Question 1

Suppose that out of the two cities that send football teams to the Super Bowl, the city with the lowest unemployment rate wins 70 percent of the time. What does this imply?

Accepted Answer

A)  A positive correlation between Super Bowl wins and low unemployment rates
B)  Evidence that richer cities always have better football teams
C)  The condition of ceteris paribus present in the winning cities
D)  A negative correlation between Super Bowl wins and low unemployment ratesE) A) and D)
F) B) and C)

Question 2

The additional cost associated with producing or consuming the next unit of a good or service is known as the:

Accepted Answer

A)  variable cost.
B)  marginal cost.
C)  utility cost.
D)  sunk cost.E) B) and D)
F) None of the above

Question 3

A car dealership advertises free satellite radio for one year with the purchase of a new car. This is an example of:

Accepted Answer

A)  bait and switch.
B)  marginal sales.
C)  an incentive.
D)  voluntary exchange.E) None of the above
F) C) and D)

Question 4

Which of the following is a basic tenant of the economic concept of scarcity?

Accepted Answer

A)  Developing countries will always have a battle to fight hunger.
B)  Resources are often wasted, which results in shortages.
C)  Income must be redistributed through taxation in order to address income disparity.
D)  Limited resources require economies to make choices among production alternatives.E) A) and B)
F) A) and C)

Question 5

A ______ statement is most likely to include the word "should".

Accepted Answer

A)  positive
B)  normative
C)  factual
D)  marginalE) A) and C)
F) A) and B)

Question 6

Suppose Hassan wants to rent a house near the lake over a holiday weekend, but the only house available is out of his price range. This is an example of:

Accepted Answer

A)  a resource constraint.
B)  rising marginal benefits.
C)  changing incentives.
D)  sunk costs.E) A) and B)
F) B) and C)

Question 7

People frequently confuse facts with judgments that are based on beliefs. This means that people have trouble making the distinction between:

Accepted Answer

A)  political statements and non-political statements.
B)  rational statements and irrational statements.
C)  macroeconomic theories and microeconomic theories.
D)  positive statements and normative statements.E) B) and D)
F) C) and D)

Question 8

In the past, there was a strong correlation between ice cream consumption and polio diagnoses in children. However, this was shown not to be a causal relationship by:

Accepted Answer

A)  identifying a common underlying omitted variable.
B)  demonstrating reverse causality.
C)  correcting errors in data reporting.
D)  eliminating coincidences.E) C) and D)
F) A) and B)

Question 9

A local street festival that previously sold bracelets in exchange for unlimited alcohol consumption is now concerned about overconsumption. If the festival providers decide to instead sell tickets for each drink, will overall alcohol consumption at the next festival decrease?

Accepted Answer

A)  No, because the marginal cost per additional drink will decrease for consumers.
B)  No, because the marginal cost per additional drink will increase for consumers.
C)  Yes, because the marginal cost per additional drink will increase for consumers.
D)  Yes, because the marginal benefit per additional drink will increase for consumers.E) None of the above
F) A) and C)

Question 10

When we believe the best result will come from the decision we have made, we are being:

Accepted Answer

A)  gullible.
B)  short-sighted.
C)  rational.
D)  considerate.E) B) and C)
F) All of the above

Question 11

Which of the following is an example of a normative statement?

Accepted Answer

A)  The average price of a Whopper Jr. is $2.19.
B)  The United States ought to adopt a flat rate personal income tax.
C)  Unemployment in the United States is too high.
D)  Average growth in real GDP per year was 1.84 percent between 2000 and 2010.E) A) and D)
F) C) and D)

Question 12

Suppose that a policy maker knows there are currently 1,000 cars purchased each year in the city. In order to build a new park next year, which will cost $500,000, the policy maker decides to impose a tax of $500 on each car purchased. Which of the following scenarios is most likely to occur?

Accepted Answer

A)  The $500 tax will disincentivize car purchases, and fewer than $500,000 will be raised.
B)  The $500 tax will have no effect on car purchases, and the $500,000 will be raised.
C)  Knowing the purpose of the $500 tax, more people will be incentivized to make car purchases, and the park will be funded.
D)  The $500 tax is a sunk cost and thus will be ignored by people making car purchases.E) None of the above
F) B) and C)

Question 13

When speed boat sales rise, the city of Las Vegas takes in more revenue. The omitted common variable between these outcomes is likely to be:

Accepted Answer

A)  life jacket sales.
B)  prices of Las Vegas flights.
C)  childhood obesity.
D)  increased disposable income.E) C) and D)
F) B) and D)

Question 14

As corn prices rise, salsa sales tend to fall. This is an example of:

Accepted Answer

A)  a positive correlation.
B)  inferior goods.
C)  two uncorrelated events.
D)  a negative correlation.E) B) and C)
F) A) and D)

