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c. attending a ball game

d. either attending a ball game or studying economics
6. Economists like to use graphs and equations primarily because

a. these tools efficiently express economic concepts.
b. economics should be difficult.
c. mathematical aptitude is necessary to understand economics.
d. the use of mathematics reduces rigor.
7. The opportunity cost of undertaking an activity is defined as the _____ activity.

a. cost forgone by not undertaking another
b. monetary cost of undertaking that
c. benefit forgone by not undertaking the next best
d. monetary benefit of undertaking that
Copyright Macmillan Learning. Powered by Cognero. Page 2

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8. (Figure: Graph Examples) Which graph is an example of a bar chart?
a. graph A
b. graph B
c. graph C
d. graph D
9. Microeconomics is concerned with issues such as

a. inflation.
b. unemployment.
c. which job to take.
d. interest rates.
10. Economic problems are analyzed using stylized models that are
a. as detailed as possible.

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b. based on recent case studies.

c. very complex and mathematical.
d. simplified by using assumptions.
11. Opportunity cost involves nonmonetary costs rather than monetary costs.
a. True
b. False
12. Which statement about economic models is FALSE?

a. In practice, it is easy for an economist to isolate economic variables.
b. Economists hold all other variables constant in order to see the impact of one particular variable.
c. Economic models lead to economic theories that must be tested.
d. Economic models are built using assumptions.
13. Production efficiency occurs when goods are

a. produced with the lowest possible resource cost.
b. allocated equally to those who paid the most for them.
c. delivered to those who have the greatest willingness and ability to acquire them.
d. allocated to those with the greatest need.
14. A society that is able to produce goods and services at the lowest possible cost is experiencing
a. allocative efficiency.
b. production efficiency.
c. opportunity costs.
d. scarcity.
15. Which statement is NOT considered a key principle of economics?

a. Scarcity exists for everyone.
b. People face economic incentives on a regular basis.
c. Irrational behavior requires thinking at the margin.
d. Information is important to producers and consumers.
16. Setting government policy to achieve economic goals is challenging because policies that tend to reduce
unemployment are likely to
a. reduce economic growth.
b. cause upward pressure on inflation.
c. be completely ineffective in the short run.
d. reduce inflation to nearly zero.
17. The highest valued alternative that is forgone when you choose an action is called its
a. opportunity cost.
b. utility.
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c. scarcity.
d. benefit.
18. Which concept would be addressed by microeconomics?

a. the national unemployment rate
b. the reasons for a decline in a country's total output
c. the price of college tuition that an individual student pays
d. the inflation rate in Brazil
19. Economists believe that

a. making information available to market participants improves market function.
b. information should be sold to the highest bidder.
c. the flow of information has minimal impact on market efficiency.
d. data is more important to traders than information.
20. When two variables appear to be related according to a scatter plot, one must be causing the other to occur.
a. True
b. False
21. Scarcity occurs when an individual's resources exceed his wants.

a. True
b. False
22. Heather has one employee in her sweater shop who can sew 6 sweaters a day. When she hires a second
person, the two employees can make 10 sweaters together. Thinking at the margin, the extra benefit received
from hiring a second worker is _____ sweaters.
a. 4
b. 6
c. 10
d. 16
23. Supply and demand analysis is used

a. only in microeconomics.
b. only in macroeconomics.
c. in both microeconomics and macroeconomics.
d. in neither microeconomics nor macroeconomics.
24. Normative questions involve societal beliefs on what should or should not be done.
a. True
b. False
25. Macroeconomics deals with aggregate variables, and microeconomics deals with individual issues.
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a. True
b. False
26. Which topic is a macroeconomic topic?

a. the study of the business cycle
b. price of a pair of Nike shoes
c. total sales for General Electric in 2009
d. labor market for computer analysts
27. Which paired variables might indicate a correlation but NOT causation?
a. advertising expenditures and sales
b. snowfall amounts and stock market performance
c. age and health care expenditures
d. grade point average and future income
28. Which statement is NOT true?

a. There are often tradeoffs between efficiency and equity.
b. Both efficiency and equity are subjective concepts.
c. There are often disagreements over what is an equitable distribution of income.
d. Another term for "equity" is "fairness."
29. When specialization is used

a. society is more productive, while individuals are less productive.
b. there are greater gains in overall well-being.
c. there is more emphasis on self-reliance.
d. opportunity costs tend to be constant.
30. Which statement is NOT a key principle of economics?

a. People follow incentives.
b. Productivity determines the standard of living.
c. Rational thinking requires perfect information.
d. Government can sometimes correct market failure.
31. The government can always successfully intervene in the case of market failure.
a. True
b. False
32. The idea that wants are virtually unlimited but the resources to meet those wants are limited is called
a. the want–resource paradox.
b. the economic gap.
c. the dismal conclusion.

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d. scarcity.
33. John, a farmer, thinks he will make a profit next year if the weather stays the same, if the price of his crop
doesn't change, and if the price of fertilizer and seed does not change. An economist would say that this farmer
thinking he will make a profit the following year is an example of
a. laissez-faire.
b. ceteris paribus.
c. post hoc ergo propter hoc.
d. e pluribus unum.
34. Economists look for rational responses to incentives.

a. True
b. False
35. For a nation, _____ productivity growth leads to _____ standards of living.
a. high; low
b. low; high
c. high; unchanging
d. high; high
36. In the equation S = 130 – 2T, where S is hot chocolate sales and T is temperature, the slope is
a. –65.
b. –2.
c. 2.
d. 130.
37. The opportunity costs of attending college do NOT include

a. food expenditures.
b. the costs of textbooks or eBooks.
c. the forgone wages that could have been earned working.
d. required student activity fees.
38. Marginal analysis is defined as when a person continues to make a decision until the value of the outcome is
zero.
a. True
b. False
39. Which statement does NOT involve thinking at the margin?

a. If John works another hour, he will beat the rush hour traffic.
b. Sally worked eight hours today.
c. Dylan's supervisor asked him to work an extra four hours this week.
d. If Jill works on her day off, she will make an additional $300.
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40. Which statement is NOT true of economic model building?

a. There may be exceptions to economic models.
b. Adding more complexity to models does not always provide greater insights.
c. Economic models always reach verifiable results.
d. Economic models provide generalizations about economic behavior.
41. Consider the equation Y = e + fX. Which letter represents the intercept?
a. e
b. f
c. X
d. Y
42. If a restaurant that traditionally has served only lunch and dinner wants to open for breakfast, which factor
should be considered?
a. rent
b. furniture
c. cost of the additional food
d. insurance costs
43. Assume that a student attends a four-year college with tuition costs of $20,000 per year; room and board
costs of $5,000 per year; and books/entertainment costs of $1,000 per year. If the student did not go to college,
she would work at a job that pays $25,000 per year but still face the same room and board, as well as
entertainment expenses. The opportunity cost of attending college for this student for four years is
a. $80,000.
b. $100,000.
c. $124,000.
d. $180,000.
44. Which statement about economic models is TRUE?

a. In practice, it is easy for an economist to isolate economic variables.
b. Economists hold all other variables constant in order to see the impact of one particular variable.
c. To be useful, an economic model must include every detail possible and not be an abstraction.
d. Complex models are always better than simple ones.
45. Which statement is a characteristic of economic models?

a. Models try to boil down an economic situation to its most basic elements.
b. Models are always complex because the economy is complex.
c. Models attempt to reproduce reality exactly.
d. Models try to avoid invoking the ceteris paribus assumption.

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46. Admission prices to Dollywood are $50 for a one-day ticket, $80 for a two-day ticket, and $100 for an
annual pass. Based on these prices, the marginal cost of visiting Dollywood the second day is _____, the third
day is _____, and the fourth day is _____.
a. $30; $20; $0
b. $30; $10; $10
c. $40; $33.33; $25
d. $80; $100; $100
47. Employers give stock options to full-time employees who have been on the job more than three years. This
is an example of
a. people following incentives.
b. thinking on the margin.
c. irrational behavior.
d. opportunity costs.
48. Much of economic analysis is directed toward ensuring an efficient allocation of resources.
a. True
b. False
49. A national health care system is an example of an institution that influences the wealth of nations.
a. True
b. False
50. The _____ the opportunity cost of an activity, the _____ a person will do that activity.
a. higher; more
b. higher; less
c. lower; less
d. It doesn't matter. Price alone will determine the action.
51. The problem of the medically uninsured involves

a. opportunity cost.
b. equity.
c. production efficiency.
d. allocative efficiency.
52. Rational behavior requires thinking at the margin. Which example represents this type of thinking?
a. deciding whether a second burger is worth the extra $2
b. deciding whether the overtime pay is worth working on your day off
c. deciding whether to pay a fine for polluting the local harbor or installing antipollution machinery
d. All of these examples represent thinking at the margin.
53. The question "How do interest rates influence employment?" is an example of a normative question.
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a. True
b. False
54. What would be a possible opportunity cost of a person going to a doctor for a check-up?
a. the cost of getting nontraditional care
b. the opportunity to make an acquaintance in the waiting room
c. lost income due to not being at work for those hours
d. the cost of the insurance reimbursing the doctor
55. The height of the bars in a bar chart may depict the number of data points in each category.
a. True
b. False
56. (Figure: Sales and Advertising) The graph shows the advertising expenditures and the resulting sales (in
bottles) of a new caffeinated beverage called Jump. If consumer tastes change in the region where Jump is
marketed and base sales increase by 1,500 bottles, what is the equation of the shifted line?
a. sales = 1,500 + 2 × advertising

b. sales = 3,000 + 2 × advertising
c. sales = 3,000 + 1,502 × advertising
d. sales = 4,500 + 2 × advertising
57. Excessive pollution is an example of market failure.

a. True
b. False
58. A nation's standard of living is primarily a function of

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a. natural resource availability.

b. government benefits.
c. national defense.
d. productivity.
59. (Figure: Graph Examples) Which graph is an example of a scatter plot?
a. graph A
b. graph B
c. graph C
d. graph D
60. There are no instances where efficient solutions to problems conflict with equity issues.
a. True
b. False

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61. Which is the BEST example of a microeconomic issue?
a. The Federal Reserve will raise interest rates this week.
b. The unemployment rate will exceed 6% this month.
c. The country's price level has increased over the last quarter.
d. The production of automobiles decreased last year.
62. Government intervention in the market is helpful when

a. consumers are free to buy from a number of different firms.
b. consumers and firms have good information.
c. firms face increasing competition from new entrants into the market.
d. firms engage in production activities that pollute the air and water.
63. Consider the equation Y = e + fX. Which letter represents the slope?
a. e
b. f
c. X
d. Y
64. Macroeconomics studies the outcomes of individual markets in the national economy.
a. True
b. False
65. In the equation S = 130 – 2T, where S is hot chocolate sales and T is temperature, sales _____ if temperature
falls by 5 degrees.
a. decrease by 2
b. decrease by 10
c. increase by 2
d. increase by 10
66. Government policy to achieve high employment may cause inflation to rise too quickly.
a. True
b. False
67. A store sells one candy bar for $0.89 and two candy bars for $1.50. The marginal cost of the second candy
bar is $0.75.
a. True
b. False

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68. (Figure: Graph Examples) Which graph is an example of a pie chart?
a. graph A
b. graph B
c. graph C
d. graph D
69. To be useful, an economic model must include every detail possible and not be an abstraction.
a. True
b. False
70. Most economists agree that there is no legitimate role for government to play in the economy.
a. True
b. False

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71. Macroeconomics is concerned about the broader issues in the economy, such as inflation, unemployment,
and national output of goods and services.
a. True
b. False
72. Questions that involve the understanding of basic facts are _____ questions.
a. positive
b. subjective
c. evaluative
d. normative
73. The answers to normative questions

a. are the same for all societies and cultures.
b. can be answered one way or another as long as the relevant information is available.
c. involve understanding basic facts.
d. often involve value judgments.
74. The purpose of invoking ceteris paribus is to

a. simplify the analysis being done.
b. make the economic model more realistic.
c. allow the model to take more complexity into account.
d. introduce risk into the model.
75. In the equation Y = e + fX, _____ is the independent variable and _____ is the slope.
a. Y; e
b. Y; f
c. X; e
d. X; f
76. In the equation Y = b – aX, a is the intercept.

