The decision of which assumptions to make is
A.        Usually regarded as an art in scientific thinking.
B.        Not a particularly important decision for an economist.
C.        Usually regarded as the easiest part of the scientific method.
D.        An easy decision for an economist, but a difficult decision for a physicist or a chemist.
2) Economic models
A.        Must incorporate all aspects of the economy if those models are to be useful.
B.        Were once thought to be useful, but that is no longer true.
C.        Can be useful, even if they are not particularly realistic.
D.        Cannot be useful if they are based on false assumptions

3) When studying the effects of public policy changes, economists
A.        Always refrain from making assumptions.
B.        Consider only the short-run effects of those policy changes and not the long-run effects.
C.        Sometimes make different assumptions about the short run and the long run.
D.        Consider only the direct effects of those policy changes and not the indirect effects.

4) A competitive market is a market in which
A.        An auctioneer helps set prices and arrange sales.
B.        No individual buyer or seller has any significant impact on the market price.
C.        There are only a few sellers.
D.        The forces of supply and demand do not apply.

5) In a market economy,
A.        Supply determines demand and, in turn, demand determines prices.
B.        Supply and demand determine prices and, in turn, prices allocate scarce resources.
C.        Demand determines supply and, in turn, supply determines prices.
D.        The allocation of scarce resources determines prices and, in turn, prices determine supply and demand.

6) Which of the following statements is correct?
A.        Buyers determine supply and sellers determine demand.
B.        Buyers and sellers as one group determine demand, but only sellers determine supply.
C.        Buyers determine demand and sellers determine supply.
D.        Buyers and sellers as one group determine supply, but only buyers determine demand.

7) If a decrease in income increases the demand for a good, then the good is
A.        A substitute good.
B.        An inferior good.
C.        A complement good.
D.        A normal good
8) A likely example of substitute goods for most people would be
A.        Peanut butter and jelly.
B.        Pencils and pens.
C.        Tennis balls and tennis rackets.
D.        Televisions and subscriptions to cable television services.
9) Economists in general
A.        Do not try to explain people’s tastes, but they do try to explain what happens when tastes change.
B.        Incorporate tastes into economic models only to the extent that tastes determine whether pairs of goods are substitutes or complements.
C.        Believe that they must be able to explain people’s tastes in order to explain what happens when tastes change.
D.        Do not believe that people’s tastes determine demand and therefore they ignore the subject of tastes
10) A decrease in input costs to firms in a market will result in
A.        A decrease in equilibrium price and an increase in equilibrium quantity.
B.        An increase in equilibrium price and an increase in equilibrium quantity.
C.        A decrease in equilibrium price and a decrease in equilibrium quantity.
D.        An increase in equilibrium price and no change in equilibrium quantity.
11) Another term for equilibrium price is
A.        Dynamic price.
B.        Satisfactory price.
C.        Market-clearing price.
D.        Quantity-defining price
12) The unique point at which the supply and demand curves intersect is called
A.        Market harmony.
B.        Equilibrium.
C.        Coincidence.
D.        Cohesion.
13) The marginal product of labor is equal to the
A.         incremental cost associated with a one unit increase in labor.
B.         increase in output obtained from a one unit increase in labor.
C.         incremental profit associated with a one unit increase in labor.
D.         increase in labor necessary to generate a one unit increase in output.

14) When a firm’s only variable input is labor, then the slope of the production function measures the
A.         total cost.
B.         quantity of labor.
C.         quantity of output.
D.         marginal product of labor

15) On a 100-acre farm, a farmer is able to produce 3,000 bushels of wheat when he hires 2 workers. He is able to produce 4,400 bushels of wheat when he hires 3 workers. Which of the following possibilities is consistent with the property of diminishing marginal product?
A.         The farmer is able to produce 5,600 bushels of wheat when he hires 4 workers.
B.         The farmer is able to produce 5,800 bushels of wheat when he hires 4 workers.
C.         The farmer is able to produce 6,000 bushels of wheat when he hires 4 workers.
D.         All of these are correct.

16) A Luddite would be expected to fear
A.         supply-shifting technologies.
B.         labor-saving technologies.
C.         labor-augmenting technologies.
D.         the Chairman of the Federal Reserve

17) The term Luddite is used to describe
A.         a person who opposes technological advances.
B.         a person who readily adopts the latest technological advances.
C.         a person who fears computers.
D.         any mythical historical figure.

18) Suppose that a new invention decreases the marginal productivity of labor, shifting labor demand to the left. Such an invention would be an example of
A.         Luddite technology.