Question: A well-tested economic theory is often called:

Answer: principle

Question: The scientific method is

Answer: used by economists and other social scientists, as well as by physical scientists and life scientists, to formulate and test hypotheses.

Question: The process by which economists test hypotheses against facts to develop theories, principles, and models is called

Answer: the scientific method.

Question: Economic theories

Answer: are generalizations based on hypotheses tested and supported with observed facts.

Question: Which of the following is a correct statement?

Answer: Although they are generalizations, economic laws are useful because they allow us to predict and therefore influence or adjust to events.

Question: In constructing models, economists

Answer: make simplifying assumptions

Question: The Latin term "ceteris paribus" means

Answer: other things equal

Question: The basic purpose of the other-things-equal assumption is to

Answer: allow one to reason about the relationship between variables X and Y without the intrusion of variable Z.

Question: The term "other things equal" means that

Answer: a number of relevant variables are assumed to be constant

Question: Kelly works at an ice cream shop and observes that the number of people buying ice cream varies greatly from day to day. For a couple of weeks, she has recorded the number of people at the shop each day, as well as the daily temperature. If Kelly is using the scientific method to better understand ice cream buying habits, her next step is to

Answer: use the observed data to form a hypothesis about ice cream buying behavior.

Question: Macroeconomics approaches the study of economics from the viewpoint of

Answer: the entire economy

Question: Which of the following is associated with macroeconomics?

Answer: an empirical investigation of the general price level and unemployment rates since 1990

Question: The issues of inflation, unemployment, and business cycles are

Answer: major topics of macroeconomics

Question: Which of the following statements pertains to macroeconomics?

Answer: National income grew by 2.7 percent last year.

Question: Macroeconomics can best be described as the

Answer: study of the large aggregates of the economy or the economy as a whole.

Question: Microeconomics is concerned with

Answer: a detailed examination of specific economic units that make up the economic system.

Question: Which of the following is a microeconomic statement?

Answer: The price of smartphones declined 2.8 percent last year.

Question: Which of the following statements is true?

Answer: Microeconomics focuses on specific decision-making units of the economy; macroeconomics examines the economy as a whole.

Question: A normative statement is one that

Answer: is based on value judgments.

Question: A positive statement is one that

Answer: focuses on facts, descriptions, and theoretical relationships.

Question: Which of the following is a positive statement?

Answer: The temperature is 92 degrees today.

Question: Normative statements are concerned primarily with

Answer: what ought to be

Question: A positive statement is concerned primarily with

Answer: what is.

Question: "Economics is concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity." This statement is

Answer: positive and correct

Question: Ben says that "an increase in the tax on beer will raise its price." Holly argues that "taxes should be increased on beer because college students drink too much." We can conclude that

Answer: Holly's statement is normative, but Ben's is positive.

Question: "Macroeconomics is the part of economics concerned with individual units, such as a person, a household, a firm, or an industry." This statement is

Answer: positive but incorrect

Question: The economizing problem is

Answer: the need to make choices because economic wants exceed economic means

Question: The economizing problem is one of deciding how to make the best use of

Answer: limited resources to satisfy virtually unlimited wants.

Question: Scarcity

Answer: persists because economic wants exceed available resources.

Question: The study of economics is primarily concerned with

Answer: choices that are made in seeking the best use of resources.

Question: Economics may best be defined as the

Answer: the social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity

Question: The study of economics is primarily concerned with

Answer: choices that are made in seeking the best use of resources

Question: Opportunity costs exist because

Answer: the decision to engage in one activity means forgoing some other activity.

Question: The assertion that "there is no free lunch" means that

Answer: all production involves the use of scarce resources and thus the sacrifice of alternative goods.

Question: Consumers spend their incomes to get the maximum benefit or satisfaction from the goods and services they purchase. This is a reflection of

Answer: purposeful behavior

Question: If someone produced too little of a good, this would suggest that

Answer: the good was produced to the point where its marginal benefit exceeded its marginal cost.