Transcript Nature of Economics Review

Microeconomics AP
CH 1 Review Game
The Nature of Economics
Macroeconomics is concerned with
A)
B)
C)
D)
changes in unemployment.
changes in the price of gasoline.
the effects of a tax on beer.
the effects of price controls on steel.
Economics is a social science and seeks to explain
A)
B)
C)
D)
why people are greedy.
how goods and services satisfy human wants.
real events.
the stock market.
Another word for “aggregate: is
A)
B)
C)
D)
complete.
partial.
public.
total.
The purpose of economics is to understand
A)
C)
money.
choices.
B) unemployment.
D) all human activity.
Wants are
A) another term for needs.
B) the things people would consume if they had
unlimited income.
C) the thinks people would consume after their
needs have been met.
D) all the things people would like to consume but
can’t afford.
Microeconomics is concerned with the study of
A)
B)
C)
D)
the causes of unemployment.
the effects of government spending.
the behavior of economy as a whole.
the behavior of individual decision-makers.
Microeconomics is concerned with the study of
A)
B)
C)
D)
the effects of inflation.
the effects of government spending.
the effects of an increase in the price of coal.
aggregate demand.
Macroeconomics is concerned with
A)
B)
C)
D)
individual business firms.
industries.
consumers.
aggregates.
Economists assume people are motivated by
A)
B)
C)
D)
selfishness.
pride.
self—interest.
social justice.
Economists assume people behave
A)instinctively.
B)rationally.
C)reasonably.
D)greedily.
The distinction between microeconomics and
macroeconomics is
A) clearly drawn, and there is no overlap between
them.
B) determined by whether aggregates or totals are
studied.
C) narrowly drawn, and microeconomic analysis
often relies on macroeconomic tools.
D) often blurred because aggregates are made up
of individuals and firms.
Economics is the study of
A) how to get rich.
B) how people allocate their resources to satisfy
their wants.
C) how people allocate their income to meet their
needs.
D) why people want certain goods and services
rather than other goods and services.
People behave rationally when they
A) follow the advice of economists.
B) never have regrets about their decisions.
C) make decisions they think will make themselves
better off.
D) make decisions based on scientifically—proved
criteria.
Modern economists are increasingly using
microeconomic analysis in macroeconomics because
A) microeconomic theory is more scientific.
B) all decisions are made by individuals.
C) macroeconomic subjects such as inflation affect
all individuals.
D) macroeconomics is older and more outdated.
Older people, on average, show less interest in
learning how to use new technologies because
A) older people aren’t as smart as young people
today.
B) they are acting irrationally.
C) they have fewer years to gain a return from their
investment.
D) the cost to older people is greater than the cost
to younger people.
Economics is a social science that involves the study
of how individuals
A) develop their tastes and preferences.
B) maximize their wealth.
C) define happiness.
D) choose among alternatives to satisfy their
unlimited wants.
Incentives are
A) potential rewards available if a particular activity
is undertaken.
B) ineffective as a device to get people to behave in
a certain fashion.
C) inappropriate ways to obtain a certain kind of
behavior.
D) useless when people behave rationally.
Economics is concerned with choices
A) that involve the wants of individuals.
B) that involve the needs of individuals.
C) made by individuals only when they are
consuming goods or services.
D) that involve money.
Economics is a part of the
A)
C)
social sciences.
B) natural sciences.
biological sciences. D) organization sciences.
Which of the following is a true statement about the
economic assumption of rationality?
A) Individuals try to act rationally at all times.
B) Individuals act as though they are rational.
C) Individual behavior may be irrational but group
behavior is always rational.
D) People make decisions as if they are omniscient.
The threat of a large fine for failure to pay income
taxes is an example of
A) the excessive power of the Internal Revenue
Service.
B) the ineffectiveness of incentives to get people to
pay their taxes.
C) a negative incentive to reduce tax—cheating.
D) people failing to consider all the benefits the
government provides them.
A decision made by a rational person
A) never would make the person worse off.
B) would always make the person wealthier.
C) is identical to a decision that would be made by
any other rational person facing the same choices.
D) is intended to make the person better off.
If people make choices rationally, then
A) their behavior is predictable.
B) they will never have regrets over the decision
they made.
C) everyone facing the same alternatives will make
the same choice.
D) they do not behave in a self—interested
manner.
As life spans in a country increase, we would expect
(on average)
A)
B)
C)
D)
people to have more children.
people to invest more in education.
the retirement age to decrease.
that new technologies would be resisted more.
Positive or Normative?
“A rise in consumer incomes will
lead to a rise in the demand for
new cars”
Positive or Normative?
“A rise in consumer incomes will
lead to a rise in the demand for
new cars”
POSITIVE
Which of the following would not provide an
incentive to reduce the amount of beef consumed?
A)
B)
C)
D)
An increase in the price of beef
A tax on ranchers
An increase in the price of chicken
A ban on beef sales by the
People respond to incentives
A)
B)
C)
D)
with anger.
only when they are irrational.
by calculating costs and benefits to themselves.
when they are not motivated by self interest.
A politician says that the government should tax
behavior they want less of and subsidize behavior
they want more of. This is an example of
A) cynical behavior in modern democracies.
B) failing to consider the incentives available to the
government.
C) a concern that people are not rational when
they make decisions.
D) using incentives to alter behavior.
Positive or Nortmative?
“ The level of tax on gas is
too unfair and unfairly
penalizes motorists”
Positive or Nortmative?
“ The level of tax on gas is
too unfair and unfairly
penalizes motorists”
NORMATIVE
Self—interest
A) implies that a person tries to increase one’s
wealth at all times.
B) implies that people will not give to charities
unless there is a tax break to do so.
C) is consistent with many goals that people strive
for.
D) applies only to people in market settings.
Shelley’s grandmother gave her socks for Christmas,
but Shelley wanted a CD. This implies that
A) Shelley’s grandmother is acting out of self
interest because she knows what Shelley really needs.
B) Shelley’s grandmother is acting out of self
interest because she wanted to give Shelley
something useful.
C) it is in Shelley’s self—interest to refuse to wear
the socks.
D) Shelley should exchange the socks for a CD.
An economic theory is also known as an economic
A)
B)
C)
D)
model.
design.
miracle.
assumption.
A simplified representation of the real world that is
used to explain economic phenomena is a(n)
A)
B)
C)
D)
paradox.
assumption.
inference.
model.
Economic models are not used to
A) explain economic phenomena.
B) predict economic phenomena.
C) understand economic phenomena.
D) minutely describe economic
phenomena.
To test their theories, economists usually have to
A) set up careful laboratory experiments.
B) examine what has already happened in the real
world.
C) use models.
D) predict future economic events.
In an economic model, assumptions
A) must be realistic if the model is to be applicable
to many real—world situations.
B) must be tested before using to make sure the
model is realistic.
C) determine the usefulness of the model.
D) define the set of circumstances in which the
model is most likely to be applicable.
Which of the following ways to obtain soldiers utilizes
incentives?
A)
B)
C)
D)
A draft
Universal service
Higher salaries
Longer lengths of service
Suppose the government wants investment spending
to increase. One way to do this would be
A) to increase taxes on saving.
B) to raise social security benefits.
C) to reduce the sales tax.
D) to reduce taxes on interest and dividend
income.
Positive or Normative?
“ The government is right to
introduce a ban on smoking
in public places”
Positive or Normative?
“ The government is right to
introduce a ban on smoking
in public places”
POSITIVE
“Ceteris paribus” means
A)“invisible hand.”
B)“other things constant.”
C)“making all the necessary changes.”
D)“economic man.”