Consider the case of a teacher who tells students that those who miss more than three classes for any reason will automatically receive a lower grade.
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This is an example of a negative incentive for students to attend class.
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Which of the following is a normative economic statement?
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The government should increase spending during times of economic recession.
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According to economic theory, how do people make decisions?
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They make decisions based on their own self-interest.
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Microeconomics focuses on...
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Individual decision makers within the economy.
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Economics is the study of
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The allocation of scarce resources to satisfy unlimited wants.
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The issues that an economic system attempts to solve include:
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How to produce items, what to produce, for whom items are produced.
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Economic models are used to...
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Simplify reality to predict outcome.
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An example of a microeconomic decision is a situation in which...
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A firm evaluates how much to reduce the price of its product in an effort to influence sales and boost its profits.
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Macroeconomics is concerned with studying the...
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Behavior of the economy as a whole.
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The difference between positive statements and normative statements is that
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a positive statement is a statement of fact and a normative statement involves value judgments.
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Which of the following is a positive economic statement?
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The rate of unemployment of young African-Americans exceeds that of white Americans
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Underlying economic theory is the idea that
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choices are affected by both positive and negative incentives.
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Self interest
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is consistent with many goals that people pursue, including betterment of others
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An economic theory is also known as an economic...
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model
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A common approach that economists use to understand, explain and predict economic phenomena is to
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form a theory or model
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Which of the following is a microeconomic topic?
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The advertising strategy of a particular company
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The primary objective of economics is
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to study how people make choices with limited resources
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Which of the expressions below best describes the aim of economic theory?
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to predict the choices people make.
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Sara looks into her closet and discovers a pair of like-new shoes she no longer wears because they give her blisters. From the economist's perspective, was Sara behaving rationally when she bought those shoes?
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Yes, as long as Sara didn't intentionally purchase blister-causing shoes.
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According to the bounded rationality hypothesis, an individual confronting a large number of complicated choices is most likely to respond by
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using a simple rule of thumb to choose among a subset of easiest-to-evaluate options
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Which of the following would NOT provide an incentive to reduce the amount of beef consumed?
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An increase in the price of beef
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The rationality assumption states that
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people do not intentionally make decisions that would leave them worse off.
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All of the following are examples of macroeconomic problems EXCEPT...
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consumers deciding to buy more fish and less beef because of concerns about a healthier diet.
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A relationship between two variables in which one variable increases at the same time as the other decreases is called
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inverse
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A macroeconomist would study
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the economy's unemployment level
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The assumption that people do not intentionally make decisions that would leave them worse off is known as
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the rationality assumption
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Based on your understanding of your roommate's preferences, you predict that he will select spaghetti for his lunch at the cafeteria, but instead he chooses the gyros. How do you describe this event in terms of economic theory?
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You constructed a model that made a prediction, and the prediction was refuted.
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Macroeconomics might study which of the following
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the causes of domestic unemployment
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Normative economics
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involves value judgments
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"All Americans should have access to health care" is an example of
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a normative statement
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Economic resources are
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items of value that are used to make other things that satisfy people's wants
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In a market system, the what, how and for whom questions in economics are determined by
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buyers and sellers together
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Which of the following statements concerning economic models is FALSE?
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Economic models are based on pure fact and no assumptions
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"No individual should have less than $20,000 income in the United States in2010" is an example of
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a normative statement
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The slope of a straight line
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is the same at all points along that line
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The macroeconomists would most likely study
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the effects of a lower income tax on the nation's total production of goods and services.
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It is assumed in economics that people make decisions based on
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rational self interest
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Which of the following is a statement with positive economic analysis?
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Lower wages increase employment and reduce the unemployment rate, a reduction in the size of the budget deficit will reduce interest rates, and slower money growth reduces inflation.
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Economic models are
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a simplified representation of the real world
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Which of the following is a normative economic statement?
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Men and women should earn the same salary if they perform the same job.
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The usefulness of a model is determined by
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whether it helps to explain or predict real world phenomena
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A relationship between two variables in which one variable increases at the same time that the other increases is called
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direct
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Which of the following is a normative economic statement
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teenage unemployment is too high
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Economists assume people behave
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rationally
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Economists assume people are motivated by
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self interest
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Which of the following statements is a positive economic statement?
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One in every five children in the United States is living in poverty
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The study of an individuals choice about what type of computer to buy is a subject of
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microeconomists
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Which of the following would likely be studied in a macroeconomics course
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the inflation rate, total output for an economy, and the unemployment rate.
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Normative economic statements
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contain value judgments
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