a. True
b. False
77. Which statement is CORRECT?

a. "Correlation" and "causation" are synonyms.
b. Shortly after a new president takes office, the unemployment rate goes down. One must conclude
that the new president's economic policies are responsible for the economic upturn.
c. The fact that two variables are correlated with each other does not mean that one causes the other.
d. If two variables move together, then they are causally related.
78. Correlation between two variables is not enough evidence to suggest that a causal relationship exists
between the two variables.
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a. True
b. False
79. People use _____ to determine how many hours to work, and businesses use _____ to determine how much
of their product they are willing to supply to the market.
a. marginal analysis; marginal analysis
b. allocative efficiency; production efficiency
c. production efficiency; marginal analysis
d. marginal analysis; allocative efficiency
80. (Figure: Crop Yield and Fertilizer) The graph shows a hypothetical relationship between tons of fertilizer
used and crop yields. Which statement is NOT correct?
a. The slope of the curve between 1 and 2 tons of fertilizer is approximately 2.

b. The relationship between fertilizer usage and yield is nonlinear.
c. Because the relationship is nonlinear, it is difficult to create an economic model describing the
relationship between the two variables.
d. Using more than 3 tons of fertilizer has minimal effect on yield.
81. Economic models must fully reflect reality.

a. True
b. False
82. When goods are produced at the lowest possible cost, an economy is said to have achieved
a. production efficiency.
b. allocative efficiency.
c. cheap production.
d. inferior quality goods.
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83. Tax policy is partly based on the notion that

a. high taxes are preferable to low taxes.
b. governments must always run a budget surplus.
c. markets never work efficiently.
d. people respond to financial incentives.
84. Which of these is NOT an example of market failure?

a. Water is polluted by a paper company located by the river.
b. Air is polluted by a manufacturing firm.
c. Competition leads firms to provide products at the lowest possible price.
d. Consumers must buy water from one local water utility.
85. The field of economics that focuses on decision making by individuals, businesses, industries, and
governments is called
a. macroeconomics.
b. decision science.
c. bargaining theory.
d. microeconomics.
86. _____ people are forced to make tradeoffs.

a. Only wealthy
b. Only middle-class
c. Only poor
d. All
87. The situation in which markets fail to provide efficiently is called

a. market failure.
b. uneconomic efficiency.
c. market collapse.
d. government failure.
88. Private markets will typically maximize production efficiency because they provide
a. profit incentives.
b. equity.
c. market information.
d. tax revenue for the government sector.
89. Economists create simplistic models in order to explain complex economic topics.
a. True
b. False

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90. Which situation(s) may require government intervention?
I. A local business has made a profit in each of the last 10 years.
II. Students are having difficulty deciding whether to go the beach or to go hiking for their class trip.
III. A manufacturing firm on a river is dumping production runoff into the water.
a. I and II
b. II and III
c. II only
d. III only
91. Which statement regarding macroeconomics and microeconomics is TRUE?

a. Microeconomics examines consumer behavior, while macroeconomics studies business behavior.
b. Macroeconomics employs many of the same analytical tools as microeconomics.
c. Because it focuses on national economies, macroeconomics does not study international trade and
finance.
d. Neither macroeconomics nor microeconomics is concerned with prices.
92. When government policies are being designed

a. there is usually a tradeoff between equity and efficiency.
b. equity and efficiency goals are usually independent of each other.
c. equity can usually be achieved without a decrease in efficiency.
d. increasing efficiency usually results in more equity.
93. (Figure: Education and Earnings) The data in the graph show the relationship between years of education
and salary. Which statement is NOT correct?

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a. A person with 13 years of education can expect to earn $25,000.

b. The slope of the line is 5,000.
c. The line represents a simple model of the relationship between education and earnings.
d. The relationship between the two variables is nonlinear.
94. Thinking at the margin is defined as maximizing a firm's or individual's well-being.

a. True
b. False
95. The main difference between macroeconomics and microeconomics is that macroeconomics _____, and
microeconomics _____.
a. largely deals with the fallacy of composition; does not deal with the fallacy of composition
b. focuses on the aggregate economy; focuses on small components of the economy
c. looks at how individuals make choices; looks at the aggregate of those choices
d. is concerned with economic policy; is concerned with international policies
96. When each member of a farm co-op specializes in one task, this will generally lead to
a. some members becoming better off while some become worse off.
b. the same outcome as without specialization because it has a neutral impact on productivity.
c. a worse outcome than if every member learns how to do every task as best as they can.
d. gains to all members as long as trade is possible.
97. Efficiency within economics focuses on

a. how well resources are used and allocated.
b. the fairness of various policies.
c. how quickly a task can be completed.
d. calculations of opportunity cost.
98. Stylized models boil down issues and facts to their basic relevant elements.
a. True
b. False
99. Economics is about allocating limited resources to maximize an individual or society's well-being or
satisfaction.
a. True
b. False
100. It must be recognized that private markets

a. will always produce the most rational level of production.
b. can fail.
c. satisfy everyone.
d. will never produce the most rational outcome.
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101. The opportunity cost of buying a ticket to a major league baseball game and then going to the game is
a. the price of the ticket.
b. the next best alternative that could have been undertaken.
c. the time spent at the game.
d. all other alternative activities that could have been undertaken.
102. Scarcity is not a problem faced by Bill Gates or Warren Buffett.

a. True
b. False
103. A situation in which output is produced at the lowest possible cost is called allocative efficiency.
a. True
b. False
104. The broad scope of economic analysis allows people to reflect on everyday choices in addition to more
global issues.
a. True
b. False
105. Rational behavior

a. means incentives don't matter.
b. requires people to consider the total costs and total benefits of their decisions.
c. requires thinking at the margin.
d. requires perfect information.

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bottles) of a new caffeinated beverage called Jump. The slope for the equation graphed is 3,000.
a. True
b. False
107. Microeconomics looks at how markets are structured.

a. True
b. False
108. If variable X rises as variable Q falls, then X and Q have a positive relationship and the slope of the line is
positive.
a. True
b. False
109. Which statement describes a time in the economy when the government should intervene?
a. Consumers cannot make up their minds what they want to purchase.
b. Sellers make poor business decisions.
c. Producers use the least-cost method of production.
d. The market fails to provide goods efficiently.
110. When the government chooses to use resources to build tourist centers, the selected resources are no longer
available to build highways. This BEST illustrates the concept of
a. macroeconomics.
b. scarcity.
c. opportunity cost.
d. efficiency.
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111. When economists use the word "additional," they generally mean
a. rational.
b. economics.
c. marginal.
d. opportunity cost.
bottles) of a new caffeinated beverage called Jump. If the company that manufactures Jump spends $3,000 on
advertising, how many bottles of Jump will it sell?
a. 7,000
b. 9,000
c. 10,000
d. 13,500
113. Model building leads to theories that must then be tested.

a. True
b. False
114. A common definition of "economics" is that it is the study of

a. the allocation of scarce resources to satisfy competing wants.
b. maximizing net personal disposable income.
c. the factors underlying financial markets.
d. maximizing personal financial wealth.
115. Discounted matinee movie ticket prices demonstrate that

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a. people follow incentives.

b. government intervention in the market is helpful.
c. market outcomes are always equitable.
d. the cost of living is decreasing.
116. Economists generally have _____ to say about equity than efficiency.
a. less
b. a little bit more
c. about the same
d. much more
117. Production inefficiency implies that

a. goods are produced at too high a cost.
b. people who want the specific goods cannot get them at any price.
c. too many Twinkies and too few Ding Dongs are produced.
d. workers are lazy.
118. The concept of scarcity implies that people must make choices among alternatives.
a. True
b. False
119. Tradeoffs occur because resources are scarce.

a. True
b. False
120. The extra cost associated with undertaking some action is its
a. marginal benefit.
b. marginal cost.
c. net cost.
d. total cost.
121. If two variables are positively related, then, as one variable

a. decreases the other variable decreases, and as one variable increases the other variable decreases.
b. increases the other variable increases, and as one variable decreases the other variable increases.
c. decreases the other variable increases, and as one variable increases the other variable decreases.
d. increases the other variable increases, and as one variable decreases the other variable decreases.
122. Wants are usually greater than resources.

a. True
b. False
123. Which statement about markets is TRUE?

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a. They always operate efficiently.

b. They bring buyers and sellers together.
c. Profits are never an effective discipline in the market.
d. Markets need to always be controlled by the government.
124. Complex models are always better than simple ones.

a. True
b. False
125. Economic analysis gives us a structure for making decisions in a rational manner.
a. True
b. False
126. Markets provide an incentive structure to

a. maximize equity.
b. eliminate scarcity.
c. maximize market information.
d. maximize efficiency.
127. Individuals do not experience opportunity costs unless external costs occur.
a. True
b. False
128. Macroeconomics is concerned with issues such as

a. which orange juice to buy.
b. unemployment.
c. which job to take.
d. what price to charge for goods.
129. Another definition of opportunity cost is the value of the next best alternative.
a. True
b. False
130. Economics is a _____ science.

a. natural
b. physical
c. life
d. social
131. When we analyze the relationship between inflation and the money supply, we assume
a. all other factors that affect the rate of inflation remain constant.
b. this relationship holds only in a democratic country.
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c. this relationship reflects a nonlinear relationship.

d. the money supply is backed by gold alone.
132. Which effect does NOT deal with macroeconomics?

a. effect of the budget deficit on the economy
b. effect of monetary policy on inflation
c. effect of Walmart's pricing policies on consumers
d. effect of government policies on the country's unemployment rate
133. In the study of economics, the goals of efficiency and equity are often
a. compatible.
b. in conflict with one another.
c. objectively definable.
d. given equal emphasis.
134. Which statement does NOT deal with microeconomics?

a. Profits for some manufacturing firms fell in 2009.
b. The unemployment rate in the United States rose to 10% in 2009.
c. Salaries of top executives fell in 2009.
d. Competitive markets promote efficiency.
135. (Figure: Interpreting Equations on a Graph) In the graph, if x is 0, then the y-intercept is
a. 0.
b. 0.6.
c. 14.
d. 14.6.
136. Information plays an important role in the market because it allows

a. market participants to make good decisions based on cost-benefit analysis.
b. sellers to enhance their sales pitch.
c. the media to grow in importance.
d. managers to make more risky decisions.
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137. The ceteris paribus assumption holds some variables constant in order to aid in model building.
a. True
b. False
138. A question whose answer is based on what should or should not take place is a _____ question.
a. positive
b. fact-based
c. objective
d. normative
139. Which would BEST represent a positive statement?

a. Congress should use income taxes to fund Social Security.
b. Dreamers should become legal citizens.
c. Eligibility for Supplemental Nutrition Assistance Program benefits ought to be restricted to those at
or below the poverty line.
d. Taxes on sugary drinks cause people to drink less of them.
140. To say that economics is a way of thinking about how people make rational decisions means that people
a. don't consider the cost of their decisions.
b. consider only monetary terms in their decisions.
c. respond to incentives.
d. are irrational.
141. (Figure: Mileage and Speed by Car Weight) Which statement about the graph is CORRECT?
a. Mileage is related only to speed, not car weight.

b. Speed is related to mileage and car weight.
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c. Mileage is related to both speed and car weight.

d. Mileage is unrelated to speed and car weight.
142. Which would best represent a normative question?

