Question 1

The circular-flow diagram is a

Accepted Answer

A) visual model of the economy. 
B) visual model of the relationships among money, prices, and businesses. 
C) model that shows the effects of government on the economy. 
D) mathematical model of how the economy works. 
A) visual model of the economy. 
B) visual model of the relationships among money, prices, and businesses. 
C) model that shows the effects of government on the economy. 
D) mathematical model of how the economy works.

Question 2

Which of the following is an example of a normative - as opposed to a positive - statement?

Accepted Answer

A) The discount rate is the interest rate the Federal Reserve charges banks to borrow funds. 
B) The US income tax rate increases with the amount of income earned. 
C) The government should increase the tax on gasoline. 
D) The US unemployment rate increased to 10 percent in 2009. 
A) The discount rate is the interest rate the Federal Reserve charges banks to borrow funds. 
B) The US income tax rate increases with the amount of income earned. 
C) The government should increase the tax on gasoline. 
D) The US unemployment rate increased to 10 percent in 2009.

Question 3

Figure 2-7  
-Refer to Figure 2-7. This economy cannot produce at which point(s)?

Accepted Answer

A) L, M 
B) N, O, P, Q 
C) N, O, P 
D) Q 
A) L, M 
B) N, O, P, Q 
C) N, O, P 
D) Q

Question 4

In the circular-flow diagram, in the markets for

Accepted Answer

A) goods and services, households and firms are both sellers. 
B) goods and services, households are sellers and firms are buyers. 
C) the factors of production, households are sellers and firms are buyers. 
D) the factors of production, households and firms are both buyers. 
A) goods and services, households and firms are both sellers. 
B) goods and services, households are sellers and firms are buyers. 
C) the factors of production, households are sellers and firms are buyers. 
D) the factors of production, households and firms are both buyers.

Question 5

If new government regulations designed to protect wetlands remove very productive farmland from production, then the production possibilities frontier will shift inward.

Accepted Answer

A) True 
 B)False

Question 6

Table 2-5  
-Refer to Table 2-5. Table 2-5 shows one set of production possibilities. What is the opportunity cost of increasing the production of corn from 400 bushels to 800 bushels?

Accepted Answer

A) 200 bushels of wheat 
B) 400 bushels of wheat 
C) 600 bushels of wheat 
D) 800 bushels of wheat 
A) 200 bushels of wheat 
B) 400 bushels of wheat 
C) 600 bushels of wheat 
D) 800 bushels of wheat

Question 7

If an economy is producing efficiently, then

Accepted Answer

A) there is no way to produce more of one good without producing less of another good. 
B) it is possible to produce more of both goods without increasing the quantities of inputs that are being used. 
C) it is possible to produce more of one good without producing less of another good. 
D) it is not possible to produce more of any good at any cost. 
A) there is no way to produce more of one good without producing less of another good. 
B) it is possible to produce more of both goods without increasing the quantities of inputs that are being used. 
C) it is possible to produce more of one good without producing less of another good. 
D) it is not possible to produce more of any good at any cost.

Question 8

Examples of graphs of a single variable include pie charts, bar graphs, and time-series graphs.

Accepted Answer

A) True 
 B)False

Question 9

For economists, historical episodes

Accepted Answer

A) are not worthy of study because they offer few insights into current economic events and problems. 
B) are not worthy of study because laboratory experiments provide more reliable data. 
C) are worthy of study because economists rely entirely on observation, rather than on theory. 
D) are worthy of study because they serve as valuable substitutes for laboratory experiments. 
A) are not worthy of study because they offer few insights into current economic events and problems. 
B) are not worthy of study because laboratory experiments provide more reliable data. 
C) are worthy of study because economists rely entirely on observation, rather than on theory. 
D) are worthy of study because they serve as valuable substitutes for laboratory experiments.

Question 10

In conducting their research, economists often substitute historical events and historical episodes for

Accepted Answer

A) theories and observations. 
B) laboratory experiments. 
C) models. 
D) assumptions. 
A) theories and observations. 
B) laboratory experiments. 
C) models. 
D) assumptions.

Question 11

Table 2-2
The following table contains some production possibilities for an economy for a given year:  
-Refer to Table 2-2. If the production possibilities frontier is bowed outward, then "?" could be

Accepted Answer

A) 6000. 
B) 5500. 
C) 5000. 
D) 4500. 
A) 6000. 
B) 5500. 
C) 5000. 
D) 4500.

