ECN Exam 1| Ques ons and answers | Updated RATED
A+ 100% CORRECT
"We should support the market because it is efficient" is an example of:
norma ve economics.
Posi ve economics is:
more objec ve than norma ve economics.
Scarcity exists because:
new wants con nue to develop and willingness to meet them is limited.
Your opportunity cost of taking this course is the:
net benefit of the ac vity you would have chosen if you had not taken the course.
The marginal benefit of another T-shirt this month to Mary is $15. If the $10 price of a T-shirt
reflects its marginal cost to Mary and Mary uses economic reasoning, she:
will buy another T-shirt this month.
a. Which of the following are microeconomic problems?
The pricing policies of firms
How wages are determined in labor markets
b. Which of the following are macroeconomic problems?
Unemployment
Infla on
Economists Henry Saffer of Kean University, Frank J. Chaloupka of the University of Illinois at
Chicago, and Dhaval Dave of Bentley College es mated that the government must spend $4,170
on drug control to deter one person from using drugs and that the cost one drug user imposes
on society is $897. Based on this informa on alone, should the government spend the money
on drug control?
No, since the marginal cost of drug control exceeds the marginal benefit, the government
should not spend $4,170 to deter one person from using drugs. Correct
,What is the difference between norma ve and posi ve statements?
A. Norma ve statements
B.Posi ve statements
A. reflect ethical judgements about what should be. It reflects values.
B. refer to a fact or a logical rela onship. It is in principle testable or is the result of logic
analysis.
State whether the following are primarily microeconomic or macroeconomic policy issues.
a. Should U.S. interest rates be lowered to decrease the amount of unemployment?
b. Will the fact that more and more doctors are selling their prac ces to managed care networks
increase the efficiency of medical providers?
c. Should the current federal income tax be lowered to reduce unemployment?
d. Should the federal minimum wage be raised?
e. Should Sprint and Verizon both be allowed to build local phone networks?
f. Should commercial banks be required to provide loans in all areas of the territory from which
they accept deposits?
a. Macroeconomic
b. Microeconomic
c. Macroeconomic
d. Microeconomic with macroeconomic implica ons
e. Microeconomic
f. Microeconomic Correct
State whether the following statements belong in posi ve economics, norma ve economics, or
the art of economics.
a. In a market, when quan ty supplied exceeds quan ty demanded, price tends to fall.
b. When determining tax rates, the government should take into account the income needs of
individuals.
, c. Given society's op ons and goals, a broad-based tax is generally preferred to a narrowly-
based tax.
d. California currently ra ons water to farmers at subsidized prices. Once California allows the
trading of water rights, it will allow economic forces to be a market force.
a. Posi ve economics
b. Norma ve economics
c. Could be either norma ve economics or art of economics
d. Posi ve economics
Suppose you currently earn $35,000 a year. You are considering a job that will increase your
life me earnings by $350,000 but that requires an MBA. The job will mean also aFending
business school for two years at an annual cost of $20,000. You already have a bachelor's
degree, for which you spent $95,000 in tui on and books.
Which of the above informa on is relevant to your decision on whether to take the job?
The relevant costs are the opportunity cost of taking the job (forgone earnings from your
current job) and other things you could have done with the money you need to pay for business
school. The tui on for the bachelor's degree is a sunk cost and is not relevant. The relevant
benefit is the increased life me earnings of $350,000.
Does economic theory prove that the free market system is best?
Why?
A. No
B. It simply gives ways to look at systems and determine what the advantages and
disadvantages of various systems will likely be. Norma ve decisions about what is best can only
follow from one's value judgments.
Two examples of poli cal or legal forces that interact with market forces are
rent control laws and restric ons on immigra on.
What is the opportunity cost of buying a $20,000 car?
The benefit from spending that $20,000 on the next-best alterna ve
Suppose your college has been given $5 million. You have been asked to decide how to spend it
to improve your college. Use the economic decision rule and the concept of opportunity costs
to decide how to spend it.
