Topic Questions and Multiple choice questions

Economics and its methodology

1.

Should an economic model describe reality exactly?

2. What is the difference between a positive and a normative statement? Give an example of each.
3.

4.

Classify the following topics as relating to microeconomics or marcoeconomics:

a) a familys decision about how much income to save;
b) the effect of government regulations on auto emissions;
c) the impact of higher national saving on economic growth;
d) a firms decision about how many workers to hire;
e) the relationship between the inflation rate and changes in the quantity of money.
Classify each of the following statements as positive or normative. Explain:
a) society focus a short-run tradeoff between inflation and unemployment;
b) a reduction in the rate of growth of money will reduce the rate of inflation;
c) society ought to require welfare recipients to look for jobs;
d) lower tax rates encourage more work and more saving.
Practice tests:

1.

Scarcity necessitates:
a) efficiency;
b) inefficiency;
c) choice;
d) utility;
e) disutility.

2.

All of the following except one are microeconomic statements. Which is the exception?
a) the price of wheat declined by 5% in Canada last year;
b) GDP increased by 2,8% in Canada last year;
c) the cost of production in the mining industry has recently declined;
d) the profits of The Canadian Corporation last year was $25 million;
e) the demand for Turbinado sugar is increasing.

3.

Which of the following is a microeconomic topic?

a) inflation rates;
b) unemployment;
c) interest rate determination;
d) tax policies;
e) supply and demand analysis of a factor market.

4.

All of the following except one are factors of production. Which is the exception?
a) land;
b) labour;
c) capital;
d) money.

5.

Which of the following terms describes the next best alternative that must be sacrificed as a result of making a
particular choice?
a) microeconomics;
b) macroeconomics;
c) scarcity;
d) opportunity costs.

6.

Assuming the alternative is summer employment, the opportunity cost of taking a course during the summer
session at FSU is:
a) foregone earning only;
b) only the expense of taking course (including the tuition and books);
c) the difference between foregone earning and earnings and course-related expenses;
d) course related expenses minus foregone earnings plus expenditures on entertainment;
e) the total of foregone earnings and course-related expenses.

7.

What is the opportunity cost of buying a new car?

a) the value of other goods and services you could have purchased with the money you spent on the car;
b) the price you paid for the car;
c) the cost of operating and maintaining the car;
d) the difference between the price of the car and the price of a used car;
e) the difference between what the car costs now and what a similar car like it will cost a year from now.

8.

When you estimated the costs of attending the Colorado School of Mines, you demonstrated your economic
knowledge by correctly including all the opportunity costs for your education. The items on her list include all
but one of the following. Which one is NOT included?
a) meals;
b) tuitions;
c) reduced leisure time as a student;
d) income for a job she quit to attend school.

9.

An economys production possibilities curve would shift outward as a result of:

a) an increase in the level of technology;
b) a reduction in the quantity of capital goods;
c) a decrease in the production of goods;
d) a change in the type of economic system;
e) a change in the political system.

10. Unemployment and/or an inefficient allocation of resources:

a) cause the production possibilities curve to shift outward;
b) can exist at any point on a production possibilities curve;
c) can both be illustrated by a point outside the production possibilities curve;
d) can both be illustrated by a point inside the production possibilities curve.
11. Which of the following is true of the concept of increasing opportunity cost?
a) it is unimportant in command economies because of central planning;
b) it suggests that the use of resources to produce a set of goods and services means that as more of one is
produced, some of other must be sacrificed;
c) it is irrelevant if the Production Possibilities Curve is convex to the origin;
d) it suggests that unlimited wants can be fulfilled;
e) it means that resources are plentiful and opportunities to produce greater amounts of goods and
services are unlimited.
12. What is true about an economic model?
a) it is built on a series of assumptions;
b) it establishes cause and effect between variables;
c) it can make predictions that can be tested with empirical data;
d) it could also be called an economic theory;
e) all of the above.
13. All of the following except one are positive statements. Which is the exception?
a) the government needs to reduce its budget deficit;
b) a decrease in price will lead to a larger quantity bought;
c) production is subject to the law of increasing costs;
d) the degree of competition in our economy has been increasing in the last ten years.
14. What is the distinction between a positive and a normative statement?
a) positive statements are assertions that can be tested with data, while normative statements are based on
a value system of beliefs;
b) normative statements are assemptions that can be tested with data, while positive statements are based
on a value system of beliefs;
c) the distinctions depends on the context in which each statement is used;
d) none of the above.
15. All of the following statements, except one, are positive statements. Which is the exception?
a) economics is a social science;
b) economics is sometimes referred as the science of choice;
c) a majority of economists argue that economics is a very relevant discipline;

d) economics should be a mandatory course in all Moldova colleges and universities;

e) economics is a good undergraduate major to choose if one wants to go to law school.