a. Are there well-paying jobs in economics upon graduation?
b. Should the minimum age to collect Social Security benefits be raised?
c. By how much did the Fed raise interest rates in the past year?
d. What is the profit-maximizing quantity to produce?
143. The field of economics that is concerned about the broader issues in the economy, such as inflation,
unemployment, and national output of goods and services is called
a. macroeconomics.
b. microeconomics.
c. national economics.
d. labor force economics.
144. Allocative inefficiency implies that

a. goods are produced at too high a cost.
b. the people who want a specific good the most cannot get it, while others can.
c. too many Twinkies and too few Ding Dongs are produced.
d. workers are lazy.
145. A strong monetary system is an example of an institution that influences the wealth of nations.
a. True
b. False
146. The private market for education can be considered a market failure because it leads to a price of education
that society believes is too ____ and a quantity of education that is too ____.
a. low; low
b. low; high
c. high; high
d. high; low
147. The observation that highly productive countries have taller populations is an example of
a. cause and effect.
b. correlation.
c. causation.
d. allocative efficiency.
148. Resources are

a. unlimited, but wants are limited.
b. limited, but efficiency is unlimited.
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c. limited, but wants are unlimited.

d. unlimited, but efficiency is limited.
149. (Figure: Graph Interpretation) In the graph, _____ is the dependent variable and the slope of the line is
_____.
a. R; negative
b. R; positive
c. S; negative
d. S; positive
150. Economists point out that the quality of economic decisions depends on the quality of the information
underlying those decisions.
a. True
b. False
151. Examining whether the country's price level has increased last quarter is a macroeconomic topic.
a. True
b. False
152. Changes in stock prices are correlated with the amount of rainfall. Therefore, rainy weather causes the
stock market to fall.
a. True
b. False
153. An example of a microeconomic question would be asking about the reasons for increases or decreases in
the price of bread.
a. True
b. False
154. Joan is trying to gather information on the membership at her Zen Center. She estimates that it will cost
around $1,000 to gather the information but expects the information to lead to increased membership revenue of
$1,100. Based on this information, Joan should
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a. not gather the information since she will only gain $100.
b. gather the information since the net gain will be $100.
c. not gather the information since it will cost money and the Zen Center is a not-for-profit
organization.
d. gather the information regardless of the cost.
155. Economists use graphs because

a. they represent relationships between variables.
b. they are more efficient than models.
c. they are less efficient than models.
d. their use makes the analysis more complicated.
156. The concept of scarcity

a. exists in all societies.
b. affects only greedy people.
c. is the cause of poverty.
d. used to be a problem but is not an issue for industrialized nations.
157. Which statement is TRUE about specialization and exchange between two individuals?
a. They generally benefit the poorer individual at the expense of the richer individual.
b. They generally benefit the richer individual at the expense of the poorer individual.
c. They generally benefit the poorer individual as well as the richer individual.
d. They generally benefit neither the poorer individual nor the richer individual.
158. A theory composed of a number of assumptions and facts boiled down to their basic relevant elements is
called a
a. metaphor.
b. model.
c. conclusion.
d. practice.
159. When the _____ outweigh(s) the _____ of information, people will attempt to obtain the information.
a. costs; benefits
b. benefits; costs
c. equity; efficiency
d. efficiency; equity
160. Which statement is an example of a normative question?

a. How do interest rates influence employment?
b. How should a society achieve full employment?
c. How do unemployment rates differ among nations?

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d. What are the long-term effects of unemployment?
161. A person will decide to take the day off work if the
a. marginal cost exceeds the marginal benefit.
b. marginal cost is less than the marginal benefit.
c. person can make up the missed work the next day.
d. person has additional sick days to spare.
162. Simple graphs never provide information about the relationship between variables.
a. True
b. False
163. If the price of carrots drops, ceteris paribus, people will buy more carrots. Which statement BEST
describes this phenomenon?
a. The relationship between the price of carrots and the number of carrots that people buy is
independent of other things.
b. If carrots are the only available good, people will buy more of them if the price decreases.
c. If the price of carrots drops and everything else remains the same, the number of carrots people buy
will increase.
d. As the price of carrots decreases, and all other prices decrease, then the quantity of carrots purchased
will increase.
164. Which is NOT considered to be an institution that influences the wealth of nations?
a. national health care system
b. legal system to enforce contracts and laws to protect the rights of citizens
c. strong monetary system
d. legislative process to develop laws and policies that provides incentives to work hard
165. Economics is only about money.

a. True
b. False
166. Thinking at the margin means that the individual thinks about the additional costs and benefits of doing
something.
a. True
b. False
167. There is general agreement as to which economic policies are fair, or equitable.
a. True
b. False
bottles) of a new caffeinated beverage called Jump. The vertical intercept for the equation graphed is 3,000
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bottles.
a. True
b. False
169. Government intervention in the market is helpful when

a. consumers are free to buy from many different firms.
b. consumers are forced to buy from just one firm.
c. business firms face increasing competition from new entrants into the market.
d. business firms always use the cleanest technologies available to mitigate pollution.
170. An increase in the price of gold is always associated with the outbreak of wars; increasing gold prices
cause wars. This would be an example of what logical misconception?
a. ceteris paribus
b. correlation is causation
c. laissez-faire
d. nonlinearity
171. The study of economics

a. primarily considers the stock market.
b. is about people making decisions regarding their use of scarce resources.
c. does not apply to decisions made by businesses.
d. states that efficiency and equity do not conflict.
172. Economic models must

a. be completely realistic to be useful.

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b. include all relationships that exist in the relevant issue to be modeled.

c. completely represent the real world.
d. rely on the ceteris paribus assumption.
173. _____ costs include the time and money that could have been spent on another highly valued activity.
a. Opportunity
b. Marginal
c. Social
d. Total
174. Which statement does NOT describe model building in economics?

a. Models are developed to cover specific behaviors only.
b. Models are created and then tested.
c. Models are used to help understand the general economy.
d. Assumptions are used to analyze an economic issue.
175. Opportunity costs exist because

a. using resources for one activity means that their use elsewhere must be given up.
b. sellers are unwilling to give up their product without a price.
c. there are opportunities to find ways to reduce costs.
d. buyers always have an opportunity to go to another seller.
176. (Table) If the numbers in the table were placed on a graph, with hot chocolate sales on the vertical axis and
temperature on the horizontal axis, a
a. positive, nonlinear curve would result.

b. negative, linear relationship between temperature and hot chocolate sales would be shown.
c. positive, linear relationship between temperature and hot chocolate sales would be shown.
d. negative, nonlinear curve would result.
177. Scatter plots use time and one other variable to determine possible relationships.
a. True
b. False
178. John chose to buy a pizza. If he had not bought the pizza, he would have bought either a hot dog or a
hamburger. John's opportunity cost of buying the pizza is
a. the hot dog.
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b. the hamburger.
c. both the hot dog and the hamburger.
d. whichever alternative, the hot dog or the hamburger, has the next highest value to John.
179. Which example represents incentives for decisions?

a. tax deductions for individual retirement accounts
b. investment tax credits for businesses
c. tax deductions for education saving accounts
d. All of these are incentives.
180. If a graph between hot chocolate sales and temperature is downward sloping, then sales of hot chocolate
a. fall as temperature falls.
b. rise as temperature falls.
c. rise over time.
d. fall over time.
181. The core problem in economics is

a. unemployment.
b. economic growth.
c. inflation.
d. scarcity.
182. A pie chart is useful for business presentations but not for macroeconomic analysis.
a. True
b. False
183. _____ is the fairness of various issues and policies.

a. Equity
b. Efficiency
c. Choice
d. Scarcity
184. Linear relationships show the same slope between any two points on a line.
a. True
b. False
185. Because people make decisions at the margin, when deciding whether to purchase a second car, they would
therefore compare the
a. dollar cost of having two cars with the potential income the two cars may generate.
b. additional benefit expected from a second car with the total cost of the two cars.
c. additional benefit expected from a second car with the additional costs of the second car.
d. None of the answers is correct.
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186. (Figure: Interpreting Equations on a Graph) In the graph, if y stands for inflation and x stands for the
money supply, then
a. for every 1% increase in the money supply, inflation increases by 0.6%.

b. for every 1% increase in inflation, the money supply increases by 0.6%.
c. if the money supply increases by 14, then inflation goes up 0.6%.
d. if inflation increases by 14, then inflation goes up 0.6%.
187. Although the United States hardly produces any coffee, it is able to acquire various types of coffee from
other countries to satisfy the desires of every American coffee drinker. This example best represents _____
efficiency.
a. production
b. allocative
c. Pareto
d. marginal
188. Which question is NOT an example involving marginal analysis?

a. Should a university offer another section of a class?
b. Should a restaurant stay open another hour?
c. Should Kmart rebrand all of its stores to use the Sears name?
d. Should Boeing hire another assembly-line worker?
189. Suppose an economist discovers that the relationship between grades and hours of tutoring is grade = 60 +
5(hours). Based on the equation, which statement is TRUE?
a. Tutoring is not worthwhile because each hour raises the grade by only 5 points.
b. If no tutoring is done, then the grade will be zero.
c. The expected grade with 5 hours of tutoring is 85.
d. The relationship between tutoring and grades is weak.

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190. (Figure: Mileage and Speed by Car Weight) Which statement about the graph is CORRECT?
I. The heavier the vehicles, ceteris paribus, the lower the mileage.
II. The higher the speed of the vehicle past 50 miles per hour, ceteris paribus, the lower the mileage.
III. Weight and speed have a linear relationship with mileage.
a. I only
b. II only
c. I and II
d. I, II, and III
191. Macroeconomics does NOT deal with

a. recessions.
b. inflation.
c. job creation rates.
d. the market for semiconductor chips.
192. (Figure: Interpreting Equations on a Graph) The graph illustrates
a. a nonlinear equation.

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b. a linear equation.
c. the concept of efficiency.
d. a rectangular hyperbola.
193. Titles, labels for axes, and a statement of how the data are measured help with the interpretation of graphs.
a. True
b. False
194. Which topic is MOST likely to be studied in a microeconomics course?

a. energy policy
b. unemployment
c. inflation
d. recessions
195. Which statement about incentives is TRUE?

a. Each person is motivated by the same incentive.
b. Each person is motivated by different incentives.
c. Incentives can be manipulated with precision.
d. Price is the only relevant economic incentive.
196. When goods are produced at the lowest possible cost, the economy is experiencing
c. equity.
d. deflation.
197. (Figure: Graph Interpretation) In the graph, a negative relationship is depicted with a slope of –0.4.
a. True
b. False
198. Which topic is a microeconomic topic?

