Chapter 1: An Introduction to Microeconomics
1. The test of a theory is
A) whether its assumptions are realistic.
B) whether it predicts well.
C) who developed the theory.
D) whether it incorporates every relevant factor bearing on the analysis.
Difficulty: E Source: 1-2 Type: F
2. Positive analysis
A) draws on accepted bodies of theory and evidence to ascertain the likely consequences of a policy or
action.
B) is always used to evaluate proposed policy changes in the most positive way.
C) is all that is needed to determine whether a policy is desirable or undesirable.
D) rejects the notion that the impact of policies can be quantified because of data difficulties.
Difficulty: E Source: 1-3 Type: F
3. The relative price of a good
A) is always measured in current dollars.
B) is a measure of the relative share of the consumer's income devoted to its purchase.
C) reflects its price compared to other prices.
D) is equal to the average price of the good over the last five years.
Difficulty: M Source: 1-4 Type: F
4. Value judgments
A) always produce predictable results.
,B) are subjective opinions that cannot be proven correct on the basis of objective facts or evidence.
C) should be the basis for all serious policy discussion.
D) can always be tested and verified using accepted standards of logic and evidence.
Difficulty: E Source: 1-3 Type: F
5. To be useful, a theory must
A) be realistic.
B) predict well.
C) account for all relevant facts and relationships.
D) have realistic assumptions.
Difficulty: E Source: 1-2 Type: F
6. Positive economic analysis utilizes
A) value judgments of highly trained professional economists.
B) economic theories and empirical tests of the theories.
C) normative economic theories in arriving at judgments on the suitability of a change in government
economic policy.
D) the same criteria as normative economics, but does not take into consideration the value judgments of
the policy makers.
Difficulty: M Source: 1-3 Type: F
7. Which of the following is an example of a positive economic statement?
A) The distribution of income in the United States should be more equal.
B) The after-tax distribution of income is more equal than the pre-tax distribution of income.
C) The tax system should be more progressive so the after-tax distribution of income can be more equal.
D) The government should not be involved in redistribution of income schemes.
Difficulty: E Source: 1-3 Type: A
,
, 8. The behavior of buyers and sellers depends on
A) relative prices of goods and services.
B) money prices of goods and services.
C) absolute prices of goods and services.
D) money prices during inflations and absolute prices during deflations.
Difficulty: M Source: 1-3 Type: F
9. Price theory is another name for
A) economics.
B) macroeconomics.
C) microeconomics.
D) positive economics.
Difficulty: E Source: 1-1 Type: F
10. Theory A is better than Theory B if
A) the assumptions of A are more realistic than the assumptions of B.
B) A takes into consideration more facts than B.
C) A predicts or explains better than B.
D) A uses more mathematics than B.
Difficulty: M Source: 1-2 Type: F
11. Positive economics differs from normative economics in that
A) positive economics involves subjective outcomes.
B) positive economics deals with propositions that can be tested.
C) normative economics involves economic theory.
D) normative economics can be proved correct or incorrect.
1. The test of a theory is
A) whether its assumptions are realistic.
B) whether it predicts well.
C) who developed the theory.
D) whether it incorporates every relevant factor bearing on the analysis.
Difficulty: E Source: 1-2 Type: F
2. Positive analysis
A) draws on accepted bodies of theory and evidence to ascertain the likely consequences of a policy or
action.
B) is always used to evaluate proposed policy changes in the most positive way.
C) is all that is needed to determine whether a policy is desirable or undesirable.
D) rejects the notion that the impact of policies can be quantified because of data difficulties.
Difficulty: E Source: 1-3 Type: F
3. The relative price of a good
A) is always measured in current dollars.
B) is a measure of the relative share of the consumer's income devoted to its purchase.
C) reflects its price compared to other prices.
D) is equal to the average price of the good over the last five years.
Difficulty: M Source: 1-4 Type: F
4. Value judgments
A) always produce predictable results.
,B) are subjective opinions that cannot be proven correct on the basis of objective facts or evidence.
C) should be the basis for all serious policy discussion.
D) can always be tested and verified using accepted standards of logic and evidence.
Difficulty: E Source: 1-3 Type: F
5. To be useful, a theory must
A) be realistic.
B) predict well.
C) account for all relevant facts and relationships.
D) have realistic assumptions.
Difficulty: E Source: 1-2 Type: F
6. Positive economic analysis utilizes
A) value judgments of highly trained professional economists.
B) economic theories and empirical tests of the theories.
C) normative economic theories in arriving at judgments on the suitability of a change in government
economic policy.
D) the same criteria as normative economics, but does not take into consideration the value judgments of
the policy makers.
Difficulty: M Source: 1-3 Type: F
7. Which of the following is an example of a positive economic statement?
A) The distribution of income in the United States should be more equal.
B) The after-tax distribution of income is more equal than the pre-tax distribution of income.
C) The tax system should be more progressive so the after-tax distribution of income can be more equal.
D) The government should not be involved in redistribution of income schemes.
Difficulty: E Source: 1-3 Type: A
,
, 8. The behavior of buyers and sellers depends on
A) relative prices of goods and services.
B) money prices of goods and services.
C) absolute prices of goods and services.
D) money prices during inflations and absolute prices during deflations.
Difficulty: M Source: 1-3 Type: F
9. Price theory is another name for
A) economics.
B) macroeconomics.
C) microeconomics.
D) positive economics.
Difficulty: E Source: 1-1 Type: F
10. Theory A is better than Theory B if
A) the assumptions of A are more realistic than the assumptions of B.
B) A takes into consideration more facts than B.
C) A predicts or explains better than B.
D) A uses more mathematics than B.
Difficulty: M Source: 1-2 Type: F
11. Positive economics differs from normative economics in that
A) positive economics involves subjective outcomes.
B) positive economics deals with propositions that can be tested.
C) normative economics involves economic theory.
D) normative economics can be proved correct or incorrect.
