1.Economics is best defined as theA) 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.2.Which of the following is NOT a reason to study economics?A) to learn a way of thinkingB) to understand society and global affairsC) to learn how eliminate scarcity in your lifeD) to learn how to make better decisions3.In economics, ________ are limited but ________ are unlimited.A) wants; resourcesB) resources; wantsC) money; ideasD) ideas; money4.In his book, An Inquiry into the Nature and Causes of the Wealth of Nations, economist Adam Smith argued that individualsA) 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.5.Which of the following statements is true about scarcity?A) Only expensive goods are considered to be scarce.B) Scarcity is not a problem for the wealthy.C) Scarcity is only a problem when a country has too large a population.D) Scarcity arises when there is a wide disparity in income distribution.E) None of the above6.An economic ________ is a simplified version of some aspect of economic life used to analyze an economic issue.A) marketB) modelC) variableD) trade-off7.If people act as if they systematically pursue their own self-interest, then they will most likelyA) 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.8.Economists assume people behave rationally, which means that peopleA) 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.9.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’s decision isn’t related to 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 spend some time at 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 would have been better off if he chose to study more.10.Incentives areA) potential rewards or punishments if a particular activity is undertakenB) ineffective as a device to get people to behave in a certain fashionC) inappropriate ways to obtain a certain kind of behaviorD) useless because people behave rationally11.What would lead an economist to conclude that Theory A is superior to Theory B?A) The assumptions underlying Theory A are more realistic than are the assumptions underlying Theory B.B) Theory A predicts real-world events better than does Theory B.C) Theory A explains how people think, whereas Theory B only explains what they do.D) Theory A is based on the assumption that an individual typically cannot determine what is in his or her own best interest, whereas Theory B assumes that each person knows what is in his or her own best interest and acts accordingly.12.Why do economists test their hypotheses?A) to see whether their models predict the choices people will makeB) to see whether people are motivated by self-interestC) to influence normative government policiesD) to learn what people are thinking when they make the choices they do13.The ceteris paribus assumption meansA) people prefer fairnessB) people always make self-interested decisionsC) the needs of the many outweigh the needs of the fewD) other things are equal.14.”All Americans should have access to free health care” is an example of aA) positive statementB) microeconomic argumentC) factual statementD) normative statementE) rational statement15.Economic Way of Thinking: In class, we briefly spoke about unintended consequences, which are generally negative and unanticipated results that occur as the result of an incentive or policy change. Suppose your wealthy uncle decides to offer you a positive incentive and tells you that he will give you $500 for each “A” you earn this semester. He is trying to incentivize studying, learning, and class attendance. However, what is a possible unintended consequence of this incentive?A) You will be more tempted to cheat to earn a high gradeB) You will enroll in easy instead of difficult coursesC) You will quit extracurricular activities and clubs in order to study moreD) All of the above16.Video Question. Watch the following video: https://www.youtube.com/watch?v=8DW9ENfRon0. What is true, according to the video?A) Many people consume gasoline, so gas prices are a Macroeconomics topic.B) Gasoline is just one good, so gas prices are a Microeconomics topic.C) If you lose your job, we can discuss how your life is affected in Macroeconomics.D) The overall unemployment rate is discussed in Microeconomics.
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