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a. U.S. inflation rate in 2009

b. the price of an iPad sold by Apple
c. U.S. unemployment rate in March 2010
d. U.S. rate of growth in GDP for the first quarter in 2016
199. _____ is how well resources are used and allocated.

a. Equity
b. Efficiency
c. Choice
d. Scarcity
200. A graph of a business cycle that plots output on the vertical axis and quarters of the year on the horizontal
axis is an example of a
a. bar chart.
b. pie chart.
c. scatter plot.
d. time series.
201. (Table) Assume the relationship between temperature (T) and hot chocolate (C) sales can be written as C =
150 – 2T. An updated study shows that the amount of hot chocolate sales at every temperature has actually
doubled. The new equation for this relationship would be
a. C = 150 – 2T
b. C = 75 – T
c. C = 300 – 4T
d. C = 300 – 2T
202. Which statement represents a microeconomic issue?

a. The unemployment rate fell by 2% last year.
b. Businesses in the United States experienced a decrease in revenues of 5% last month due to the
recession.
c. About 15% of teachers were laid off last week.
d. GDP increased by 6% last quarter.
203. Which example represents a bad incentive?

a. charging drivers a gasoline tax to fund green energy projects
b. offering factories tax credits for reducing pollution
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c. rewarding students for studying and earning high grades

d. raising homeowners' property taxes because of home improvements
204. Open access to information is necessary in order for a market to work efficiently.
a. True
b. False
205. Allocative efficiency occurs when

a. production is allocated equally among all citizens.
b. people who want a product the most get it.
c. goods are produced at the lowest possible cost.
d. resources are equally allocated between the private and public sectors of the economy.
206. An economy exhibits production efficiency if

a. it produces more than enough clothes to clothe everyone.
b. economic growth increases every year.
c. it produces goods at the lowest possible cost.
d. it eliminates poverty.
207. A basic belief of economics is that

a. people always, and in every case, respond to economic incentives.
b. in general, people respond to economic incentives.
c. history shows that tax incentives rarely work.
d. people do not respond to changes in costs and prices.
208. Economists never assume that people respond to economic incentives.

a. True
b. False
209. If variable S falls as variable X falls, then S and X have a positive relationship and the slope of the line is
positive.
a. True
b. False
210. The key difference between microeconomics and macroeconomics is microeconomics focuses on _____
while macroeconomics focuses on _____.
a. time issues; money issues
b. economic growth; labor issues
c. individual decisions; aggregate issues
d. normative questions; positive questions
211. Choosing to work an extra hour of overtime is an example of

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a. thinking at the margin.

b. efficiency.
c. equity.
d. market equilibrium.
212. Economic analysis cannot be applied to concepts outside economics.

a. True
b. False
bottles) of a new caffeinated beverage called Jump. If a new health advisory is released that warns consumers
about problems associated with too much caffeine consumption and the level of base sales of Jump then
decreases by 2,000 bottles, what is the equation of this shifted line?
a. sales = 1,000 + 2 × advertising

b. sales = 3,000 + 2 × advertising
c. sales = 3,000 + 2,002 × advertising
d. sales = 5,000 + 2 × advertising
214. What drives and disciplines markets?

a. equity
b. prices and profits
c. the ceteris paribus assumption
d. efficiency
215. Specialization and exchange between two individuals generally benefit the poorer individual at the expense
of the richer individual.
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a. True
b. False
216. Marginal analysis would put an emphasis on _____ costs and benefits.
a. total monetary
b. total opportunity
c. additional
d. total tangible
217. Which statement is TRUE?

a. Low productivity and low pay go together.
b. High productivity and low pay go together.
c. Low productivity and high pay go together.
d. The most productive countries are those with the lowest per capita incomes.
218. Economics deals only with financial issues.

a. True
b. False
219. If a graph showed that as the amount of time a person spent partying increased, her GPA decreased, then
this relationship would be
a. negative.
b. positive.
c. linear.
d. nonlinear.
220. Which statement is NOT a macroeconomic issue?

a. The Federal Reserve will raise interest rates this week.
b. The unemployment rate will exceed 6% this month.
c. The country's price level has increased over the last quarter.
d. The production of automobiles decreased last year.
221. The concept of equity relates to how quickly something can be produced.
a. True
b. False
222. The purpose of an economic model is to

a. be a complex, exact replica of reality.
b. demonstrate which values and beliefs are best for the economy.
c. explain the behavior of the issue being examined.
d. manage the economy like an automatic pilot.

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223. When countries specialize in producing a particular product and trade products they don't produce, it will
generally lead to a worse outcome than if every country produces all the products as best they can.
a. True
b. False
224. Efficiency in markets is generally increased by the discipline of

a. planning and profits.
b. prices and planning.
c. prices and profits.
d. production and planning.
225. Which scenario does NOT fall under the category of microeconomics?
a. Cooks at McDonalds supply labor in return for wages.
b. The cost of living rises due to rising housing and food prices.
c. Jonathan decides to go to the movies instead of going to work.
d. Pepsi is experiencing an increase in revenue for this quarter.
226. Consider the following statements. Which, if any, are positive statements?
I. Main Street needs more coffee shops.
II. A new parking garage on campus will reduce parking congestion.
III. Last winter, the state should have spent more money on snow removal.
a. I
b. I and II
c. II only
d. I, II, and III
227. Why is it important for students to study economics?

a. Most students will work as professional economists.
b. It helps us reduce our personal income taxes.
c. It helps us make better and wiser decisions, given our limited resources.
d. There is no long-term benefit to studying economics.
228. When consumers have no choice but to buy from one firm
a. they usually end up paying too much for the good or service.
b. government regulation is usually used to protect consumers.
c. they will always get the good or service at the lowest price available.
d. None of these occur.
229. Economists understand that people respond to

a. laws.
b. incentives.
c. threats more than rewards.
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d. positives but not negatives.
230. If two variables are correlated with one another, it is possible but not necessary that one variable causes the
other.
a. True
b. False
231. The basic idea of opportunity cost is that

a. buyers miss opportunities to find better bargains.
b. using resources in an activity imposes costs on other people.
c. the decision to use resources in one activity means that the resources cannot be used elsewhere.
d. economic agents are always looking for better opportunities.
232. Economists generally do NOT define an institution as a

a. government free of corruption.
b. government that controls resource allocation.
c. legal system that enforces contracts and laws.
d. strong monetary system.
233. "Scarcity" is best defined as when the quantity demanded exceeds the quantity supplied.
a. True
b. False
234. Reasons to study economics include all of these EXCEPT that you
a. will always live in a world of scarcity and choices.
b. will understand more about how governments and businesses interact.
c. may become a better prepared voter.
d. will learn exactly how to invest your cash in the short term for the highest return on investment.
235. In the equation C = a + bY, Y is the dependent variable and a is the intercept.
a. True
b. False
236. When economists assume people make rational decisions, it means that
a. people never make mistakes.
b. a rational person can never appear to make irrational decisions.
c. people are always selfish.
d. a rational person will respond to the benefits and costs associated with incentives.
237. Which statement about economics is CORRECT?

a. Economists do not believe that criminals behave rationally.
b. Economists have little to say about social issues.
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c. Economists consider how rational people respond to incentives.

d. Economists assume that people don't respond to incentives.
238. Production efficiency reflects

a. how often economists make assumptions about important variables.
b. how well resources are allocated.
c. the fact that all labor is equally productive.
d. the assumption made by economists that holds important variables constant.
239. The main focus of efficiency is for

a. firms to charge high prices for their goods.
b. firms to earn the largest profits.
c. consumers to get the goods and services they want at the lowest possible cost.
d. consumers to pay high prices.
240. Macroeconomics focuses on

a. decisions made by individuals.
b. decisions made by firms.
c. the decision to purchase a new home for a family.
d. decisions affecting the entire economy.
241. Positive questions are questions about how things ought to be.
a. True
b. False
242. Thinking at the margin involves

a. influencing how individuals make decisions.
b. making wiser decisions given limited information.
c. maximizing a firm's or individual's well-being.
d. weighing the impact of one additional activity.
243. A rich person does not experience scarcity.

a. True
b. False
244. When the ceteris paribus assumption is violated in economics, the effect is shown by
a. a movement down along the curve.
b. a movement up along the curve.
c. a shift of the entire curve.
d. correlation but not causation.

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245. The country of Economia has a higher productivity rate than Productstan. Which statement is therefore
correct?
a. Economia has a lower standard of living than Productstan.
b. Economia has a higher standard of living than Productstan.
c. It can be assumed that both have the same high standard of living because productivity and living
standards are unrelated.
d. It cannot be determined from what is given which country has the higher standard of living.
246. Which scenario can occur when specialization in tasks is coupled with trade?
a. It can lead to gains for all parties.
b. It leads to gains for one party and losses for the other parties.
c. It leads to losses for all parties.
d. It works only with government intervention.
247. Which statement is a key idea in economic thinking?

a. Scarcity exists for the poor but not for the rich.
b. Incentives matter.
c. The value of a good can be objectively measured and is the same for everyone.
d. All of these are key ideas in economic thinking.
248. The assumption that people will act in such a way as to maximize their self-interest is a reasonable one for
most cases that economists analyze.
a. True
b. False
249. It is impossible to have a conflict between allocative efficiency and production efficiency.
a. True
b. False
250. Scarcity is BEST defined as when

a. the quantity demanded exceeds the quantity supplied.
b. the quantity supplied exceeds the quantity demanded.
c. unlimited resources exceed limited wants.
d. unlimited wants exceed limited resources.
251. The decisions made by individuals and firms are covered in microeconomics.
a. True
b. False
252. Economics is BEST defined as the study of how

a. to classify resources used to produce final goods and services.
b. resources are apportioned to satisfy human wants.
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c. people make rational decisions.

d. technology can be used to change scarce resources into free resources.
253. (Figure: Interpreting Equations on a Graph) In the graph, the slope of the line is
a. 0.
b. 0.6.
c. 14.
d. 14.6.
254. If temperature and ice cream sales are positively related, as the temperature _____, ice cream sales _____.
a. rises; fall
b. rises; stay the same
c. falls; decline
d. falls; rise
255. There would be no economic problems in a world where all resources are
a. unlimited.
b. privately owned.
c. owned by the government.
d. scarce.
256. In the equation S = 130 – 2T, where S is hot chocolate sales and T is temperature, hot chocolate sales are
_____ when the temperature is 0.
a. 65
b. 128
c. 130
d. 132

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257. (Table) Using the information in the table, the equation that represents the relationship between
temperature (T) on the horizontal axis and hot chocolate (C) sales on the vertical axis would be
a. C = 150 – 2T
b. C = 50 – 1/2T
c. T = 75 – 2C
d. T = 25 – 1/2C
258. Macroeconomics focuses on decisions made for the entire economy.

a. True
b. False
259. (Figure: Graph Interpretation) In the graph, the equation for the line is
a. R = 120 – 0.4S.
b. R = 120 – 300S.
c. R = 120 + 0.4S.
d. R = 300 + 120S.
260. Pie charts

a. depict two variables to see if any correlation exists.
b. show how data can be split into percentages by category.
c. include a variable for time.
d. show trends of data over time.
261. If a society produces a pie at the lowest possible cost and then distributes the pie evenly among its
population, then _____ achieved.
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a. production and allocative efficiency are

b. only production efficiency is
c. neither production efficiency nor allocative efficiency is
d. only allocative efficiency is
262. International finance is generally studied in

a. microeconomics.
b. macroeconomics.
c. deductive logic.
d. inductive logic.
263. If you plot temperature on the y axis and world carbon emissions on the x axis, you have created a
a. time series.
b. scatter plot.
c. pie chart.
d. bar chart.
264. If you plot temperature on the y axis and time on the x axis, you have created a
a. time series.
b. scatter plot.
c. pie chart.
d. bar chart.
265. Which of the following words BEST describes what economics is about?
a. choices
b. scheduling
c. opportunity
d. money
266. The opportunity cost of one good is the quantity of resources that could be used to purchase the next best
choice.
a. True
b. False
267. Sujata has a stopover in Iceland and can choose one of three tours: visit the thermal springs, hike the
glaciers, or view the Northern Lights. If Sujata chooses the Northern Lights, her opportunity cost would be
a. the combined value of visiting the thermal springs and the glaciers.
b. zero as long as the Northern Lights was her top choice.
c. the value of visiting the thermal springs if that was her second choice after the Northern Lights.
d. the value of visiting the thermal springs if that was her last choice among the three tours.