Question 12

In the ordered pair (10,30), 10 is the horizontal location of the point and 30 is the vertical location of the point.

Accepted Answer

A) True 
 B)False

Question 13

Irregular fluctuations in economic activity are known as the

Accepted Answer

A) business cycle. 
B) broken window fallacy. 
C) tradeoff between inflation and unemployment. 
D) ten principles of economics. 
A) business cycle. 
B) broken window fallacy. 
C) tradeoff between inflation and unemployment. 
D) ten principles of economics.

Question 14

Which of the following is one of the basic reasons why economists often appear to give conflicting advice to policymakers?

Accepted Answer

A) similar opinions about the validity of economic theories 
B) significant differences in education 
C) differences in personal values 
D) a reliance on normative statement for research theories 
A) similar opinions about the validity of economic theories 
B) significant differences in education 
C) differences in personal values 
D) a reliance on normative statement for research theories

Question 15

Because it is difficult for economists to use experiments to generate data, they generally must

Accepted Answer

A) do without data. 
B) substitute assumptions for data when data are unavailable. 
C) rely upon hypothetical data that were previously concocted by other economists. 
D) use whatever data the world gives them. 
A) do without data. 
B) substitute assumptions for data when data are unavailable. 
C) rely upon hypothetical data that were previously concocted by other economists. 
D) use whatever data the world gives them.

Question 16

The first number in any ordered pair is

Accepted Answer

A) the x-coordinate. 
B) the y-coordinate. 
C) the vertical location of the point. 
D) the slope. 
A) the x-coordinate. 
B) the y-coordinate. 
C) the vertical location of the point. 
D) the slope.

Question 17

The president of the United States receives tax policy advice from economists in the

Accepted Answer

A) Federal Reserve. 
B) Department of Justice. 
C) Department of the Treasury. 
D) Congressional Budget Office. 
A) Federal Reserve. 
B) Department of Justice. 
C) Department of the Treasury. 
D) Congressional Budget Office.

Question 18

Table 2-6  
-Refer to Table 2-6. Consider the production possibilities table for an economy that produces only mobile phones and pizzas. What is the opportunity cost of increasing production of mobile phones from 200 to 500?

Accepted Answer

The answer of Table 2-6  
-Refer to Table 2-6....

Question 19

The two basic reasons why economists often appear to give conflicting advice to policymakers are differences in

Accepted Answer

A) opinions and education. 
B) opinions and values. 
C) scientific judgments and education. 
D) scientific judgments and values. 
A) opinions and education. 
B) opinions and values. 
C) scientific judgments and education. 
D) scientific judgments and values.

Question 20

The Council of Economic Advisers' Economic Report of the President discusses recent developments in the economy and presents the council's analysis of current policy issues.

Accepted Answer

A) True 
 B)False

Exam 2: Thinking Like an Economist

The circular-flow diagram is a

Which of the following is an example of a normative - as opposed to a positive - statement?

Figure 2-7 -Refer to Figure 2-7. This economy cannot produce at which point(s)?

In the circular-flow diagram, in the markets for

If new government regulations designed to protect wetlands remove very productive farmland from production, then the production possibilities frontier will shift inward.

Table 2-5 -Refer to Table 2-5. Table 2-5 shows one set of production possibilities. What is the opportunity cost of increasing the production of corn from 400 bushels to 800 bushels?

If an economy is producing efficiently, then

Examples of graphs of a single variable include pie charts, bar graphs, and time-series graphs.

For economists, historical episodes

In conducting their research, economists often substitute historical events and historical episodes for

Table 2-2 The following table contains some production possibilities for an economy for a given year: -Refer to Table 2-2. If the production possibilities frontier is bowed outward, then "?" could be

In the ordered pair (10,30), 10 is the horizontal location of the point and 30 is the vertical location of the point.

Irregular fluctuations in economic activity are known as the

Which of the following is one of the basic reasons why economists often appear to give conflicting advice to policymakers?

Because it is difficult for economists to use experiments to generate data, they generally must

The first number in any ordered pair is

The president of the United States receives tax policy advice from economists in the

Table 2-6 -Refer to Table 2-6. Consider the production possibilities table for an economy that produces only mobile phones and pizzas. What is the opportunity cost of increasing production of mobile phones from 200 to 500?

The two basic reasons why economists often appear to give conflicting advice to policymakers are differences in

The Council of Economic Advisers' Economic Report of the President discusses recent developments in the economy and presents the council's analysis of current policy issues.

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

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