Question 1

In the circular-flow diagram, an individual or a group of people (usually a family) who share their income is a(n):

Accepted Answer

A)  market. 
B)  factor. 
C)  household. 
D)  business. 
A)  market. 
B)  factor. 
C)  household. 
D)  business.

Question 2

The basis of the circular-flow diagram is that the money flowing into each sector or market is greater than the money that flows out.

Accepted Answer

A) True 
 B)False

Question 3

Use the following to answer questions:
\  
-(Figure: Production Possibilities and Circular-Flow Diagram) Use Figure: Production Possibilities and Circular-Flow Diagram. Assume the two figures represent the same economy. Suppose that in the circular-flow diagram most firms undergo a significant increase in productivity. This results in a significant increase in the output of both coconuts and fish. If all other variables remain unchanged, then the adjustment in this economy would be BEST represented in the production possibilities figure by a movement from point A toward:

Accepted Answer

A)  point A (no movement). 
B)  point B (a decrease in coconut production and an increase in fish production). 
C)  point C (a decrease in coconut production). 
D)  point D (an outward shift of the entire curve). 
A)  point A (no movement). 
B)  point B (a decrease in coconut production and an increase in fish production). 
C)  point C (a decrease in coconut production). 
D)  point D (an outward shift of the entire curve).

Question 4

The slope of a straight line is the ratio of the:

Accepted Answer

A)  vertical change to the horizontal change. 
B)  horizontal change to the vertical change. 
C)  run over the rise. 
D)  vertical change to the horizontal change, and it must be positive. 
A)  vertical change to the horizontal change. 
B)  horizontal change to the vertical change. 
C)  run over the rise. 
D)  vertical change to the horizontal change, and it must be positive.

Question 5

The production possibility frontier illustrates:

Accepted Answer

A)  the maximum quantity of one good that can be produced given the quantity of the other good produced. 
B)  that, when markets don't achieve efficiency, government intervention can improve society's welfare. 
C)  the inverse relation between price and quantity of a particular good. 
D)  that people usually exploit opportunities to make themselves better off. 
A)  the maximum quantity of one good that can be produced given the quantity of the other good produced. 
B)  that, when markets don't achieve efficiency, government intervention can improve society's welfare. 
C)  the inverse relation between price and quantity of a particular good. 
D)  that people usually exploit opportunities to make themselves better off.

Question 6

"Teachers in northern New Hampshire should earn more money" is a normative statement.

Accepted Answer

A) True 
 B)False

Question 7

Use the following to answer questions:  
-(Table: Price, Quantity Demanded, and Quantity Supplied) Use Table: Price, Quantity Demanded, and Quantity Supplied. A linear relationship exists between:

Accepted Answer

A)  price and quantity demanded. 
B)  price and quantity supplied. 
C)  price and quantity demanded minus quantity supplied. 
D)  quantity demanded and quantity supplied. 
A)  price and quantity demanded. 
B)  price and quantity supplied. 
C)  price and quantity demanded minus quantity supplied. 
D)  quantity demanded and quantity supplied.

Question 8

An economy is said to have a comparative advantage in the production of a good if it can produce that good:

Accepted Answer

A)  with more resources than another economy. 
B)  at a higher opportunity cost than another economy. 
C)  outside its production possibility frontier. 
D)  at a lower opportunity cost than another economy. 
A)  with more resources than another economy. 
B)  at a higher opportunity cost than another economy. 
C)  outside its production possibility frontier. 
D)  at a lower opportunity cost than another economy.

Question 9

Use the following to answer questions:
\  
-(Table: Production Possibilities Schedule I) Use Table: Production Possibilities Schedule I. If the economy produces 10 units of capital goods per period, it also can produce, at MOST, _____ units of consumer goods per period.

Accepted Answer

A)  5 
B)  4 
C)  3 
D)  2 
A)  5 
B)  4 
C)  3 
D)  2

Question 10

Which of the following is sold in the factor market?

Accepted Answer

A)  hot dogs 
B)  bulldozers 
C)  nail polish 
D)  appendectomies 
A)  hot dogs 
B)  bulldozers 
C)  nail polish 
D)  appendectomies

Question 11

Businesses buy resources used to produce goods and services in the:

Accepted Answer

A)  factor market. 
B)  product market. 
C)  market for goods and services. 
D)  foreign exchange market. 
A)  factor market. 
B)  product market. 
C)  market for goods and services. 
D)  foreign exchange market.

Question 12

Use the following to answer questions:
\  
-(Table: Coffee and Salmon Production Possibilities) Use Table: Coffee and Salmon Production Possibilities. The table shows the maximum amounts of coffee and salmon that Brazil and Alaska can produce if they just produce one good. The opportunity cost of producing 1 unit of coffee for Brazil is _____ salmon.

Accepted Answer

A)  2 
B)  0.25 
C)  1 
D)  0.5 
A)  2 
B)  0.25 
C)  1 
D)  0.5

Question 13

If two variables are negatively related:

Accepted Answer

A)  as one goes up in value, the other must go up in value, too. 
B)  as one goes up in value, the other must go down in value. 
C)  there is no relationship between the two. 
D)  one variable is always the reciprocal of the other. 
A)  as one goes up in value, the other must go up in value, too. 
B)  as one goes up in value, the other must go down in value. 
C)  there is no relationship between the two. 
D)  one variable is always the reciprocal of the other.

Question 14

In building models, economists often assume that opportunity costs don't matter.

