Chapter 1: What is Economics?

___(1)___ helps us understand why the economy sometimes cools and sometimes overheats and what the government can do to moderate the fluctuations.

1) Macroeconomics

Managers use ___(1)___ analysis to decide how to produce goods and​ services, how much to​ produce, and how much to charge for them.

1) Microeconomics

One reason for studying ___(1)___ is to better understand how markets work and to predict how various events affect the prices and quantities of products in markets.

1) Microeconomics

We can use ___(1)___ analysis to determine how well the government performs its roles in the market economy and explore the​ trade-offs associated with various public policies.

1) Microeconomics

An economic ___(1)___ is used to explore the choices people make and the consequences of those choices.

1) Model

The question​ "What is?" is associated with ___(1)___ economic​ analysis, whereas the question​ "What ought to​ be?" is associated with ___(2)___ economic analysis.

1) Positive 2) Normative

Economists use ___(1)___ to make things simpler and focus attention on what really matters.

1) assumptions

The federal subsidy for hybrid cars was responsible for roughly ___(1)___ of the hybrid cars purchased in 2007.

1) one-fifth

Which of the following is true about the current economic situation in​ sub-Saharan Africa? A) It is harder to start a business in​ sub-Saharan Africa than in North America. B) There is no foreign aid to help investment. C) Debt resolution is a simple and quick process. D) The regulatory environment is more friendly in​ sub-Saharan Africa.

A) It is harder to start a business in​ sub-Saharan Africa than in North America.

Which of the following is not a factor of​ production? A) Money B) Land C) Human capital D) Entrepreneurship

A) Money

What will happen to my income if I have to pay more taxes? A) Positive B) Normative

A) Positive

Who is the United States largest trading​ partner? A) Positive B) Normative

A) Positive

Adam Smith suggested that people act in their own self minus interestpeople act in their own self−interest. A) True B) False

A) True

Adam Smith suggested that self-interest is more powerful than kindness or altruismself−interest is more powerful than kindness or altruism. A) True B) False

A) True

Economists may differ in their conclusions from positive analysis. A) True B) False

A) True

The legal system is an example of an institution that plays a key role in economic growth. A) True B) False

A) True

The Latin expression meaning that other variables are held fixed is A) ceteris paribus. B) carpe diem. C) cetera desunt. D) circulus vitiosus.

A) ceteris paribus.

The inability of Cuban homeowners to sell their dwellings led to less investment in A) housing repair and maintenance. B) technology. C) consumer goods. D) roads and bridges.

A) housing repair and maintenance.

What is the​ economist's solution to the congestion​ problem? A) Require people to move closer to their jobs. B) Charge a toll during rush hour. C) Require people to carpool. D) No economist would suggest any of the above.

B) Charge a toll during rush hour.

Normative statements answer questions like​ "What will happen​ if..." A) True B) False

B) False

Positive Statements answer questions like​ " What ought to happen​ to..." A) True B) False

B) False

Is the president doing a good​ job? A) Positive B) Normative

B) Normative

Should the government raise taxes? A) Positive B) Normative

B) Normative

Should the highway speed limit be raised? A) Positive B) Normative

B) Normative

Which of the following is not one of the three questions​ individuals, firms, and governments use to make economic​ decisions? A) What products do we​ produce? B) Where is the product​ made? C) How do we produce the​ products? D) Who consumes the​ products?

B) Where is the product​ made?

Which of the following would an economist not use to determine the appropriate congestion​ tax? A) thinking at the margin. B) conduct a survey C) assumptions to simplify D) ceteris paribus

B) conduct a survey

Which of the following is not an element of the economic way of​ thinking? A) Thinking at the margin. B) Rational people respond to incentives. C) Use normative statements. D) Use assumptions to simplify complex behavior.

C) Use normative statements.

Which of the following is not an explanation for how economic growth​ occurs? A) country expands its production facilities B) a country improves its public infrastructure C) a country implements population control D) a country widens educational opportunities

C) a country implements population control

A​ small, one-unit change in value is called A) an incidental change. B)an irrelevant change. C) a marginal change. D) a fractional change.

C) a marginal change.

The financial crisis and the recession that began in late 2007 occured when A) the government raised taxes. B) oil prices doubled. C) purchasers of homes and properties could not really afford them. D) banks started charging high interest rates.

C) purchasers of homes and properties could not really afford them.

Which of the following is one of the three basic questions a society must​ answer? A) Who consumes the​ products? B) What products do we​ produce? C) How do we produce the​ products? D) All of the above

D) All of the above

What does the Latin expression ceteris paribus​ mean? A) Resources are limited. B) A measure of something that can take on different values. C) Seize the day. D) Other things being held fixed.

D) Other things being held fixed.

One possible solution to the congestion problem that is described in the book is to A) pay people not to drive. B) limit the number of cars that can use the road. C) force car manufacturers to make fewer cars. D) force people to pay for using the​ road, just as they pay for gasoline and tires.

D) force people to pay for using the​ road, just as they pay for gasoline and tires.

Maps are a good​ non-economic example of using assumptions to make things simpler. Which of the following are assumptions used to make maps​ useful? A) The earth is flat. B) The roads are flat. C) Directions, such as north and​ south, can not be determined. D) All of the above. E) A and B are both correct.

E) A and B are both correct.

According to Adam​ Smith, people are motivated by ​A) self-interest. B) public policy. C) group-interest. D) human instinct.

​A) self-interest.

A manager who studies ___(1)___ will be better equipped to understand the complexities of interest rates and inflation and how they affect the firm.

1) Macroeconomics

___(1)___ explains why resources increase over time and the consequences for our standard of living.

1) Macroeconomics