the price of beef B) A subsidy to buyers of beef C) A decrease in the price of chicken D) A ban on beef sales by the Food and Drug Administration Answer: A Diff: 3 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 46 ScholarStock31) People respond to incentives A) by ignoring negative incentives and responding to positive incentives only.  B) only when they are irrational.  C) by calculating their individual costs and benefits and determining which is greater.  D) when they have low incomes. Answer: C Diff: 2 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 32) The threat of a large fine for failure to pay income taxes is an example of  A) the excessive power of the Internal Revenue Service.  B) the ineffectiveness of incentives to get people to pay their taxes.  C) a negative incentive to get all people to pay taxes.  D) people failing to consider all the benefits the government provides them. Answer: C Diff: 2 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 33) A politician says that the government should tax behavior they want less of and subsidize  behavior they want more of. This is an example of A) cynical behavior in modern democracies.  B) failing to consider the alternatives available to the government.  C) a concern that people are not rational when they make decisions.  D) using incentives to alter behavior. Answer: D Diff: 2 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 47 ScholarStock34) Which of the following ways to recruit soldiers utilizes incentives? A) a draft B) universal service  C) higher salaries D) longer lengths of service Answer: C Diff: 2 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 35) Self-interest A) implies that a person must try to increase wealth at all times.  B) implies that people will not give away wealth.  C) is consistent with many goals that people pursue, including betterment of others. D) applies only to people in market settings. Answer: C Diff: 2 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 36) Self-interest A) relates strictly to material well-being, such as a person's stock of wealth at a point in time. B) is measured entirely based on an individual's income, whether earned from labor or inherited. C) is inconsistent with economic analysis, which suggests that self-interest is irrational. D) can involve any action that makes a person feel better off, such as charitable contributions. Answer: D Diff: 2 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 48 ScholarStock37) Shelley's grandmother gave her a sweater for her birthday, but Shelley wanted a DVD. This  implies that A) Shelley's grandmother is not acting out of self-interest because she knows that Shelley really  wanted a DVD. B) Shelley's grandmother is acting out of self-interest because she wanted to give Shelley  something useful.  C) it is in Shelley's self-interest to refuse to wear the sweater.  D) Shelley should exchange the sweater for a DVD. Answer: B Diff: 3 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 38) Charitable donations to the Red Cross A) can be explained by the rational ignorance theory. B) can be explained by the rational self-interest theory. C) cannot be explained by the rational self-interest theory. D) prove that there is no scarcity in the United States. Answer: B Diff: 2 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 39) A five-cent deposit on beer bottles A) provides a positive incentive because it rewards people for recycling. B) provides a negative incentive because it punishes people who do not recycle. C) is an irrational policy, because it fails to take into account incentives. D) is an irrational policy, because it fails to take into account self-interest. Answer: A Diff: 3 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 49 ScholarStock40) If a teacher tells a student that those who attend the study session typically score higher on  the final exam, A) the student has a positive incentive to attend the study session because she may get a higher  grade. B) the student has a negative incentive to attend the study session because she will be punished if she does not go. C) the student has no greater incentive to attend because there is no guarantee she will get a  higher grade on the exam. D) a "C" student will be making an irrational decision if she decides to skip the study session  since she has plenty of time to go. Answer: A Diff: 2 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 41) Consider the case of a teacher who tells students that those who miss more than three classes  for any reason will automatically receive a lower grade. A) This is an example of a positive incentive for students to attend class. B) This is an example of a negative incentive for students to attend class. C) The teacher is assuming that students are irrational, and she must force them to attend class.  