Chapter 1: The Nature of Economics

1. Chapter 1: The Nature of Economics

2. Economic analysis is • a tool that can aid all decision making. • a tool that can be used in only macroeconomics. • a tool that can be used in only microeconomics. • an unnecessary complication to decision making.

3. Which statement most accurately defines economics? • Economics is the study of how people make money. • Economics is the study of how people make choices to satisfy their wants. • Economics is the study of values a society should choose. • Economics is the study of how to eliminate scarcity.

4. Economics is the study of • how to get rich. • how people allocate their limited resources to satisfy their unlimited wants. • how people spend their income. • why people want certain goods and services rather than other goods and services.

5. Economics is a part of the • social sciences. • natural sciences. • biological sciences. • organizational sciences.

6. The issues that an economic system attempts to solve include • what to produce. • how to produce items. • for whom items are produced. • all of the above.

7. Central planning is a key characteristic of which economic system? • free market • price system • command and control • mixed economic system

8. When the text refers to rational self-interest, it means • your looking out for what is best for you as an individual. • your focus on your own contributions to society. • behavior that makes society better off. • behavior that helps your employer earn higher profits.

9. Do economists analyze people's thought processes or do they look at what people actually do? • Economists focus only on people's thought processes. • Economists focus on what people do, not their thought processes. • An economist's focus is about half-and-half between actions and thought processes. • Macroeconomists focus on thought processes while microeconomists focus on actions.

10. One reason why economists often use models in their analysis is that • a model helps us to understand, explain, and predict economic phenomena in the real world. • a model accurately pictures every detail of the real world economy. • a model relates to individual thought processes rather than behavior. • it is relatively easy to perfectly specify a model.

11. Economics is called an empirical science because • economists study real-world evidence to test their models. • economists use assumptions in their models. • economic models have no predictive power. • economic analysis is only useful in a capitalistic society.

12. Normative economics • is never studied at the undergraduate level. • involves value judgments. • is always objective. • cannot be applied to all economic problems.

13. Economics seeks to use only positive analysis to • provide a value-free analysis. • seek the best answer. • predict how people should act. • provide normative values.

14. In the above graphs, an inverse relationship is shown by • Graph A. • Graph B. • Graph C. • Graph D.

15. In an inverse relationship, • one variable rises while the other falls. • both variables rise together. • both variables fall together. • the two variables have nothing to do with each other.

16. The "paired observation" of (14, 6) means • x = 14, y = 6. • x = 6, y = 14. • x = any multiple of 14, y = any multiple of 6. • the origin is at 14 and 6.

17. The intersection of the x-axis and the y-axis is called the • "meeting point." • origin. • "zero" point. • corresponding point.

18. Suppose that on average there are five more car accidents for every extra inch of snowfall in a certain region. If snowfall is graphed on the y-axis and car accidents on the x-axis, then if we graph this relationship, the slope of the line will be • 25. • 5. • 1/5. • 1.

19. If the slope of a curve is 1/5, we know that • the relationship is linear, and the line moves from lower left to upper right. • the relationship is non-linear, and the line moves from lower left to upper right. • the relationship is linear, and the line moves from upper left to lower right. • the relationship is non-linear, and the line moves from upper left to lower right.

20. The slope of a straight line • is the same at all points along that line. • cannot be defined. • changes from one point to the next on that line. • is always equal to zero.

21. If a straight line crosses the y-axis at 5 and crosses the x-axis at 10, we can conclude that the slope of the line is • positive. • negative. • zero. • infinity.