1. Economics may best be defined as:
A) the interaction between macro and micro considerations.
B) the study of the behavior of people and institutions in the production, distribution, and consumption of scarce goods.
C) the empirical testing of value judgments through the use of induction and deduction.
D) the use of policy to refute facts and hypotheses.
Ans: B
2. The study of economics is primarily concerned with:
A) keeping private businesses from losing money.
B) demonstrating that capitalistic economies are superior to socialistic economies.
C) choices which are made in seeking to use scarce resources efficiently. D) determining the most equitable distribution of society’s output.
Ans: C
3. You should decide to go to a movie:
A) if the marginal cost of the movie exceeds its marginal benefit.
B) if the marginal benefit of the movie exceeds its marginal cost.
C) if your income will allow you to buy a ticket.
D) because movies are inherently good products.
Ans: B
4. Studying economics:
A) helps one become a better-informed citizen and voter.
B) is detrimental to good citizenship because economics emphasizes individualism.
C) is a waste of time since we all participate in the economy whether we understand it or not.
D) is important because economics is the “science of earning money.”
Ans: A
5. Economic theories:
A) are useless because they are not based upon laboratory experimentation.
B) which are true for individual economic units are never true for the economy as a whole.
C) are generalizations based upon a careful observation of facts.
D) are abstractions and therefore of no application to real situations.
Ans: C
6. The term “ceteris paribus” means:
A) that if event A precedes event B, A has caused B.
B) that economics deals with facts, not values.
C) other things equal.
D) prosperity inevitably follows recession.
Ans: C
7. Macroeconomics can best be described as the:
A) analysis of how a consumer tries to spend income.
B) study of the large aggregates of the economy or the economy as a whole.
C) analysis of how firms attempt to maximize their profits.
D) study of how supply and demand determine prices in individual markets.
Ans: B
8. Microeconomics is concerned with:
A) the aggregate or total levels of income, employment, and output.
B) a detailed examination of specific economic units which comprise the economic system.
C) the concealing of detailed information about specific segments of the economy.
D) the establishing of an overall view of the operation of the economic system.
Ans: B
9. A normative statement is one which:
A) is based on the law of averages.
B) pertains only to microeconomics.
C) pertains only to macroeconomics.
D) is based upon value judgments.
Ans: D
10. A positive statement is one which is:
A) derived by induction.
B) derived by deduction.
C) subjective and is based on a value judgment.
D) objective and is based on facts.
Ans: D