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268. Suppose that a store sells candy bars for $0.89 for one and $1.50 for two. The marginal cost of the second
candy bar is
a. $0.61.
b. $0.75.
c. $0.89.
d. $1.50.
269. Microeconomics looks at particular markets within an economy.

a. True
b. False
270. When the individuals who get a good or service are the ones who desire that product the most, the
economy is experiencing
c. equity.
d. deflation.
271. One of the key ingredients in making rational choices is access to

a. sufficient funds.
b. information.
c. foreign markets.
d. a university psychology department.
272. The economics of uranium mining would be studied in

a. microeconomics.
b. macroeconomics.
c. deductive logic.
d. inductive logic.
273. Time series graphs include the value of a variable on the vertical axis and minutes, hours, days, months,
quarters, or years on the horizontal axis.
a. True
b. False
274. People tend to make rational choices for which they rely on
a. scarcity.
b. utility.
c. information.
d. ceteris paribus.
275. Paying a salesperson more for increased sales is an example of

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a. an incentive.
b. an opportunity cost.
c. efficiency.
d. equity.
276. Positive questions involve the understanding of basic facts.

a. True
b. False
277. Opportunity costs

a. are generally the same from individual to individual.
b. involve monetary rather than nonmonetary costs.
c. decrease as individuals become wealthier.
d. influence all economic decisions.
278. (Table) If the numbers in the table were placed on a graph, with hot chocolate sales on the vertical axis and
temperature on the horizontal axis, the slope would be
a. –10.
b. –2.
c. –1/2.
d. 2.
279. Microeconomics focuses on decision making by individuals, businesses, industries, and governments.
a. True
b. False
280. Economics is a social science that involves the study of how individuals, firms, and societies
a. maximize happiness.
b. maximize incomes.
c. choose among alternatives to satisfy their unlimited wants.
d. develop their tastes and preferences.
281. In the equation S = 130 – 2T, where S is hot chocolate sales and T is temperature, sales _____ if
temperature increases by 10 degrees.
a. increase by 2
b. increase by 20
Name: Class: Date:
chapter 1
c. decrease by 2
d. decrease by 20
282. An airline finds that its morning flights are half-empty, but the mid-afternoon flights are full. Which would
be the MOST plausible statement for an economist to make?
a. Cut the prices of early morning flights and raise the prices of afternoon flights.
b. Nothing can be done to rectify the situation because of consumer sovereignty.
c. Fewer flights should be scheduled in the afternoon to force travelers to take morning flights.
d. Nothing can be done because travelers are inflexible with their schedules.
283. Positive statements

a. are concerned with how something ought to be.
b. involve societal beliefs.
c. involve understanding basic facts.
d. often include the words "should" or "ought."
284. Time series graphs allow us to see trends in one variable over a set time frame.
a. True
b. False
285. A question whose answer is based on societal beliefs is a ____ question.

a. positive
b. fact-based
c. objective
d. normative
286. (Figure: Weight Loss and Exercise Time) According to the data in the graph, where weight loss is shown
on the y axis, every two extra hours of exercise

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chapter 1
a. decreases weight by ½ a pound.

b. increases weight by ½ a pound.
c. decreases weight by 1 pound.
d. increases weight by 1 pound.
287. Hitting your snooze alarm before you get out of bed is an example of
a. thinking at the margin.
b. efficiency.
c. equity.
d. market equilibrium.
288. If a student were not studying economics, he could be doing one of the following: sleeping in (which he
values at $5), playing cards with his friends (which he values at $10), or working (he would have earned an
extra $8). The opportunity cost of studying economics is therefore
a. $5.
b. $8.
c. $10.
d. $23.
289. The _____ of parking at school includes the amount of time a person has to search for a parking space.
a. opportunity cost
b. equity concerns
c. efficiency
d. productivity
290. Because of scarcity

a. resources are limitless.
b. wants are limited.
c. choices are unlimited.
d. people face tradeoffs in nearly every choice they make.
291. Which topic is MOST likely to be studied in a macroeconomics course?

a. market structures
b. recession
c. public utility regulation
d. game theory
292. _____ occur(s) when goods are produced at the lowest possible cost, and _____ occur(s) when individuals
who desire a product the most receive those goods and services.
a. Production efficiency; allocative efficiency
b. Production possibilities; allocative possibilities
c. Allocative efficiency; production efficiency
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d. Allocative possibilities; production possibilities
293. Economists tend to look

a. at costs but not at benefits.
b. at benefits but not at costs.
c. for rational responses to incentives.
d. only at macroeconomic topics.
294. Scarcity
a. is synonymous with poverty.
b. is eliminated with greater technology.
c. is faced by all individuals and societies.
d. can be eliminated with adequate resources.
295. Generally speaking, private markets are the most efficient institutions for providing goods and services.
a. True
b. False
296. Scarcity refers to the fact that

a. some goods are scarce.
b. something is scarce.
c. a person must make choices given the resource limitations he or she faces.
d. there is no long-term benefit to studying economics.
297. Markets tend to be efficient because

a. people respond to incentives.
b. Adam Smith created markets.
c. entrepreneurs always try to produce at the lowest possible cost.
d. decisions are always made at the margin.
298. A recent decision regarding the Federal Reserve's impending interest rate increase is an example of a
_____ topic. On the other hand, a debate on the impact of the arrival of Uber on local taxi businesses is an
example of a _____ topic.
a. microeconomics; macroeconomics
b. macroeconomics; macroeconomics
c. microeconomics; microeconomics
d. macroeconomics; microeconomics
299. Discuss the difference between efficiency and equity.
300. Evaluate this statement: There is more than one concept of economic efficiency.
Name: Class: Date:
chapter 1
301. Briefly describe how macroeconomics and microeconomics are related. How do they differ?
302. Describe how economists use models and how the results of stylized models may compare with those from
more complex models.
303. What is the opportunity cost of taking an economics class?
304. Explain the following statement: Economic theories must be tested.
305. How do the concepts of scarcity and opportunity cost relate to each other?
306. Provide two examples of what economists refer to as institutions.
307. Distinguish between macroeconomics and microeconomics.
308. Explain the difference between positive questions and normative questions.
309. What are the benefits of learning the techniques and tools involved within economic analysis?
310. What assumption about human motivation is made in economics? Explain.
311. Is understanding recessions a macroeconomic or a microeconomic issue? Explain.
312. Describe the ceteris paribus assumption and discuss how it might affect a person's fast-food purchase.
313. Explain what is meant by economic efficiency. Does efficiency imply that the fastest production processes
or the most powerful equipment must always be used? Explain.
314. Evaluate the following statement: To be useful, a model must be completely realistic.
315. Explain the meaning of the phrase "People respond to incentives."
316. Why are markets efficient?
317. Why do economists develop models (stylized facts) to help with analysis? Discuss the strengths and
weaknesses of such an approach.
318. At the start of the war in Iraq, homeowners in the United States found it difficult to find plywood. At the
same time, the U.S. military was constructing buildings in Iraq. How do the two situations reflect economic
tradeoffs?
319. What are some ways a person uses marginal analysis in daily life?
320. What are some examples of the types of issues analyzed by macroeconomics? What are some topics
examined by microeconomics?

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321. Explain why incentives are important, and give examples of incentives that a business might provide to its
customers to increase product sales on weekdays.
322. Compare and contrast the focuses of macroeconomics and microeconomics.
323. Why do economists focus on efficiency rather than equity?
324. Why is model building considered a process of understanding the economy?

Name: Class: Date:
chapter 1
Answer Key
1. c
2. d
3. a
4. d
5. c
6. a
7. c
8. d
9. c
10. d
11. b
12. a
13. a
14. b
15. c
16. b
17. a
18. c
19. a
20. b
21. b
22. a
23. c
24. a
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chapter 1
25. a
26. a
27. b
28. b
29. b
30. c
31. b
32. d
33. b
34. a
35. d
36. b
37. a
38. b
39. b
40. c
41. a
42. c
43. b
44. b
45. a
46. a
47. a
48. a

Name: Class: Date:
chapter 1
49. b
50. b
51. b
52. d
53. b
54. c
55. a
56. d
57. a
58. d
59. b
60. b
61. d
62. d
63. b
64. b
65. d
66. a
67. b
68. c
69. b
70. b
71. a
72. a
73. d
Name: Class: Date:
chapter 1
74. a
75. d
76. b
77. c
78. a
79. a
80. c
81. b
82. a
83. d
84. c
85. d
86. d
87. a
88. a
89. a
90. d
91. b
92. a
93. d
94. b
95. b
96. d
97. a

Name: Class: Date:
chapter 1
98. a
99. a
100. b
101. b
102. b
103. b
104. a
105. c
106. b
107. a
108. b
109. d
110. c
111. c
112. b
113. a
114. a
115. a
116. a
117. a
118. a
119. a
120. b
121. d
122. a
Name: Class: Date:
chapter 1
123. b
124. b
125. a
126. d
127. b
128. b
129. a
130. d
131. a
132. c
133. b
134. b
135. c
136. a
137. a
138. d
139. d
140. c
141. c
142. b
143. a
144. b
145. a
146. d

Name: Class: Date:
chapter 1
147. b
148. c
149. a
150. a
151. a
152. b
153. a
154. b
155. a
156. a
157. c
158. b
159. b
160. b
161. b
162. b
163. c
164. a
165. b
166. a
167. b
168. a
169. b
170. b
171. b
Name: Class: Date:
chapter 1
172. d
173. a
174. a
175. a
176. b
177. b
178. d
179. d
180. b
181. d
182. b
183. a
184. a
185. c
186. a
187. b
188. c
189. c
190. c
191. d
192. b
193. a
194. a
195. b

Name: Class: Date:
chapter 1
196. b
197. a
198. b
199. b
200. d
201. d
202. c
203. d
204. a
205. b
206. c
207. b
208. b
209. a
210. c
211. a
212. b
213. a
214. b
215. b
216. c
217. a
218. b
219. a
220. d
Name: Class: Date:
chapter 1
221. b
222. c
223. b
224. c
225. b
226. c
227. c
228. b
229. b
230. a
231. c
232. b
233. b
234. d
235. b
236. d
237. c
238. b
239. c
240. d
241. b
242. d
243. b
244. c

Name: Class: Date:
chapter 1
245. b
246. a
247. b
248. a
249. b
250. d
251. a
252. c
253. b
254. c
255. a
256. c
257. a
258. a
259. a
260. b
261. b
262. b
263. b
264. a
265. a
266. b
267. c
268. a
269. a
Name: Class: Date:
chapter 1
270. a
271. b
272. a
273. a
274. c
275. a
276. a
277. d
278. b
279. a
280. c
281. d
282. a
283. c
284. a
285. d
286. c
287. a
288. c
289. a
290. d
291. b
292. a
293. c