D) Students who miss more than three classes are irrational. Answer: B Diff: 2 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 42) If the government offers to reduce your property taxes by 10 percent if you install solar  heating for your home, this would be an example of A) police power. B) incentives. C) disincentives. D) ceteris paribus. Answer: B Diff: 2 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 50 ScholarStock43) Economists assume that people are motivated by A) a desire to please others. B) the interests of the community at large. C) self-interest. D) morally correct behavior. Answer: C Diff: 1 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 44) When we say that an individual behaves according to "rational self-interest," we mean that  this individual A) is motivated by greed. B) will always buy the most fashionable items available. C) will always buy the cheapest products available on the market. D) is making choices that he or she believes will leave him or her better off. Answer: D Diff: 2 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 45) Rational behavior for an economist means that individuals A) are motivated by self-interest. B) never change their minds. C) always make positive choices. D) are self-sacrificing. Answer: A Diff: 1 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 51 ScholarStock46) According to economists, when two people make exactly the opposite decision, A) one of them is acting irrationally. B) each person evaluates the situation according to his/her individual self-interest. C) one of them is acting out of spite. D) one of them should compromise. Answer: B Diff: 1 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 47) It is assumed in economics that people make decisions based upon A) altruism. B) rational self-interest. C) tradition. D) governmental persuasion. Answer: B Diff: 1 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 48) An incentive is a A) need. B) want. C) reward for desired behavior. D) resource. Answer: C Diff: 1 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 52 ScholarStock49) The assumption that individuals do NOT intentionally make decisions that would leave them  worse off is referred to as A) the premium assumption. B) the law of comparative advantage. C) the rationality assumption. D) the law of demand. Answer: C Diff: 1 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 50) The author of the book An Inquiry into the Nature and Causes of the Wealth of Nations is A) Thorstein Veblen. B) Adam Smith. C) Milton Friedman. D) Alan Greenspan. Answer: B Diff: 1 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 51) Rational self-interest means A) always increasing your wealth. B) pursuing what makes you better off. C) pursuing activities that maximize income. D) always pursuing activities that are consistent with your faith. Answer: B Diff: 1 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 53 ScholarStock52) The rationality assumption states that A) all actions taken by consumers are based on what is good for society. B) people make decisions regardless of how the outcome will affect them. C) people make decisions to buy only those goods that they need rather than goods that they  want. D) people do not intentionally make decisions that would leave them worse off. Answer: D Diff: 1 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 53) Economic theory predicts that people make choices in a manner that A) makes them well liked by others.  B) makes them better off. C) reflects the fact that resources are unlimited.  D) shows that they do not respond to monetary incentives. Answer: B Diff: 1 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 54) How could Adam Smith's comment about the butcher, the brewer, and the baker be  accurately rephrased in modern terms? A) The butcher, the brewer, and the baker give us our dinner because they want to be well liked  in the community.  B) The butcher, the brewer, and the baker give us our dinner because they will be sued if they  don't do so.  C) The butcher, the brewer, and the baker give us our dinner because they each earn a living by  doing so. D) The butcher, the brewer, and the baker give us our dinner because they view doing so as a  public service. Answer: C Diff: 2 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 54 ScholarStock55) According to economic theory, how do people make decisions? A) They make decisions in the same manner as their parents did.  B) They make decisions by looking at what others have done in the same situation and then  doing the opposite.  C) They make decisions by looking at what others have done in the same situation and then  doing the same.  D) They make decisions based on their own self-interest. Answer: D Diff: 2 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 56) Underlying economic theory is the idea that A) people respond only to negative incentives, not to positive ones.  B) choices are affected by both positive and negative incentives.  C) value judgments do not play a role in the economic decisions people make.  D) money is the only incentive that matters. Answer: B Diff: 2 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 57) High gasoline prices give people all of the following incentives EXCEPT A) to drive less. B) to car pool. C) to buy a hybrid car. D) to take vacations that require driving more miles. Answer: D Diff: 2 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 55 ScholarStock58) The idea that people will not consciously make decisions that make them worse off is known  as  A) rationality assumption. B) the decision duality. C) Adam Smith's doctrine. D) incentive assumption. Answer: A Diff: 1 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 59) Explain what economists mean when they apply the rationality assumption. Answer: The rationality assumption means that people do not intentionally make themselves  worse off. It does not deal with the interior reasoning of a person or the psychology of a person.  