Accepted Answer

A) True 
 B)False

Question 15

Which statement is normative?

Accepted Answer

A)  Government has grown too large and should be reduced. 
B)  The rate of inflation has increased. 
C)  Government is subject to the same rules as all other institutions. 
D)  The money supply grew by 3% last year. 
A)  Government has grown too large and should be reduced. 
B)  The rate of inflation has increased. 
C)  Government is subject to the same rules as all other institutions. 
D)  The money supply grew by 3% last year.

Question 16

Which of the following is sold in the product market?

Accepted Answer

A)  land 
B)  labor 
C)  cell phones 
D)  human capital 
A)  land 
B)  labor 
C)  cell phones 
D)  human capital

Question 17

In the circular-flow diagram, firms buy _____ in the _____ market.

Accepted Answer

A)  goods and services; product 
B)  goods and services; factor 
C)  resources; product 
D)  resources; factor 
A)  goods and services; product 
B)  goods and services; factor 
C)  resources; product 
D)  resources; factor

Question 18

Use the following to answer questions:
\  
-(Figure: Production Possibility Frontier) Use Figure: Production Possibilities Frontier. This production possibility frontier is:

Accepted Answer

A)  bowed out because of increasing opportunity costs. 
B)  bowed in because of increasing opportunity costs. 
C)  bowed out because of constant cost of cars and computers. 
D)  linear because of constant costs. 
A)  bowed out because of increasing opportunity costs. 
B)  bowed in because of increasing opportunity costs. 
C)  bowed out because of constant cost of cars and computers. 
D)  linear because of constant costs.

Question 19

Which statement is positive?

Accepted Answer

A)  The poverty rate is 14%. 
B)  A high rate of inflation is the most important economic goal for the country. 
C)  Everyone in the country should save money for retirement. 
D)  Basketball players should not be paid higher salaries than are teachers. 
A)  The poverty rate is 14%. 
B)  A high rate of inflation is the most important economic goal for the country. 
C)  Everyone in the country should save money for retirement. 
D)  Basketball players should not be paid higher salaries than are teachers.

Question 20

Use the following to answer questions:
\  
-(Table: Comparative Advantage I) Use Table: Comparative Advantage I. Finland has an absolute advantage in producing:

Accepted Answer

A)  cell phones only. 
B)  herring only. 
C)  both cell phones and herring. 
D)  neither cell phones nor herring. 
A)  cell phones only. 
B)  herring only. 
C)  both cell phones and herring. 
D)  neither cell phones nor herring.

In the circular-flow diagram, an individual or a group of people (usually a family) who share their income is a(n):

The basis of the circular-flow diagram is that the money flowing into each sector or market is greater than the money that flows out.

The slope of a straight line is the ratio of the:

The production possibility frontier illustrates:

"Teachers in northern New Hampshire should earn more money" is a normative statement.

Use the following to answer questions: -(Table: Price, Quantity Demanded, and Quantity Supplied) Use Table: Price, Quantity Demanded, and Quantity Supplied. A linear relationship exists between:

An economy is said to have a comparative advantage in the production of a good if it can produce that good:

Which of the following is sold in the factor market?

Businesses buy resources used to produce goods and services in the:

If two variables are negatively related:

In building models, economists often assume that opportunity costs don't matter.

Which statement is normative?

Which of the following is sold in the product market?

In the circular-flow diagram, firms buy _ in the _ market.

Which statement is positive?

First Principles

Supply and Demand

Price Controls and Quotas: Meddling With Markets

International Trade

Macroeconomics: the Big Picture

GDP and the CPI: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial Syst

Income and Expenditure

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Macroeconomics: Events and Ideas

International Macroeconomics

Filters

Exam 2: Economic Models: Trade-Offs and Trade

In the circular-flow diagram, an individual or a group of people (usually a family) who share their income is a(n):

The basis of the circular-flow diagram is that the money flowing into each sector or market is greater than the money that flows out.

The slope of a straight line is the ratio of the:

The production possibility frontier illustrates:

"Teachers in northern New Hampshire should earn more money" is a normative statement.

Use the following to answer questions: -(Table: Price, Quantity Demanded, and Quantity Supplied) Use Table: Price, Quantity Demanded, and Quantity Supplied. A linear relationship exists between:

An economy is said to have a comparative advantage in the production of a good if it can produce that good:

Use the following to answer questions: \\ -(Table: Production Possibilities Schedule I) Use Table: Production Possibilities Schedule I. If the economy produces 10 units of capital goods per period, it also can produce, at MOST, _____ units of consumer goods per period.

Which of the following is sold in the factor market?

Businesses buy resources used to produce goods and services in the:

If two variables are negatively related:

In building models, economists often assume that opportunity costs don't matter.

Which statement is normative?

Which of the following is sold in the product market?

In the circular-flow diagram, firms buy _____ in the _____ market.

Use the following to answer questions: \\ -(Figure: Production Possibility Frontier) Use Figure: Production Possibilities Frontier. This production possibility frontier is:

Which statement is positive?

Use the following to answer questions: \\ -(Table: Comparative Advantage I) Use Table: Comparative Advantage I. Finland has an absolute advantage in producing:

First Principles

Supply and Demand

Price Controls and Quotas: Meddling With Markets

International Trade

Macroeconomics: the Big Picture

GDP and the CPI: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial Syst

Income and Expenditure

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Macroeconomics: Events and Ideas

International Macroeconomics

Filters

In the circular-flow diagram, firms buy _ in the _ market.