Name: Class: Date:
chapter 1
294. c
295. a
296. c
297. a
298. d
299. Efficiency deals with how well resources are utilized and allocated. No one likes waste. Much of economic
analysis is directed toward ensuring that the most efficient outcomes result from public policy. On the other
hand, there is equity, or fairness. There are many divergent views about fairness until extreme cases result.
There are instances in which efficiency and equity collide. A person may agree that a specific policy is efficient,
but he or she may also think it is unfair to a particular group of people.
300. Efficiency has to do with how things are allocated and utilized. When a firm tries to produce a product
efficiently, it uses the mix of inputs (labor, raw materials, and so on) that has the lowest cost. However, there is
also allocative efficiency, which deals with what is produced and who gets it. A society that produces large
quantities of laptop computers, even at a minimal cost, is not allocatively efficient if consumer demand favors
other technologies, such as tablet computers. Society would be better off if more tablet computers and fewer
laptop computers were made.
301. Macroeconomics looks at the economy as a whole. Microeconomics looks at the individual components of
the economy: consumers, businesses, governments, and imports/exports. For example, macroeconomics
examines the overall demand for goods and services, while microeconomics is concerned with the demand for
particular products.
302. Economists boil down facts to their basic relevant elements and use assumptions to develop a stylized
(simple) model to analyze the issue. Although there are always situations that lie outside the models, they are
exceptions. Economists generalize about economic behavior and reach generally applicable results. They can
add more dimensions and make the model more complex, but, often, complexity does not provide any greater
insight than the simple model does.
303. Each student will have a different response. The opportunity cost is the value of what is given up in order
to study and to come to class. Some students may be giving up sleeping late, the chance to go on a trip because
they use their money to pay tuition, or the income and experience of a job.
304. Economists build models to explain economic relationships. To be useful, the model must bring insight into
an economic situation. Therefore, as in any scientific endeavor, economists test models against real-world data.
If the model does a poor job of explaining real-world observations, then new models must be developed.
305. There are limited resources (scarcity), so people must make tradeoffs in nearly everything they do. In fact,
economics is often defined as the study of the allocation of scarce resources to competing wants. People have to
decide between alternatives, and they have limited resources. Every activity involves opportunity costs.
Sleeping, eating, studying, partying, running, hiking, and so on all require spending resources that could be
used in another activity. The activity not chosen represents the opportunity cost of the current activity that was
chosen.
Name: Class: Date:
chapter 1
306. Institutions include a legal system to enforce contracts and laws and to protect the rights of citizens and
the ideas they create; a legislative process to develop laws and policies that provide incentives to individuals
and firms to work hard; a government free of corruption; and a strong monetary system.
307. Macroeconomics focuses on the behavior of the economy as a whole, while microeconomics is concerned
with the decisions of individuals, such as households and firms. Macroeconomics is concerned with aggregates
such as the total output of the economy or unemployment, while microeconomics deals with the decisions of one
firm or industry.
308. Positive questions involve the understanding of basic facts, and can be answered one way or another as
long as information is available. Normative questions, in contrast, involve societal beliefs on what should or
should not be done, and will be answered differently by people with different beliefs.
309. Economic analysis provides a structure for making decisions in a rational manner. It is a way of analyzing
decisions that are not economic in the general sense of the term. That is the benefit of learning economic
analysis—it can be applied to many areas.
310. In economics, economists assume that people act as if motivated by self-interest and that people respond
predictably to opportunities for gain. That is, people look out for their own self-interest and do so in a rational
manner. A central assumption about human motivation is that people respond to incentives.
311. It is a macroeconomic issue; it is concerned with the overall economy.
312. To aid in model building, economists use the ceteris paribus assumption. Holding all other things equal
means that some important variables are held constant. For example, to determine how many fast-food meals a
person might be willing to purchase in any given week, we would hold his or her weekly income constant. Then
economists would change the prices of fast-food meals to see the impact on the number purchased. Fast-food
businesses, such as McDonald's, use this information to set what they hope is an optimum price.
313. Efficiency does not imply that the fastest production processes or the most powerful equipment must
always be used. Output is greater when people produce goods for which the opportunity cost of producing them
is lower than in other locations. They trade for those goods for which they do not have a comparative
advantage. International trade based on production taking place in areas with the lowest opportunity cost
increases total output of the two countries and can result in higher standards of living for citizens of both
countries.
314. This statement is NOT true. To be useful, a model must be fairly realistic, but it does not have to account
for every detail of the real world. The model needs to capture the essential relationships that enable economists
to analyze the problem they are concerned about. A model is useful so long as it sheds light on the problem at
hand.
315. People are rational, that is, they make decisions based on cost-benefit analyses. If the price of something
rises, people buy less of it. For example, higher taxes on certain items discourage buyers from purchasing them.
Retailers discount items they wish to sell more of. Rising gasoline prices discourage people from buying cars
that are not fuel-efficient.

Name: Class: Date:
chapter 1
316. Private markets and the incentives they provide are the best mechanisms known today for providing
products and services. Markets bring buyers and sellers together. Competition for the consumer dollar forces
firms to provide products at the lowest possible price; otherwise, some other firm will undercut their high
prices. New products enter the market and old products die out.
317. By using stylized facts, economists distill economic phenomena to their most basic relationships. The main
advantage of the process is that it simplifies reality so that it is easier to grasp and analyze. The disadvantage is
that an economic model cannot account for all details.
318. All economic resources, including plywood, are limited. The decision to send and supply an army in the
Middle East meant that resources had to be diverted to military use. The tradeoffs involved more than building
material because many workers were sent to Iraq, whether as members of the National Guard or as
contractors.
319. Students can provide many examples of marginal analysis. Should the student stay up an extra hour to
study or go to sleep? Should the student take on an extra course when they register? Should the student work an
extra hour at a part-time job?
320. There are many different examples of the types of situations a macro-oriented economist would analyze.
The answer should center on the overall outcome of the economy, captured under several categories of
indicators: employment, price stability, production, and international trade. Students can cite the business
cycle, unemployment rate, inflation, or the balance of trade. Microeconomics focuses on a particular market
outcome or structure: Pricing, employment in a particular trade, monopolization, changing demands, and
resource usage are all typical microeconomic topics.
321. Incentives cause people to change their behavior. By providing the proper incentives, businesses can help
increase their sales. A 40%-off sale, like that used by Macy's on Wednesdays only, can bring more customers
into the store and increase weekday sales. Not everyone leaps to use the incentives all the time, but they are
helpful. Another possibility is early-bird previews of seasonal merchandise on Mondays only.
322. Macroeconomics focuses on the broader issues in the economy. Microeconomics, in contrast, deals with
decision making by individuals, business firms, industries, and governments.
323. Economists generally stay out of discussions about fairness, leaving the issue to philosophers and
politicians. When it comes to public policy issues, economics will help people see the tradeoffs between
efficiency and equity, but given these tradeoffs, people will ultimately have to make up their own mind about the
wisdom of the policy. Economists tend to focus on matters of efficiency and to avoid making sweeping
judgments about equity, leaving people to decide what is fair.
324. Although model building can lead to surprising insights into how economic actors and economies behave,
it is NOT the end of the story. Economic insight leads to economic theories, but the theories must then be tested.
So, it may be best to think of model building as a process of understanding economic actors and the general
economy: Models are created and then tested; if they fail to explain, new models are constructed. Some models
have stood the test of time. Others have had to be corrected or discarded. Progress has, however, been made.

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planet itself, in proportion to the quantity of matter in each; and the
planets attract one another just as much as they attract the sun,
according to the quantity of matter.
To prove this part of the law exactly is a matter which requires

careful experiments; and though proved experimentally by Newton,
has been considered in our time worthy of re-examination by the
great astronomer Bessel. There was some ground for doubt; for the
mass of Jupiter, as deduced from the perturbations of Saturn, was
only 1⁄1070 of the mass of the sun; the mass of the same planet as
deduced from the perturbations of Juno and Pallas was 1⁄1045 of that
of the Sun. If this difference were to be confirmed by accurate
observations and calculations, it would follow that the attractive
power exercised by Jupiter upon the minor planets was greater than
that exercised upon 550 Saturn. And in the same way, if the attraction
of the Earth had any specific relation to different kinds of matter, the
time of oscillation of a pendulum of equal length composed wholly or
in part of the two substances would be different. If, for instance, it
were more intense for magnetized iron than for stone, the iron
pendulum would oscillate more quickly. Bessel showed 47 that it was
possible to assume hypothetically a constitution of the sun, planets,
and their appendages, such that the attraction of the Sun on the
Planets and Satellites should be proportional to the quantity of
matter in each; but that the attraction of the Planets on one another
would not be on the same scale.
47 Berlin Mem. 1824.
Newton had made experiments (described in the Principia, Book

iii., Prop. vi.) by which it was shown that there could be no
considerable or palpable amount of such specific difference among
terrestrial bodies, but his experiments could not be regarded as
exact enough for the requirements of modern science. Bessel
instituted a laborious series of experiments (presented to the Berlin
Academy in 1832) which completely disproved the conjecture of
such a difference; every substance examined having given exactly
the same coefficient of gravitating intensity as compared with inertia.
Among the substances examined were metallic and stony masses of
meteoric origin, which might be supposed, if any bodies could, to
come from other parts of the solar system.
CHAPTER IV.
Verification and Completion of the Newtonian Theory.
Tables of the Moon and Planets.
T HE Newtonian discovery of Universal Gravitation, so remarkable

in other respects, is also remarkable as exemplifying the
immense extent to which the verification of a great truth may be
carried, the amount of human labor which may be requisite to do it
justice, and the striking extension of human knowledge to which it
may lead. I have said that it is remarked as a beauty in the first
fixation of a theory that its measures or elements are established by
means of a few 551 data; but that its excellence when established is
in the number of observations which it explains. The multiplicity of
observations which are explained by astronomy, and which are
made because astronomy explains them, is immense, as I have
noted in the text. And the multitude of observations thus made is
employed for the purpose of correcting the first adopted elements of
the theory. I have mentioned some of the examples of this process: I
might mention many others in order to continue the history of this
part of Astronomy up to the present time. But I will notice only those
which seem to me the most remarkable.
In 1812, Burckhardt’s Tables de la Lune were published by the

French Bureau des Longitudes. A comparison of these and Burg’s
with a considerable number of observations, gave 9⁄100ths of a
second as the mean error of the former in the Moon’s longitude,
while the mean error of Burg’s was 18⁄100ths. The preference was
therefore accorded to Burckhardt’s.
Yet the Lunar Tables were still as much as thirty seconds wrong in
single observations. This circumstance, and Laplace’s expressed
wish, induced the French Academy to offer a prize for a complete
and purely theoretical determination of the Lunar path, instead of
determinations resting, as hitherto, partly upon theory and partly
upon observations. In 1820, two prize essays appeared, the one by
Damoiseau, the other by Plana and Carlini. And some years
afterwards (in 1824, and again in 1828), Damoiseau published
Tables de la Lune formées sur la seule Théorie d’Attraction. These
agree very closely with observation. That we may form some notion
of the complexity of the problem, I may state that the longitude of the
Moon is in these Tables affected by no fewer than forty-seven
equations; and the other quantities which determine her place are
subject to inequalities not much less in number.
Still I had to state in the second Edition, published in 1847, that

there remained an unexplained discordance between theory and
observation in the motions of the Moon; an inequality of long period
as it seemed, which the theory did not give.
A careful examination of a long series of the best observations of

the Moon, compared throughout with the theory in its most perfect
form, would afford the means both of correcting the numerical
elements of the theory, and of detecting the nature, and perhaps the
law, of any still remaining discrepancies. Such a work, however,
required vast labor, as well as great skill and profound mathematical
knowledge. 552 Mr. Airy undertook the task; employing for that
purpose, the Observations of the Moon made at Greenwich from
1750 to 1830. Above 8000 observed places of the Moon were
compared with theory by the computation of the same number of
places, each separately and independently calculated from Plana’s
Formulæ. A body of calculators (sometimes sixteen), at the expense
of the British Government, was employed for about eight years in
this work. When we take this in conjunction with the labor which the
observations themselves imply, it may serve to show on what a scale
the verification of the Newtonian theory has been conducted. The
first results of this labor were published in two quarto volumes; the
final deductions as to correction of elements, &c., were given in the
Memoirs of the Astronomical Society in 1848. 48
48 The total expense of computers, to the end of reading the
proof-sheets, was 4300l.
Mr. Airy’s estimate of days’ works [made before beginning], for
the heavy part of calculations only, was thirty-six years of one
computer. This was somewhat exceeded, but not very greatly, in
that part.
Even while the calculations were going on, it became apparent

that there were some differences between the observed places of
the Moon, and the theory so far as it had then been developed. M.
Hansen, an eminent German mathematician who had devised new
and powerful methods for the mathematical determination of the
results of the law of gravitation, was thus led to explore still further
the motions of the Moon in pursuance of this law. The result was that
he found there must exist two lunar inequalities, hitherto not known;
the one of 273, and the other of 239 years, the coefficients of which
are respectively 27 and 23 seconds. Both these originate in the
attraction of Venus; one of them being connected with the long
inequality in the Solar Tables, of which Mr. Airy had already proved
the existence, as stated in Chap. vi. Sect. 6 of this Book.
These inequalities fell in with the discrepancies between the actual

observations and the previously calculated Tables, which Mr. Airy
had discovered. And again, shortly afterwards, M. Hansen found that
there resulted from the theory two other new equations of the Moon;
one in latitude and one in longitude, agreeing with two which were
found by Mr. Airy in deducing from the observations the correction of
the elements of the Lunar Tables. And again, a little later, there was
detected by these mathematicians a theoretical correction for the 553
motion of the Node of the Moon’s orbit, coinciding exactly with one
which had been found to appear in the observations.
Nothing can more strikingly exhibit the confirmation which