Instead, rationality applies to the way people actually behave in a world of scarcity. Diff: 1 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Communication abilities Question Status: Previous Edition 60) "Economists assume people are selfish." Do you agree with this statement or not? Explain. Answer: Economists do not assume people are selfish, although clearly some people are. Self interest does not necessarily mean selfishness. People have many goals, some of which may be  self-centered and some of which may be more altruistic. Charity is consistent with self-interested behavior. Diff: 2 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 56 ScholarStock61) "Rational, self-interested people would never end up worse off by any decision they make.  Obviously, people often make mistakes or have regrets. Therefore, people do not act rationally or out of self-interest." Do you agree with these statements? Why or why not? Answer: No. People may make mistakes because they often do not have enough information to  make the best decision or because they are wrong about the effect of their actions. When they  make a decision, given their circumstances and the information they have, they make the best  choice for themselves. Diff: 3 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Reflective thinking skills Question Status: Previous Edition 62) What assumption about human motivation is made in economics? Explain. Answer: Economists assume that people act as if motivated by self-interest. People respond  predictably to opportunities for gain. That is, people look out for their own self-interest and do so in a rational manner. Diff: 1 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 63) What is meant by the term "incentives," and why are they important? Answer: Incentives are rewards for engaging in particular activities. Much of human behavior  can be explained in terms of incentives. For example, grades in school are an incentive, as are  paychecks for work. Incentives are important because rational human beings seeking to promote  their own welfare will respond to incentives in predictable ways. Diff: 1 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 57 ScholarStock64) During the Middle Ages, heretics were often burned at the stake. Were the heretics violating  the assumption of rational self-interest? Explain. Answer: For someone today, or even many people living at that time, it would seem the heretics' behavior was irrational and not in their own self interest. But, in their own eyes, they may have  been acting rationally and with self-interest. Given their goals, dying rather than recanting their  views was in their self-interest, especially if they believed such a death guaranteed them eternal  life. They believed they would have been worse off had they recanted their views. The benefit of  dying for their cause was greater to them than the cost of dying. Diff: 3 Topic: 1.4 The Economic Approach: Systematic Decisions Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Reflective thinking skills Question Status: Previous Edition 1.5 Economics as a Science 1) Another term for "economic models" is A) economic designs. B) economic theories. C) economic science. D) economic maps. Answer: B Diff: 1 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 2) A simplified representation of the real world that is used to explain economic phenomena is  a(n) A) map. B) model. C) assumption. D) implication. Answer: B Diff: 1 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 58 ScholarStock3) Economics is an empirical science, which means that economists A) must use laboratory experiments to test their theories. B) evaluate a model or theory by whether its assumptions are consistent with the real world. C) try to prove their models are true by referring to logic. D) look for evidence to determine whether the model is useful or not. Answer: D Diff: 1 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 4) Both the social sciences and the natural sciences employ ________ to help them understand  the world around them. A) models B) designs C) traditional thinking D) implications Answer: A Diff: 1 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 5) Which is NOT true about the use of economic models? A) Economic models are simplified representations of the real world. B) Economists sometimes use laboratory experiments to test their theories. C) Economists use what has already happened in the real world to test their theories. D) Economists are employed to explain economic phenomena but are never used to predict what  might happen next. Answer: D Diff: 2 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 59 ScholarStock6) Which of the following statements is FALSE? A) Economists empirically test their models. B) Economic models are not used to forecast. C) An economic model should capture only the essential relationships that are sufficient to  analyze the particular problem being studied. D) Economic models relate to behavior rather than to individual thought processes. Answer: B Diff: 1 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 7) Economists develop models to A) capture every detail of the real world. B) make their arguments more realistic. C) justify the assumptions they make about people's behavior. D) help us understand economic phenomena in the real world. Answer: D Diff: 2 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 8) Which of the following statements concerning economic models is FALSE? A) Economic models must provide usable predictions. B) Economic models are based on pure fact and no assumptions. C) Economic models are tested empirically. D) Economic models relate to how people behave. Answer: B Diff: 2 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 60 ScholarStock9) Which of the following statements about economic models is true? A) Economic models are not empirically testable. B) The predictive power of models is