Question 15

The extra benefit associated with producing or consuming the next unit of a good or service is known as the:

Accepted Answer

A)  revenue product.
B)  spillover.
C)  marginal benefit.
D)  economic benefit.E) All of the above
F) B) and D)

Question 16

Individuals, firms, and societies are limited in the amount of goods and services that they can produce. This is a direct result of:

Accepted Answer

A)  unemployment.
B)  waste.
C)  irrational behavior.
D)  scarcity.E) C) and D)
F) None of the above

Question 17

The two flows, or things being exchanged, in the circular flow model are:

Accepted Answer

A)  inputs and outputs.
B)  imports and exports.
C)  inputs/outputs and money.
D)  land and labor.E) A) and D)
F) C) and D)

Question 18

Suppose a university offers college seniors one "free" course. Is this course also free to society?

Accepted Answer

A)  Yes, because the seniors live in society.
B)  Yes, because the school has satisfied the assumption of making a rational choice.
C)  No, because if a college senior takes the last seat in the class, then a paying student will not have the opportunity to take it.
D)  No, because some students will not take a free class seriously and will ultimately become less productive workers.E) C) and D)
F) B) and D)

Question 19

The Widgetville County Wolfpack has won 90 percent of their last 20 games played under a full moon. What does this imply?

Accepted Answer

A)  The weather affects how they play.
B)  There is a positive correlation between their play and the occurrence of a full moon.
C)  Full moons cause the team to play better.
D)  Causation can be found between their play and a full moonE) None of the above
F) All of the above

Question 20

The Bureau of Economic Analysis releases last quarter's growth rate in real GDP. This release would most likely have been written by a:

Accepted Answer

A)  monetary economist.
B)  macroeconomist.
C)  microeconomist.
D)  labor economist.E) B) and C)
F) A) and C)

Exam 1: Economics and Life

Which of the following is an example of a normative statement?

Correct AnswerverifiedShow Answer

Suppose Hassan wants to rent a house near the lake over a holiday weekend, but the only house available is out of his price range. This is an example of:

Correct AnswerverifiedShow Answer

The two flows, or things being exchanged, in the circular flow model are:

Correct AnswerverifiedShow Answer

Which of the following is a basic tenant of the economic concept of scarcity?

Correct AnswerverifiedShow Answer

In the past, there was a strong correlation between ice cream consumption and polio diagnoses in children. However, this was shown not to be a causal relationship by:

Correct AnswerverifiedShow Answer

When we believe the best result will come from the decision we have made, we are being:

Correct AnswerverifiedShow Answer

As corn prices rise, salsa sales tend to fall. This is an example of:

Correct AnswerverifiedShow Answer

Suppose that a policy maker knows there are currently 1,000 cars purchased each year in the city. In order to build a new park next year, which will cost $500,000, the policy maker decides to impose a tax of $500 on each car purchased. Which of the following scenarios is most likely to occur?

Correct AnswerverifiedShow Answer

Suppose a university offers college seniors one "free" course. Is this course also free to society?

Correct AnswerverifiedShow Answer

The Widgetville County Wolfpack has won 90 percent of their last 20 games played under a full moon. What does this imply?

Correct AnswerverifiedShow Answer

People frequently confuse facts with judgments that are based on beliefs. This means that people have trouble making the distinction between:

Correct AnswerverifiedShow Answer

Suppose that out of the two cities that send football teams to the Super Bowl, the city with the lowest unemployment rate wins 70 percent of the time. What does this imply?

Correct AnswerverifiedShow Answer

A car dealership advertises free satellite radio for one year with the purchase of a new car. This is an example of:

Correct AnswerverifiedShow Answer

The Bureau of Economic Analysis releases last quarter's growth rate in real GDP. This release would most likely have been written by a:

Correct AnswerverifiedShow Answer

A ______ statement is most likely to include the word "should".

Correct AnswerverifiedShow Answer

Individuals, firms, and societies are limited in the amount of goods and services that they can produce. This is a direct result of:

Correct AnswerverifiedShow Answer

When speed boat sales rise, the city of Las Vegas takes in more revenue. The omitted common variable between these outcomes is likely to be:

Correct AnswerverifiedShow Answer

The extra benefit associated with producing or consuming the next unit of a good or service is known as the:

Correct AnswerverifiedShow Answer

A local street festival that previously sold bracelets in exchange for unlimited alcohol consumption is now concerned about overconsumption. If the festival providers decide to instead sell tickets for each drink, will overall alcohol consumption at the next festival decrease?

Correct AnswerverifiedShow Answer

The additional cost associated with producing or consuming the next unit of a good or service is known as the:

Correct AnswerverifiedShow Answer

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