A+ 100% CORRECT
"We should support the market because it is efficient" is an example of:
norma ve economics.
Posi ve economics is:
more objec ve than norma ve economics.
Scarcity exists because:
new wants con nue to develop and willingness to meet them is limited.
Your opportunity cost of taking this course is the:
net benefit of the ac vity you would have chosen if you had not taken the course.
The marginal benefit of another T-shirt this month to Mary is $15. If the $10 price of a T-shirt
reflects its marginal cost to Mary and Mary uses economic reasoning, she:
will buy another T-shirt this month.
a. Which of the following are microeconomic problems?
The pricing policies of firms
How wages are determined in labor markets
b. Which of the following are macroeconomic problems?
Unemployment
Infla on
Economists Henry Saffer of Kean University, Frank J. Chaloupka of the University of Illinois at
Chicago, and Dhaval Dave of Bentley College es mated that the government must spend $4,170
on drug control to deter one person from using drugs and that the cost one drug user imposes
on society is $897. Based on this informa on alone, should the government spend the money
on drug control?
No, since the marginal cost of drug control exceeds the marginal benefit, the government
should not spend $4,170 to deter one person from using drugs. Correct
,What is the difference between norma ve and posi ve statements?
A. Norma ve statements
B.Posi ve statements
A. reflect ethical judgements about what should be. It reflects values.
B. refer to a fact or a logical rela onship. It is in principle testable or is the result of logic
analysis.
State whether the following are primarily microeconomic or macroeconomic policy issues.
a. Should U.S. interest rates be lowered to decrease the amount of unemployment?
b. Will the fact that more and more doctors are selling their prac ces to managed care networks
increase the efficiency of medical providers?
c. Should the current federal income tax be lowered to reduce unemployment?
d. Should the federal minimum wage be raised?
e. Should Sprint and Verizon both be allowed to build local phone networks?
f. Should commercial banks be required to provide loans in all areas of the territory from which
they accept deposits?
a. Macroeconomic
b. Microeconomic
c. Macroeconomic
d. Microeconomic with macroeconomic implica ons
e. Microeconomic
f. Microeconomic Correct
State whether the following statements belong in posi ve economics, norma ve economics, or
the art of economics.
a. In a market, when quan ty supplied exceeds quan ty demanded, price tends to fall.
b. When determining tax rates, the government should take into account the income needs of
individuals.
, c. Given society's op ons and goals, a broad-based tax is generally preferred to a narrowly-
based tax.
d. California currently ra ons water to farmers at subsidized prices. Once California allows the
trading of water rights, it will allow economic forces to be a market force.
a. Posi ve economics
b. Norma ve economics
c. Could be either norma ve economics or art of economics
d. Posi ve economics
Suppose you currently earn $35,000 a year. You are considering a job that will increase your
life me earnings by $350,000 but that requires an MBA. The job will mean also aFending
business school for two years at an annual cost of $20,000. You already have a bachelor's
degree, for which you spent $95,000 in tui on and books.
Which of the above informa on is relevant to your decision on whether to take the job?
The relevant costs are the opportunity cost of taking the job (forgone earnings from your
current job) and other things you could have done with the money you need to pay for business
school. The tui on for the bachelor's degree is a sunk cost and is not relevant. The relevant
benefit is the increased life me earnings of $350,000.
Does economic theory prove that the free market system is best?
Why?
A. No
B. It simply gives ways to look at systems and determine what the advantages and
disadvantages of various systems will likely be. Norma ve decisions about what is best can only
follow from one's value judgments.
Two examples of poli cal or legal forces that interact with market forces are
rent control laws and restric ons on immigra on.
What is the opportunity cost of buying a $20,000 car?
The benefit from spending that $20,000 on the next-best alterna ve
Suppose your college has been given $5 million. You have been asked to decide how to spend it
to improve your college. Use the economic decision rule and the concept of opportunity costs
to decide how to spend it.
