Question 1

The fallacy of composition is the error of believing that a cause and effect relationship exists between two events that are associated in time.

Accepted Answer

A) True 
 B)False

Question 2

The association is causation fallacy is the error of assuming that what is true for one member of a group must be true for the group.

Accepted Answer

A) True 
 B)False

Question 3

The behavior of the entertainment industry in a city is a microeconomics topic.

Accepted Answer

A) True 
 B)False

Question 4

Behavioral assumptions:

Accepted Answer

A)   make economic models more complex than if these assumptions were removed.
B)   pertain only to consumers.
C)   hold all other things constant.
D)   are ways to test a hypothesis.
E)   describe how individuals are expected to behave.F) C) and D)
G) A) and E)

Question 5

The other-things-constant assumption:

Accepted Answer

A)   allows the economist to make useful predictions.
B)   is a prediction.
C)   applies only to consumers' decisions and not to those of firms.
D)   forces the economist to ignore reality, where things are constantly changing.
E)   implies rational self-interest on the part of all economic actors.F) A) and C)
G) All of the above

Question 6

Rational self-interest is equivalent to pure selfishness.

Accepted Answer

A) True 
 B)False

Question 7

Economic theory allows economists to predict the behavior of a specific person or firm.

Accepted Answer

A) True 
 B)False

Question 8

Patrick decided to go to class today instead of going to the movies. He made this decision because:

Accepted Answer

A)   Patrick's additional benefit of going to class exceeds the additional cost of going to class.
B)   Patrick's additional benefit of going to the movies exceeds the additional cost of going to class.
C)   Patrick's additional benefit of going to class exceeds the additional cost of going to the movies.
D)   Patrick's additional benefit of going to the movies exceeds the additional cost of going to the movies.
E)   Patrick's additional benefit of going to class equals the additional cost of going to the movies.F) B) and E)
G) A) and C)

Question 9

Microeconomics is the study of:

Accepted Answer

A)   marginal or inferior products.
B)   how to use the fewest natural resources to produce goods and services.
C)   the behavior of the economy as a whole.
D)   the economic behavior of individual decision makers.
E)   the government's role as a producer in the economy.F) B) and E)
G) A) and C)

Question 10

Michigan has an abundant supply of fresh water. However, an economist would consider it a scarce resource because:

Accepted Answer

A)   water is necessary for human survival.
B)   pollution will eventually destroy all life in the Great Lakes.
C)   water is limited relative to people's unlimited wants.
D)   water commands a very high price.
E)   nature can destroy water as well as create it.F) B) and C)
G) A) and E)

Question 11

In economics, money is an example of capital.

Accepted Answer

A) True 
 B)False

Question 12

The ceteris paribus assumption is a behavioral assumption.

Accepted Answer

A) True 
 B)False

Question 13

Secondary effects are consequences of economic actions that develop slowly over time as people react to events.

Accepted Answer

A) True 
 B)False

Question 14

A rational decision maker will take only those actions for which the expected marginal benefit:

Accepted Answer

A)   is positive.
B)   is at its maximum level.
C)   is greater than or equal to the expected marginal cost.
D)   is less than the expected marginal cost.
E)   exactly equals the expected marginal cost.F) A) and B)
G) A) and C)

Question 15

As a scientist, an economist's main professional objective is to:

Accepted Answer

A)   become wealthy.
B)   control the government's decision-making processes.
C)   understand how the economy works.
D)   discover which stock prices will decrease.
E)   understand the psychology of participants in markets.F) D) and E)
G) B) and D)

Question 16

Elijah, a basketball fan, reasons that because his favorite team has three superstars on it, the team must be a great team and will win the championship. Elijah is committing the:

Accepted Answer

A)   fallacy of composition.
B)   fallacy that association is causation.
C)   fallacy of segmentation.
D)   mistake of ignoring the secondary effects.
E)   mistake of ignoring the obvious.F) C) and E)
G) B) and D)

Question 17

One of the difficulties with an economic policy such as rent control is that:

Accepted Answer

A)   policy makers do not consider its secondary effects.
B)   economists disagree about the impacts of the policy.
C)   it is difficult to enforce antidiscrimination laws in the rental market.
D)   it makes landlords wealthy at the expense of renters.
E)   the pressure from landlords has resulted in its repeal in many cities.F) A) and D)
G) A) and C)

Question 18

You want to sell your old iPad that you no longer use, and your cousin wants to give you $300 for it. If you decide to sell your iPad to your cousin, you'll have to pay $40 for shipping the iPad to your cousin. As a rational decision maker, you should:

Accepted Answer

A)   sell it because the marginal benefit is smaller than the marginal cost.
B)   not sell it because the marginal benefit is smaller than the marginal cost.
C)   sell it because the marginal benefit is greater than the marginal cost.
D)   not sell it because the marginal benefit is greater than the marginal cost.
E)   sell it because the marginal benefit is equal to the marginal cost.F) C) and D)
G) A) and D)

Question 19

The economic behavior of individual decision makers and the determination of price and output in specific markets are both studied in:

Accepted Answer

A)   disequilibrium economics.
B)   normative economics.
C)   positive economics.
D)   microeconomics.
E)   macroeconomics.F) All of the above
G) B) and D)

Question 20

Economics is best defined as the study of how individuals decide to use limited resources in an attempt to satisfy unlimited wants.

Accepted Answer

A) True 
 B)False

Exam 1: The Art and Science of Economic Analysis

Economics is best defined as the study of how individuals decide to use limited resources in an attempt to satisfy unlimited wants.

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Secondary effects are consequences of economic actions that develop slowly over time as people react to events.

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The fallacy of composition is the error of believing that a cause and effect relationship exists between two events that are associated in time.

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Rational self-interest is equivalent to pure selfishness.

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Patrick decided to go to class today instead of going to the movies. He made this decision because:

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A rational decision maker will take only those actions for which the expected marginal benefit:

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The behavior of the entertainment industry in a city is a microeconomics topic.

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Elijah, a basketball fan, reasons that because his favorite team has three superstars on it, the team must be a great team and will win the championship. Elijah is committing the:

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The ceteris paribus assumption is a behavioral assumption.

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As a scientist, an economist's main professional objective is to:

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The association is causation fallacy is the error of assuming that what is true for one member of a group must be true for the group.

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One of the difficulties with an economic policy such as rent control is that:

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Economic theory allows economists to predict the behavior of a specific person or firm.

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Microeconomics is the study of:

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In economics, money is an example of capital.

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Behavioral assumptions:

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The other-things-constant assumption:

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Michigan has an abundant supply of fresh water. However, an economist would consider it a scarce resource because:

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The economic behavior of individual decision makers and the determination of price and output in specific markets are both studied in:

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You want to sell your old iPad that you no longer use, and your cousin wants to give you $300 for it. If you decide to sell your iPad to your cousin, you'll have to pay $40 for shipping the iPad to your cousin. As a rational decision maker, you should:

Correct AnswerverifiedShow Answer

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