not important. C) Economic models are designed so that every detail of the real world can be analyzed. D) Every economic model is based on a set of assumptions. Answer: D Diff: 1 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 10) Economic models A) are used to explain how people think. B) are used to explain how people behave. C) are essential representations of the real world. D) are never used for making economic projections or predictions. Answer: B Diff: 1 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 11) One reason why economists often use models in their analysis is that A) a model helps us to understand, explain, and predict economic phenomena in the real world. B) a model accurately pictures every detail of the real world economy. C) a model relates to individual thought processes rather than behavior. D) it is relatively easy to perfectly specify a model. Answer: A Diff: 1 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 61 ScholarStock12) An economic model should capture A) the essential relationships that help to analyze the problem. B) all possible variables that apply to the problem. C) only social value related variables. D) all of the above. Answer: A Diff: 2 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 13) One problem with constructing a perfectly complete realistic economic model is that A) it would be too simplistic to have any value. B) it would be far too complicated to analyze. C) politicians see little value in such a model. D) None of the above is true. Answer: B Diff: 2 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 14) Which of the following statements is true? A) No economic model captures every detail that affects a problem. B) Economic models always make accurate predictions about behaviors. C) Economic models must fully reflect reality. D) Economic models use economists' opinions with no use of data. Answer: A Diff: 2 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 62 ScholarStock15) A map is an example of a model because a map A) realistically describes an area. B) is always as complex as space will permit. C) is two-dimensional. D) is a simplified representation of reality. Answer: D Diff: 2 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 16) Holding all variables constant but one and assessing the impact of the one variable that has  changed is an example of using A) the ceteris paribus assumption. B) an economic model based on unrealistic assumptions. C) a flawed economic model. D) an untestable proposition. Answer: A Diff: 1 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 17) The term ceteris paribus means A) the greatest good for all. B) the study of scarcity and choice. C) all other things remaining constant or equal. D) value-free and testable. Answer: C Diff: 1 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 63 ScholarStock18) In order to study how changing price affects consumer decisions, we must assume all other  factors, such as income and the prices of other goods are constant. This assumption is best know as A) rationality. B) ceteris paribus. C) normative economics. D) behavioral economics. Answer: B Diff: 1 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 19) Which of the following is an example of an application of the ceteris paribus assumption? A) An analysis of how price changes affect how much of a good people will purchase when all  other factors are held constant B) An analysis of how people purchase more goods when prices decline and income increases C) After reading an article on the dangers of high-fat diets, an individual buys less red meat when prices increase D) An analysis of how worker productivity increases when a firm invests in new machines and  training programs Answer: A Diff: 2 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 20) Ceteris paribus means A) making all the necessary changes. B) other things constant. C) for certain parameters. D) let the buyer beware. Answer: B Diff: 1 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 64 ScholarStock21) The ceteris paribus assumption is important in economics because A) all empirical data are equal. B) it would be impossible to relate the effects of changes in one variable on another without  holding some variables constant. C) economic data move very slowly over time and so they can always be considered constant. D) models are always complex and require as many variables as possible. Answer: B Diff: 2 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 22) The assumption that "other things are constant" is also known as the A) ceteris paribus assumption. B) rational self-interest assumption. C) distinguishing characteristic of economics as a science. D) relationships assumption. Answer: A Diff: 1 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 23) Mary says she plans to return to college next semester assuming her car keeps running,  tuition fees don't go up, and her daycare provider continues to be dependable. An economist  would say that Mary plans to return to college next semester, ________. A) caveat emptor B) ceteris paribus C) laissez faire D) ipso facto Answer: B Diff: 2 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 65 ScholarStock24) Professor's economics students are constructing models for how gasoline prices change.  