increased scrutiny brings to light between the Newtonian theory on
the one hand, and the celestial motions on the other. We have here
a very large mass of the best observations which have ever been
made, systematically examined, with immense labor, and with the
set purpose of correcting at once all the elements of the Lunar
Tables. The corrections of the elements thus deduced imply of
course some error in the theory as previously developed. But at the
same time, and with the like determination thoroughly to explore the
subject, the theory is again pressed to yield its most complete
results, by the invention of new and powerful mathematical methods;
and the event is, that residual errors of the old Tables, several in
number, following the most diverse laws, occurring in several
detached parts, agree with the residual results of the Theory thus
newly extracted from it. And thus every additional exactness of
scrutiny into the celestial motions on the one hand and the
Newtonian theory on the other, has ended, sooner or later, in
showing the exactness of their coincidence.
The comparison of the theory with observation in the case of the

motions of the Planets, the motion of each being disturbed by the
attraction of all the others, is a subject in some respects still more
complicated and laborious. This work also was undertaken by the
same indefatigable astronomer; and here also his materials
belonged to the same period as before; being the admirable
observations made at Greenwich from 1750 to 1830, during the time
that Bradley, Maskelyne, and Pond were the Astronomers Royal. 49
These Planetary observations were deduced, and the observed
places were compared with the tabular places: with Lindenau’s
Tables of Mercury, Venus, and Mars; and with Bouvard’s Tables of
Jupiter, Saturn, and Uranus; and thus, while the received theory and
its elements were confirmed, the means of testing any improvement
which may hereafter be proposed, either in the form of the
theoretical results or in the constant elements which they involved,
was placed within the reach of the 554 astronomers of all future time.
The work appeared in 1845; the expense of the compilations and the
publication being defrayed by the British Government.
49 The observations of stars made by Bradley, who preceded
Maskelyne at Greenwich, had already been discussed by Bessel,
a great German astronomer; and the results published in 1818,
with a title that well showed the estimation in which he held those
materials: Fundamenta Astronomiæ pro anno 1775, deducta ex
Ohservationibus viri incomparabilis James Bradley in specula
Astronomica Grenovicensi per annos 1750–1762 institutis.
The Discovery of Neptune.
The theory of gravitation was destined to receive a confirmation

more striking than any which could arise from any explanation,
however perfect, given by the motions of a known planet; namely, in
revealing the existence of an unknown planet, disclosed to
astronomers by the attraction which it exerted upon a known one.
The story of the discovery of Neptune by the calculations of Mr.
Adams and M. Le Verrier was partly told in the former edition of this
History. I had there stated (vol. ii. p. 306) that “a deviation of
observation from the theory occurs at the very extremity of the solar
system, and that its existence appears to be beyond doubt. Uranus
does not conform to the Tables calculated for him on the theory of
gravitation. In 1821, Bouvard said in the Preface to the Tables of this
Planet, “the formation of these Tables offers to us this alternative,
that we cannot satisfy modern observations to the requisite degree
of precision without making our Tables deviate from the ancient
observations.” But when we have done this, there is still a
discordance between the Tables and the more modern observations,
and this discordance goes on increasing. At present the Tables make
the Planet come upon the meridian about eight seconds later than
he really does. This discrepancy has turned the thoughts of
astronomers to the effects which would result from a planet external
to Uranus. It appears that the observed motion would be explained
by applying a planet at twice the distance of Uranus from the Sun to
exercise a disturbing force, and it is found that the present longitude
of this disturbing body must be about 325 degrees.
I added, “M. Le Verrier (Comptes Rendus, Jan. 1, 1846) and, as I

am informed by the Astronomer Royal, Mr. Adams, of St. John’s
College, Cambridge, have both arrived independently at this result.”
To this Edition I added a Postscript, dated, Nov. 7, 1846, in which I

said:
“The planet exterior to Uranus, of which the existence was inferred

by M. Le Verrier and Mr. Adams from the motions of Uranus (vol. ii.
Note (l.)), has since been discovered. This confirmation of
calculations founded upon the doctrine of universal gravitation, may
be looked upon as the most remarkable event of the kind since the
return of Halley’s comet in 1757 and in some respects, as a more
striking event 555 even than that; inasmuch as the new planet had
never been seen at all, and was discovered by mathematicians
entirely by their feeling of its influence, which they perceived through
the organ of mathematical calculation.
“There can be no doubt that to M. Le Verrier belongs the glory of

having first published a prediction of the place and appearance of
the new planet, and of having thus occasioned its discovery by
astronomical observers. M. Le Verrier’s first prediction was published
in the Comptes Rendus de l’Acad. des Sciences, for June 1, 1846
(not Jan. 1, as erroneously printed in my Note). A subsequent paper
on the subject was read Aug. 31. The planet was seen by M. Galle,
at the Observatory of Berlin, on September 23, on which day he had
received an express application from M. Le Verrier, recommending
him to endeavor to recognize the stranger by its having a visible
disk. Professor Challis, at the Observatory of Cambridge, was
looking out for the new planet from July 29, and saw it on August 4,
and again on August 12, but without recognizing it, in consequence
of his plan of not comparing his observations till he had accumulated
a greater number of them. On Sept. 29, having read for the first time
M. Le Verrier’s second paper, he altered his plan, and paid attention
to the physical appearance rather than the position of the star. On
that very evening, not having then heard of M. Galle’s discovery, he
singled out the star by its seeming to have a disk.
“M. Le Verrier’s mode of discussing the circumstances of Uranus’s

motion, and inferring the new planet from these circumstances, is in
the highest degree sagacious and masterly. Justice to him cannot
require that the contemporaneous, though unpublished, labors of Mr.
Adams, of St John’s College, Cambridge, should not also be
recorded. Mr. Adams made his first calculations to account for the
anomalies in the motion of Uranus, on the hypothesis of a more
distant planet, in 1843. At first he had not taken into account the
earlier Greenwich observations; but these were supplied to him by
the Astronomer Royal, in 1844. In September, 1845, Mr. Adams
communicated to Professor Challis values of the elements of the
supposed disturbing body; namely, its mean distance, mean
longitude at a given epoch, longitude of perihelion, eccentricity of
orbit, and mass. In the next month, he communicated to the
Astronomer Royal values of the same elements, somewhat
corrected. The note (l.), vol. ii., of the present work (2d Ed.), in which
the names of MM. Le Verrier and Adams are mentioned in
conjunction, was in the press in August, 1846, a 556 month before
the planet was seen. As I have stated in the text, Mr. Adams and M.
Le Verrier assigned to the unseen planet nearly the same position;
they also assigned to it nearly the same mass; namely, 2½ times the
mass of Uranus. And hence, supposing the density to be not greater
than that of Uranus, it followed that the visible diameter would be
about 3”, an apparent magnitude not much smaller than Uranus
himself.
“M. Le Verrier has mentioned for the new planet the name
Neptunus; and probably, deference to his authority as its discoverer,
will obtain general currency for this name.”
Mr. Airy has given a very complete history of the circumstances

attending the discovery of Neptune, in the Memoirs of the
Astronomical Society (read November 13, 1846). In this he shows
that the probability of some disturbing body beyond Uranus had
suggested itself to M. A. Bouvard and Mr. Hussey as early as 1834.
Mr. Airy himself then thought that the time was not ripe for making
out the nature of any external action on the planets. But Mr. Adams
soon afterwards proceeded to work at the problem. As early as 1841
(as he himself informs me) he conjectured the existence of a planet
exterior to Uranus, and recorded in a memorandum his design of
examining its effect; but deferred the calculations till he had
completed his preparations for the University examination which he
was to undergo in January, 1843, in order to receive the Degree of
Bachelor of Arts. He was the Senior Wrangler of that occasion, and
soon afterwards proceeded to carry his design into effect; applying to
the Astronomer Royal for recorded observations which might aid him
in his task. On one of the last days of October, 1845, Mr. Adams
went to the Observatory at Greenwich; and finding the Astronomer
Royal abroad, he left there a paper containing the elements of the
extra-Uranian Planet: the longitude was in this paper stated as 323½
degrees. It was, as we have seen, in June, 1846, that M. Le Verrier’s
Memoir appeared, in which he assigned to the disturbing body a
longitude of 325 degrees. The coincidence was striking. “I cannot
sufficiently express,” says Mr. Airy, “the feeling of delight and
satisfaction which I received from the Memoir of M. Le Verrier.” This
feeling communicated itself to others. Sir John Herschel said in
September, 1846, at a meeting of the British Association at
Southampton, “We see it (the probable new planet) as Columbus
saw America from the shores of Spain. Its movements have been
felt, trembling along the far-reaching line of our analysis, with a
certainty hardly inferior to that of ocular demonstration.” 557
In truth, at the moment when this was uttered, the new Planet had
already been seen by Professor Challis; for, as we have said, he had
seen it in the early part of August. He had included it in the net which
he had cast among the stars for this very purpose; but employing a
slow and cautious process, he had deferred for a time that
examination of his capture which would have enabled him to detect
the object sought. As soon as he received M. Le Verrier’s paper of
August 31 on September 29, he was so much impressed with the
sagacity and clearness of the limitations of the field of observation
there laid down, that he instantly changed his plan of observation,
and noted the planet, as an object having a visible disk, on the
evening of the same day.
In this manner the theory of gravitation predicted and produced the

discovery. Thus to predict unknown facts found afterwards to be true,
is, as I have said, a confirmation of a theory which in impressiveness
and value goes beyond any explanation of known facts. It is a
confirmation which has only occurred a few times in the history of
science; and in the case only of the most refined and complete
theories, such as those of Astronomy and Optics. The mathematical
skill which was requisite in order to arrive at such a discovery, may in
some measure be judged of by the account which we have had to
give of the previous mathematical progress of the theory of
gravitation. It there appeared that the lives of many of the most
acute, clear-sighted, and laborious of mankind, had been employed
for generations in solving the problem. Given the planetary bodies, to
find their mutual perturbations: but here we have the inverse problem
—Given the perturbations, to find the planets. 50
50 This may be called the inverse problem with reference to the
older and more familiar problem; but we may remark that the
usual phraseology of the Problem of Central Forces differs from
this analogy. In Newton’s Principia, the earlier Sections, in which
the motion is given to find the force, are spoken of as containing
the Direct Problem of Central Forces: the Eighth Section of the
First Book, where the Force is given to find the orbit, is spoken of
as containing the Inverse Problem of Central Forces.
The Minor Planets.
The discovery of the Minor Planets which revolve between the

orbits of Mars and Jupiter was not a consequence or confirmation of
the Newtonian theory. That theory gives no reason for the distance
of 558 the Planets from the Sun; nor does any theory yet devised
give such reason. But an empirical formula proposed by the
Astronomer Bode of Berlin, gives a law of these distances (Bode’s
Law), which, to make it coherent, requires a planet between Mars
and Jupiter. With such an addition, the distance of Mercury, Venus,
Earth, Mars, the Missing Planet, Jupiter, Saturn, and Uranus, are
nearly as the numbers
4, 7, 10, 16, 28, 52, 100, 196,
in which the excesses of each number above the preceding are the
series
3, 3, 6, 12, 24, 48, 96.
On the strength of this law the Germans wrote on the long-expected
Planet, and formed themselves into associations for the discovery of
it.
Not only did this law stimulate the inquiries for the Missing Planet,
and thus lead to the discovery of the Minor Planets, but it had also a
share in the discovery of Neptune. According to the law, a planet
beyond Uranus may be expected to be at the distance represented
by 388. Mr. Adams and M. Le Verrier both of them began by
assuming a distance of nearly this magnitude for the Planet which
they sought; that is, a distance more than 38 times the earth’s
distance. It was found afterwards that the distance of Neptune is only
30 times that of the earth; yet the assumption was of essential use in
obtaining the result and Mr. Airy remarks that the history of the
discovery shows the importance of using any received theory as far
as it will go, even if the theory can claim no higher merit than that of
being plausible. 51
51 Account of the Discovery of Neptune, &c., Mem. Ast. Soc., vol.
xvi. p. 414.
The discovery of Minor Planets in a certain region of the interval

