Question 1

Sometimes economists disagree because their values differ. Which of the following instances best reflects this source of disagreement?

Accepted Answer

A) One economist believes the North American Free Trade Agreement (NAFT
A)  has led to a loss of American jobs; another economist disputes this claim. 
B) One economist believes that when income taxes are cut, people will increase their spending; another economist believes that when income taxes are cut, people will increase their saving. 
C) One economist advises against increases in sales taxes because she thinks such increases are unfair to low-income people; another economist disputes the idea that increases in sales taxes are unfair to low-income people. 
D) One economist believes that, prior to the Civil War, slavery contributed to economic growth in the South; another economist believes that slavery held back the South's economic growth. 
A) One economist believes the North American Free Trade Agreement (NAFT
A)  has led to a loss of American jobs; another economist disputes this claim. 
B) One economist believes that when income taxes are cut, people will increase their spending; another economist believes that when income taxes are cut, people will increase their saving. 
C) One economist advises against increases in sales taxes because she thinks such increases are unfair to low-income people; another economist disputes the idea that increases in sales taxes are unfair to low-income people. 
D) One economist believes that, prior to the Civil War, slavery contributed to economic growth in the South; another economist believes that slavery held back the South's economic growth.

Question 2

A circular-flow diagram is a visual model of the economy.

Accepted Answer

A) True 
 B)False

Question 3

Economists view positive statements as

Accepted Answer

A) affirmative, justifying existing economic policy. 
B) optimistic, putting the best possible interpretation on things. 
C) descriptive, making a claim about how the world is. 
D) prescriptive, making a claim about how the world ought to be. 
A) affirmative, justifying existing economic policy. 
B) optimistic, putting the best possible interpretation on things. 
C) descriptive, making a claim about how the world is. 
D) prescriptive, making a claim about how the world ought to be.

Question 4

The President receives economic policy advice from economists at each of the following except

Accepted Answer

A) the Council of Economic Advisors. 
B) the Department of the Treasury. 
C) the Congressional Budget office. 
D) the Department of Labor. 
A) the Council of Economic Advisors. 
B) the Department of the Treasury. 
C) the Congressional Budget office. 
D) the Department of Labor.

Question 5

When two variables have a negative correlation and the x-variable decreases,

Accepted Answer

A) the y-variable increases. 
B) the y-variable decreases. 
C) the y-variable stays the same. 
D) the x-variable can never be positive. 
A) the y-variable increases. 
B) the y-variable decreases. 
C) the y-variable stays the same. 
D) the x-variable can never be positive.

Question 6

Figure 2-16​  
-Refer to Figure 2-16. It is not possible for this economy to produce at point

Accepted Answer

A) A. 
B) B. 
C) C. 
D) D. 
A) A. 
B) B. 
C) C. 
D) D.

Question 7

Economists make assumptions to

Accepted Answer

A) mimic the methodologies employed by other scientists. 
B) minimize the number of experiments that yield no useful data. 
C) minimize the likelihood that some aspect of the problem at hand is being overlooked. 
D) focus their thinking on the essence of the problem at hand. 
A) mimic the methodologies employed by other scientists. 
B) minimize the number of experiments that yield no useful data. 
C) minimize the likelihood that some aspect of the problem at hand is being overlooked. 
D) focus their thinking on the essence of the problem at hand.

Question 8

Which of the following is not an example of a positive, as opposed to normative, statement?

Accepted Answer

A) Higher gasoline prices will reduce gasoline consumption. 
B) Equality is more important than efficiency. 
C) Trade restrictions lower our standard of living. 
D) If a nation wants to avoid inflation, it will restrict the growth rate of the quantity of money. 
A) Higher gasoline prices will reduce gasoline consumption. 
B) Equality is more important than efficiency. 
C) Trade restrictions lower our standard of living. 
D) If a nation wants to avoid inflation, it will restrict the growth rate of the quantity of money.

Question 9

Figure 2-2  
-Refer to Figure 2-2. Boxes A and B of this circular-flow diagram represent

Accepted Answer

A) firms and households. 
B) households and government. 
C) the markets for goods and services and the markets for financial assets. 
D) the markets for goods and the markets for services. 
A) firms and households. 
B) households and government. 
C) the markets for goods and services and the markets for financial assets. 
D) the markets for goods and the markets for services.

Question 10

The slope of a steep upward-sloping line will be a

Accepted Answer

A) small positive number. 
B) large positive number. 
C) small negative number. 
D) large negative number. 
A) small positive number. 
B) large positive number. 
C) small negative number. 
D) large negative number.

Question 11

Different values are not a reason for disagreement among economists.

Accepted Answer

A) True 
 B)False

Question 12

Figure 2-16​  
-Refer to Figure 2-16. It is possible for this economy to produce

Accepted Answer

A) 30 gadgets and 90 widgets. 
B) 50 gadgets and 80 widgets. 
C) 80 gadgets and 50 widgets. 
D) 90 gadgets and 30 widgets. 
A) 30 gadgets and 90 widgets. 
B) 50 gadgets and 80 widgets. 
C) 80 gadgets and 50 widgets. 
D) 90 gadgets and 30 widgets.

Question 13

Figure 2-8  
-Refer to Figure 2-8. Which point on the graph best represents the fact that, because resources are scarce, not every conceivable outcome is feasible?

Accepted Answer

A) point J 
B) point K 
C) point L 
D) point M 
A) point J 
B) point K 
C) point L 
D) point M

Question 14

Almost all economists agree that rent control

Accepted Answer

A) has no effect on the rental income of landlords. 
B) allows the market for housing to work more efficiently. 
C) adversely affects the availability and quality of housing. 
D) is a very inexpensive way to help the most needy members of society. 
A) has no effect on the rental income of landlords. 
B) allows the market for housing to work more efficiently. 
C) adversely affects the availability and quality of housing. 
D) is a very inexpensive way to help the most needy members of society.