Maria's model has very realistic assumptions and is quite complex. Anna's model is less  complicated and less realistic. Maria's model correctly predicts gas price increases 5% of the  time. Anna's model predicts correctly 15% of the time. On the basis of usefulness or "goodness,"  Professor will give which student's model the higher grade and why? A) Maria's model gets the higher grade because it is more complex. B) Anna's model gets the higher grade because it is simpler. C) Maria's model gets the higher grade because it is more realistic. D) Anna's model gets the higher grade because it predicts accurately more often. Answer: D Diff: 2 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 25) Why is economics called an empirical science? A) because economics has been used to both create and destroy empires B) because economics uses impressions to evaluate the usefulness of its models C) because economics relies on real-world data to determine the usefulness of a model D) because economics utilizes intuition rather than data to evaluate a model's worth Answer: C Diff: 2 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 26) An appropriate test of the effectiveness of an economic model is A) the number of variables contained within the model. B) the model's ability to predict future economic activity. C) the number of economists who have worked on the model. D) the number of assumptions which the economist has made. Answer: B Diff: 1 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 66 ScholarStock27) A good economic model A) utilizes only the two most important factors to analyze the problem under consideration. B) generates statements that are incapable of refutation. C) represents every detail of the real world. D) yields usable predictions and implications for the real world. Answer: D Diff: 2 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 28) The usefulness of a model is determined by A) whether it helps to explain or predict real world phenomena. B) whether it possesses realistic assumptions. C) how well it uses the ceteris paribus assumption. D) how many of the possible relationships that exist are included in the model. Answer: A Diff: 1 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 29) The use of data in economic models is important because A) the model's predictive value rests on supportive evidence from real-world data. B) the models are always complex in nature. C) models must analyze every possible angle of the problem. D) social problems analyzed by economists require long streams of data. Answer: A Diff: 2 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 67 ScholarStock30) If two competing models are offered to explain a certain economic phenomenon, the better  model is the one A) that is the newest since newer models are better than old models. B) with the fewest unrealistic assumptions. C) that more often predicts with most accuracy. D) that is not subject to empirical verification. Answer: C Diff: 2 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 31) To be useful, a model must A) predict accurately all of the time. B) predict more accurately than other models that have been developed. C) have assumptions that have been verified by empirical testing. D) explain and predict the behavior of every individual. Answer: B Diff: 2 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 32) Economics is called an empirical science because A) economists study real-world evidence to test their models. B) economists use assumptions in their models. C) economic models have no predictive power. D) economic analysis is only useful in a capitalistic society. Answer: A Diff: 1 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 68 ScholarStock33) Which of these social sciences deals most with models of behavior rather than with thought  processes? A) Psychology B) Sociology C) Psychiatry D) Economics Answer: D Diff: 1 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 34) Which of the following best describes how economists test the empirical predictions of  economic models? A) Economists survey individuals to learn about how people think through decisions about how  much to purchase or to produce. B) Economists collect and analyze real-world observations of people's actions to discern if those  actions accord with theories' predictions. C) Based on theories about thought processes, economists seek to determine which thought  processes predominate in determining how a person decides what actions to take. D) Recognizing that people always do what they say they will do, economists rely exclusively on information gleaned from polls and surveys conducted by poll takers and market researchers. Answer: B Diff: 2 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 35) When constructing economic models, economists are more concerned with  A) what people say than what they do. B) what people think than what they say. C) what people do than what they say. D) what people say than what they do or think. Answer: C Diff: 1 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 69 ScholarStock36) Behavioral economics is an approach to the study of consumer behavior A) that emphasizes psychological limitations and complications that potentially interfere with  rational decision making. B) that emphasizes the capabilities of individuals to succeed in attaining all their unlimited wants utilizing limited resources. C) that, in contrast to standard approaches in economics, utilizes the ceteris paribus assumption. D) that, in contrast to standard approaches in economics, relies on real-world data to evaluate the usefulness of economic models. Answer: A Diff: 1 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 37) The hypothesis that people are nearly, but not fully rational, cannot possibly fully examine  every available choice, and utilize simple rules of thumb in making decisions is known as the