between Mars and Jupiter has gone on to such an extent, that their
number makes them assume in a peculiar manner the character of
representatives of a Missing Planet. At first, as I have said in the
text, it was supposed that all these portions must pass through or
near a common node; this opinion being founded on the very bold
doctrine, that the portions must at one time have been united in one
Planet, and must then have separated. At this node, as I have
stated, Olbers lay in wait for them, as for a hostile army at a defile.
Ceres, Pallas, and Juno had been discovered in this way in the
period from 1801 to 1804; and Vesta was caught in 1807. For a time
the chase for new planets in this region seemed to have exhausted
the stock. But after thirty-eight years, to the astonishment of
astronomers, they began to be again detected in extraordinary
numbers. In 1845, M. Hencke of 559 Driessen discovered a fifth of
these planets, which was termed Astræa. In various quarters the
chase was resumed with great ardor. In 1847 were found Hebe, Iris,
and Flora; in 1848, Metis; in 1849, Hygæa; in 1850, Parthenope,
Victoria, and Egeria; in 1861, Irene and Eunomia; in 1852, Psyche,
Thetis, Melpomene, Fortuna, Massilia, Lutetia, Calliope. To these we
have now (at the close of 1856) to add nineteen others; making up
the whole number of these Minor Planets at present known to forty-
two.
As their enumeration will show, the ancient practice has been

continued of giving to the Planets mythological names. And for a
time, till the numbers became too great, each of the Minor Planets
was designated in astronomical books by some symbol appropriate
to the character of the mythological person; as from ancient times
Mars has been denoted by a mark indicating a spear, and Venus by
one representing a looking-glass. Thus, when a Minor Planet was
discovered at London in 1851, the year in which the peace of the
world was, in a manner, celebrated by the Great Exhibition of the
Products of All Nations, held at that metropolis, the name Irene was
given to the new star, as a memorial of the auspicious time of its
discovery. And it was agreed, for awhile, that its symbol should be a
dove with an olive-branch. But the vast multitude of the Minor
Planets, as discovery went on, made any mode of designation,
except a numerical one, practically inconvenient. They are now
denoted by a small circle inclosing a figure in the order of their
discovery. Thus, Ceres is ⓵, Irene is ⑭, and Isis is ㊷.
The rapidity with which these discoveries were made was owing in
part to the formation of star-maps, in which all known fixed stars
being represented, the existence of a new and movable star might
be recognized by comparison of the sky with the map. These maps
were first constructed by astronomers of different countries at the
suggestion of the Academy of Berlin; but they have since been
greatly extended, and now include much smaller stars than were
originally laid down.
I will mention the number of planets discovered in each year. After
the start was once made, by Hencke’s discovery of Astræa in 1845,
the same astronomer discovered Hebe in 1847; and in the same
year Mr. Hind, of London, discovered two others, Iris and Flora. The
years 1848 and 1849 each supplied one; the year 1850, three; 1851,
two; 1852 was marked by the extraordinary discovery of eight new
members of the planetary system. The year 1853 supplied four;
1854, six; 1855, four; and 1856 has already given us five. 560
These discoveries have been distributed among the observatories

of Europe. The bright sky of Naples has revealed seven new planets
to the telescope of Signer Gasparis. Marseilles has given us one;
Germany, four, discovered by M. Luther at Bilk; Paris has furnished
seven; and Mr. Hind, in Mr. Bishop’s private observatory in London,
notwithstanding our turbid skies, has discovered no less than ten
planets; and there also Mr. Marth discovered ㉙ Amphitrite. Mr.
Graham, at the private observatory of Mr. Cooper, in Ireland,
discovered ⓽ Metis.
America has supplied its planet, namely ㉛ Euphrosyne,

discovered by Mr. Ferguson at Washington and the most recent of
these discoveries is that by Mr. Pogson, of Oxford, who has found
the forty-second of these Minor Planets, which has been named
Isis. 52
52 I take this list from a Memoir of M. Bruhns, Berlin, 1856.
I may add that it appears to follow from the best calculations that
the total mass of all these bodies is very small. Herschel reckoned
the diameters of Ceres at 35, and of Pallas at 26 miles. It has since
been calculated 53 that some of them are smaller still; Victoria having
a diameter of 9 miles, Lutetia of 8, and Atalanta of little more than 4.
It follows from this that the whole mass would probably be less than
the sixth part of our moon. Hence their perturbing effects on each
other or on other planets are null; but they are not the less disturbed
by the action of the other planets, and especially of Jupiter.
53 Bruhns, as above.
Anomalies in the Action of Gravitation.
The complete and exact manner in which the doctrine of

gravitation explains the motions of the Comets as well as of the
Planets, has made astronomers very bold in proposing hypotheses
to account for any deviations from the motion which the theory
requires. Thus Encke’s Comet is found to have its motion
accelerated by about one-eighth of a day in every revolution. This
result was conceived to be established by former observations, and
is confirmed by the facts of the appearance of 1852. 54 The
hypothesis which is proposed in order to explain this result is, that
the Comet moves in a resisting medium, which makes it fall inwards
from its path, towards the Sun, and thus, by narrowing its orbit,
diminishes its periodic time. On the other hand, M. Le Verrier has
found that Mercury’s mean motion has gone on diminishing; 561 as if
the planet were, in the progress of his revolutions, receding further
from the Sun. This is explained, if we suppose that there is, in the
region of Mercury, a resisting medium which moves round the Sun in
the same direction as the Planets move. Evidence of a kind of
nebulous disk surrounding the Sun, and extending beyond the orbits
of Mercury and Venus, appears to be afforded us by the
phenomenon called the Zodiacal Light; and as the Sun itself rotates
on its axis, it is most probable that this kind of atmosphere rotates
also. 55 On the other hand, M. Le Verrier conceives that the Comets
which now revolve within the ordinary planetary limits have not
always done so, but have been caught and detained by the Planets
among which they move. In this way the action of Jupiter has
brought the Comets of Faye and Vico into their present limited orbits,
as it drew the Comet of Lexell out of its known orbit, when the Comet
passed over the Planet in 1779, since which time it has not been
seen.
54 Berlin Memoirs, 1854.
55 M. Le Verrier, Annales de l’Obs. de Paris, vol. i. p. 89.
Among the examples of the boldness with which astronomers

assume the doctrine of gravitation even beyond the limits of the solar
system to be so entirely established, that hypotheses may and must
be assumed to explain any apparent irregularity of motion, we may
reckon the mode of accounting for certain supposed irregularities in
the proper motion of Sirius, which has been proposed by Bessel, and
which M. Peters thinks is proved to be true by his recent researches
(Astr. Nach. xxxi. p. 219, and xxxii. p. 1). The hypothesis is, that
Sirius has a companion star, dark, and therefore invisible to us; and
that the two, revolving round their common centre as the system
moves on, the motion of Sirius is seen to be sometimes quicker and
sometimes slower.
The Earth’s Density.
“Cavendish’s experiment,” as it is commonly called—the measure

of the attractions of manageable masses by the torsion balance, in
order to determine the density of the Earth—has been repeated
recently by Professor Reich at Freiberg, and by Mr. Baily in England,
with great attention to the means of attaining accuracy. Professor
Reich’s result for the density of the Earth is 5·44; Mr. Baily’s is 5·92.
Cavendish’s result was 5·48; according to recent revisions 56 it is
5·52.
56The calculation has been revised by M. Edward Schmidt.
Humboldt’s Kosmos, ii. p. 425.
562 But the statical effect of the attraction of manageable masses,

or even of mountains, is very small. The effect of a small change in
gravity may be accumulated by being constantly repeated in the
oscillations of a pendulum, and thus may become perceptible. Mr.
Airy attempted to determine the density of the Earth by a method
depending on this view. A pendulum oscillating at the surface was to
be compared with an equal pendulum at a great depth below the
surface. The difference of their rates would disclose the different
force of gravity at the two positions; and hence, the density of the
Earth. In 1826 and 1828, Mr. Airy attempted this experiment at the
copper mine of Dolcoath in Cornwall, but failed from various causes.
But in 1854, he resumed it at the Harton coal mine in Durham, the
depth of which is 1260 feet; having in this new trial, the advantage of
transmitting the time from one station to the other by the
instantaneous effect of galvanism, instead of by portable watches.
The result was a density of 6·56; which is much larger than the
preceding results, but, as Mr. Airy holds, is entitled to compete with
the others on at least equal terms.
Tides.
I should be wanting in the expression of gratitude to those who

have practically assisted me in Researches on the Tides, if I did not
mention the grand series of Tide Observations made on the coast of
Europe and America in June, 1835, through the authority of the
Board of Admiralty, and the interposition of the late Duke of
Wellington, at that time Foreign Secretary. Tide observations were
made for a fortnight at all the Coast-guard stations of Great Britain
and Ireland in June, 1834; and these were repeated in June, 1835,
with corresponding observations on all the coasts of Europe, from
the North Cape of Norway to the Straits of Gibraltar; and from the
mouth of the St. Lawrence to the mouth of the Mississippi. The
results of these observations, which were very complete so far as
the coast tides were concerned, were given in the Philosophical
Transactions for 1836.
Additional accuracy respecting the Tides of the North American

coast may be expected from the survey now going on under the
direction of Superintendent A. Bache. The Tides of the English
Channel have been further investigated, and the phenomena
presented under a new point of view by Admiral Beechey. 563
The Tides of the Coast of Ireland have been examined with great
care by Mr. Airy. Numerous and careful observations were made with
a view, in the first instance, of determining what was to be regarded
as “the Level of the Sea;” but the results were discussed so as to
bring into view the laws and progress, on the Irish coast, of the
various inequalities of the Tides mentioned in Chap. iv. Sect. 9 of this
Book.
I may notice as one of the curious results of the Tide Observations

of 1836, that it appeared to me, from a comparison of the
Observations, that there must be a point in the German Ocean,
about midway between Lowestoft on the English coast, and the Brill
on the Dutch coast, where the tide would vanish: and this was

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c. attending a ball game

6. Economists like to use graphs and equations primarily because

7. The opportunity cost of undertaking an activity is defined as the _____ activity.

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9. Microeconomics is concerned with issues such as

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b. based on recent case studies.

12. Which statement about economic models is FALSE?

13. Production efficiency occurs when goods are

15. Which statement is NOT considered a key principle of economics?

18. Which concept would be addressed by microeconomics?

19. Economists believe that

21. Scarcity occurs when an individual's resources exceed his wants.

23. Supply and demand analysis is used

26. Which topic is a macroeconomic topic?

28. Which statement is NOT true?

29. When specialization is used

30. Which statement is NOT a key principle of economics?

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34. Economists look for rational responses to incentives.

37. The opportunity costs of attending college do NOT include

39. Which statement does NOT involve thinking at the margin?

40. Which statement is NOT true of economic model building?

44. Which statement about economic models is TRUE?

45. Which statement is a characteristic of economic models?

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51. The problem of the medically uninsured involves

a. sales = 1,500 + 2 × advertising

57. Excessive pollution is an example of market failure.

58. A nation's standard of living is primarily a function of

a. natural resource availability.

59. (Figure: Graph Examples) Which graph is an example of a scatter plot?

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62. Government intervention in the market is helpful when

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73. The answers to normative questions

74. The purpose of invoking ceteris paribus is to

76. In the equation Y = b – aX, a is the intercept.

77. Which statement is CORRECT?

a. The slope of the curve between 1 and 2 tons of fertilizer is approximately 2.

81. Economic models must fully reflect reality.

83. Tax policy is partly based on the notion that

84. Which of these is NOT an example of market failure?

86. _____ people are forced to make tradeoffs.

87. The situation in which markets fail to provide efficiently is called

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91. Which statement regarding macroeconomics and microeconomics is TRUE?

92. When government policies are being designed

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a. A person with 13 years of education can expect to earn $25,000.

94. Thinking at the margin is defined as maximizing a firm's or individual's well-being.

97. Efficiency within economics focuses on