Question 15

Figure 2-9
Panel (a)
Panel (b)    
-Refer to Figure 2-9, Panel (a) and Panel (b). Which of the following is not a result of the shift of the economy's production possibilities frontier from Panel (a) to Panel (b)?

Accepted Answer

A) the tradeoff between the production of donuts and coffee changes 
B) the opportunity cost of a cup of coffee is higher at all levels of coffee production 
C) production of 4 donuts and 2 cups of coffee becomes possible 
D) production of 1 donut and 4 cups of coffee becomes efficient 
A) the tradeoff between the production of donuts and coffee changes 
B) the opportunity cost of a cup of coffee is higher at all levels of coffee production 
C) production of 4 donuts and 2 cups of coffee becomes possible 
D) production of 1 donut and 4 cups of coffee becomes efficient

Question 16

In the circular-flow diagram, which of the following items flows from households to firms through the markets for goods and services?

Accepted Answer

A) goods and services 
B) dollars paid to land, labor, and capital 
C) dollars spent on goods and services 
D) wages, rent, and profit 
A) goods and services 
B) dollars paid to land, labor, and capital 
C) dollars spent on goods and services 
D) wages, rent, and profit

Question 17

You know an economist has crossed the line from scientist to policy adviser when he or she

Accepted Answer

A) claims that the problem at hand is widely misunderstood by non-economists. 
B) talks about the evidence. 
C) makes normative statements. 
D) makes a claim about how the world is. 
A) claims that the problem at hand is widely misunderstood by non-economists. 
B) talks about the evidence. 
C) makes normative statements. 
D) makes a claim about how the world is.

Question 18

Figure 2-14  
-Refer to Figure 2-14. Points B and C represent infeasible outcomes for this economy.

Accepted Answer

A) True 
 B)False

Question 19

Suppose an economist advises a city's mayor to begin charging drivers a fee to drive on a busy highway during congested times. The mayor does not implement the policy because it would not be popular with voters. Which of the following statements best describes the scenario?

Accepted Answer

A) This is a common occurrence. The policymaker knows the best policy but chooses not to institute it for other reasons. 
B) This is a common occurrence. The policymaker usually disregards an economist's advice because they do not believe it is the most efficient policy. 
C) This is an unlikely occurrence. Most of the time, policymakers follow the advice of economists and institute the most efficient policies. 
D) This would never happen. Policymakers always follow the advice of economists. 
A) This is a common occurrence. The policymaker knows the best policy but chooses not to institute it for other reasons. 
B) This is a common occurrence. The policymaker usually disregards an economist's advice because they do not believe it is the most efficient policy. 
C) This is an unlikely occurrence. Most of the time, policymakers follow the advice of economists and institute the most efficient policies. 
D) This would never happen. Policymakers always follow the advice of economists.

Question 20

Figure 2-20
Relationship Between Years of Education and Annual Income  
-Refer to Figure 2-20. Senator Smith observes the graph and concludes that people who earn higher incomes attend school for more years. Senator Jones observes the graph and concludes that people who attend school for more years earn higher incomes. Who is correct?

Accepted Answer

A) Senator Smith is correct. 
B) Senator Jones is correct. 
C) It is difficult to say which senator might be correct due to the reverse causality problem. 
D) It is difficult to say which senator might be correct due to omitted variable bias. 
A) Senator Smith is correct. 
B) Senator Jones is correct. 
C) It is difficult to say which senator might be correct due to the reverse causality problem. 
D) It is difficult to say which senator might be correct due to omitted variable bias.

Exam 2: Thinking Like an Economist

Sometimes economists disagree because their values differ. Which of the following instances best reflects this source of disagreement?

A circular-flow diagram is a visual model of the economy.

Economists view positive statements as

The President receives economic policy advice from economists at each of the following except

When two variables have a negative correlation and the x-variable decreases,

Figure 2-16​ -Refer to Figure 2-16. It is not possible for this economy to produce at point

Economists make assumptions to

Which of the following is not an example of a positive, as opposed to normative, statement?

Figure 2-2 -Refer to Figure 2-2. Boxes A and B of this circular-flow diagram represent

The slope of a steep upward-sloping line will be a

Different values are not a reason for disagreement among economists.

Figure 2-16​ -Refer to Figure 2-16. It is possible for this economy to produce

Figure 2-8 -Refer to Figure 2-8. Which point on the graph best represents the fact that, because resources are scarce, not every conceivable outcome is feasible?

Almost all economists agree that rent control

Figure 2-9 Panel (a) Panel (b) -Refer to Figure 2-9, Panel (a) and Panel (b). Which of the following is not a result of the shift of the economy's production possibilities frontier from Panel (a) to Panel (b)?

In the circular-flow diagram, which of the following items flows from households to firms through the markets for goods and services?

You know an economist has crossed the line from scientist to policy adviser when he or she

Figure 2-14 -Refer to Figure 2-14. Points B and C represent infeasible outcomes for this economy.

Suppose an economist advises a city's mayor to begin charging drivers a fee to drive on a busy highway during congested times. The mayor does not implement the policy because it would not be popular with voters. Which of the following statements best describes the scenario?

Ten Principles of Economics

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Filters

Figure 2-16 -Refer to Figure 2-16. It is not possible for this economy to produce at point

Figure 2-16 -Refer to Figure 2-16. It is possible for this economy to produce