A) irrationality hypothesis. B) ceteris paribus hypothesis. C) individual aggregation hypothesis. D) bounded rationality hypothesis. Answer: D Diff: 1 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 38) According to the bounded rationality hypothesis, an individual confronting a large number of complicated choices is most likely to respond by A) using a simple rule of thumb to choose among a subset of easiest-to-evaluate options. B) using the ceteris paribus assumption to assist in simplifying and examining each of the  possible options. C) utilizing readily available empirical evidence to assist in evaluating every option. D) assessing every available choice by developing sophisticated theories regarding each option. Answer: A Diff: 1 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 70 ScholarStock39) An economic theory is also known as an economic A) model. B) art. C) miracle. D) assumption. Answer: A Diff: 1 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Revised 40) Economic models are A) always based on laboratory methods similar to natural sciences. B) a simplified representations of the real world. C) used only in microeconomic analysis by households. D) used only in macroeconomic analysis by business firms. Answer: B Diff: 1 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 41) Economic models are NOT used to A) explain economic phenomena.  B) predict economic phenomena.  C) understand economic phenomena.  D) describe all economic phenomena in minute detail. Answer: D Diff: 1 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 71 ScholarStock42) To test their theories, economists usually have to A) set up careful laboratory experiments with all variables controlled. B) first examine theory and what has happened in the past in the real world.  C) use only models that have a proven record of success.  D) anticipate every factor with 100 percent accuracy. Answer: B Diff: 3 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 43) A difference between biology and economics is that A) economists use models and biologists use theories.  B) biologists often use laboratory methods and economists do less often.  C) economics explains events while biology predict events. D) biologists use the scientific method while economists do not. Answer: B Diff: 2 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 44) Models must A) be able to yield useable predictions. B) be totally realistic in every detail. C) be a complete reproduction of the real world. D) include every relationship that exists. Answer: A Diff: 1 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 72 ScholarStock45) A good economic model A) cannot be refuted.  B) describes the real world completely and in detail.  C) captures the essential relationships of the problem under consideration.  D) captures all relationships about the problem under consideration. Answer: C Diff: 2 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 46) Which of the following statements is NOT true? A) Economics is a social science. B) Economics is an empirical science. C) Economics does not use theories. D) Economics is the study of how people allocate their limited resources to satisfy their  unlimited wants. Answer: C Diff: 1 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 47) A characteristic of a good model is that A) its predictions can be tested using real-world data.  B) it is useful for making irrefutable predictions.  C) it applies to all situations.  D) it predicts perfectly. Answer: A Diff: 2 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 73 ScholarStock48) In an economic model, assumptions A) must be applicable to all real-world situations.  B) must be eliminated before being used to make sure the model is realistic.  C) are not important in determining the usefulness of the model.  D) define the set of circumstances in which the model is most likely to be applicable in the real  world. Answer: D Diff: 1 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 49) A model is used to explain economic behavior. Therefore, A) the assumptions must be complex while the model itself is simple.  B) the model must be complex.  C) the model must be simple.  D) the model can be either simple or complex so long as it explains economic behavior. Answer: D Diff: 2 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 50) "Ceteris paribus" assumption means A) the role of rational self-interest in the economy. B) that nothing else changes except the variables under consideration. C) relying on real-world data in evaluating the usefulness of a model. D) analysis that is strictly limited to making either purely descriptive statements or scientific  predictions. Answer: B Diff: 2 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 74 ScholarStock51) If economists are making the assumption that business people try to maximize profits, the  best way to determine whether this assumption is useful or not is to A) see whether it generates accurate predictions about the choices of business people.  B) ask business people whether it is true or not.  C) find out whether U.S. businesses are more profitable than European businesses.  D) take a survey of people and see if they agree with this assumption. Answer: A Diff: 3 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 52) The assumption that nothing changes except the factor being studied is A) the ceteris paribus assumption. B) the rationality assumption. C) positive economic analysis. D) normative economic analysis. Answer: A Diff: 1 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 53) "Ceteris paribus" means A) "invisible hand." B) "other things constant."  C) "making all the necessary changes." D) "individual." Answer: B Diff: 1 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 75 ScholarStock54) A scientist who is studying earthquakes includes the impact of wind when performing some  tests of damages to structures. This is an example of A) failing to understand how to do scientific methodology.  B) irrational behavior in noneconomic situations.  C) accounting for every possible phenomena that may effect the problem under examination.  D) failing to hold all other things constant. Answer: D Diff: 2 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 55) Economics is an empirical science, which means that economists A) look at evidence to see whether or not the model is applicable.  B) test their models by utilizing unknown variables.  C) do only laboratory experiments.  D) refuse to test their models since the usefulness of a model is determined by whether it is  logical or not. Answer: A Diff: 2 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 56) Which expression below matches most closely the way economists go about testing their  models? A) "Consistency is the hobgoblin of small minds."  B) "Seeing the results is the only way to know if you are right."  C) "A bird in the hand is worth two in the bush."  D) "In the long run we are all dead." Answer: B Diff: 2 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 76 ScholarStock57) Economic models relate to A) people's choices.  B) how people think about something.  C) group opinions.  D) the reasons people give for donating to charity. Answer: A Diff: 1 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 58) A poll conducted by a national firm finds that most Americans say they care more about  safety when buying a car than about fuel efficiency. As a result, a car maker produces a car with  many safety features, but it doesn't sell well. This behavior A) contradicts economic theory because the people didn't do what they said they would do.  B) contradicts economic theory because it is irrational not to purchase safer cars.  C) does not contradict economic theory because economists focus on what people do rather than  on what they say.  D) does not contradict economic theory because economic theory only relates to prices and not  to features such as safety. Answer: C Diff: 3 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 59) According to proponents of behavioral economics, because every possible choice cannot be  considered, an individual will tend to fall back on methods of making decisions that are simpler  than trying to sort through every single possibility, known as A) rules of thumb.  B) rational options. C) irrational choices.  D) normative decisions.  Answer: A Diff: 1 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 77 ScholarStock60) Which of the following is NOT an alleged "unrealistic" assumption that proponents of  behavioral economics suggest are commonly utilized in traditional economic models based on  the rationality assumption?  A) unbounded selfishness B) unbounded rationality C) unbounded will power D) unbounded resources Answer: D Diff: 1 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 61) If psychological limitations and other complications cause people to be unable to examine  and think through every possible choice available to them and rely instead on rules of thumb,  then these individuals exhibit A) unbounded rationality. B) normative thinking. C) bounded rationality.  D) positive thinking. Answer: C Diff: 1 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 62) A theory or a model A) is a simplified, abstract view of reality. B) is based on each economist's value judgments. C) is a detailed analysis of what ought to be. D) captures all aspects of the real world. Answer: A Diff: 1 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 78 ScholarStock63) Ceteris paribus means A) "all variables are independent." B) "other things being equal." C) "some assumptions must be accepted without proof." D) "some theories are not rational." Answer: B Diff: 1 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 64) The ceteris paribus assumption means A) favors are returned in kind. B) this is the proof of the matter. C) from many, one. D) other things are equal. Answer: D Diff: 2 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 65) In building a model the assumption that allows economists to study only the factors being  analyzed is the A) rationality assumption. B) ceteris paribus assumption. C) the self-interest assumption. D) the scarcity assumption. Answer: B Diff: 2 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 79 ScholarStock66) Ceteris paribus means A) other variables are held constant. B) almost certainly. C) only if everything works just right. D) perhaps. Answer: A Diff: 1 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 67) In constructing models, economists A) include all independent variables. B) include all available information. C) attempt to duplicate the real world. D) make simplifying assumptions. Answer: D Diff: 1 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 68) In building a model to analyze economic situations, one of the important assumptions is A) ceteris paribus. B) scarcity. C) conversion abstraction. D) cognitive dissonance. Answer: A Diff: 1 Topic: 1.5 Economics as a Science Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to  think like an economist AACSB: Analytic skills Question Status: Previous Edition 80 ScholarStock

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