Question 1

Select the statement below that is an example of a microeconomic issue?

Accepted Answer

A) due to widespread unemployment, clothes stores have begun to lay off workers 
B) a reduction in costs of producing clothes has made clothes cheaper for Anna and Sinead 
C) Anna and Sinead sometimes sell clothes to each other 
D) Australia buys a lot of clothes from China 
A) due to widespread unemployment, clothes stores have begun to lay off workers 
B) a reduction in costs of producing clothes has made clothes cheaper for Anna and Sinead 
C) Anna and Sinead sometimes sell clothes to each other 
D) Australia buys a lot of clothes from China

Question 2

Assumptions are sometimes necessary because:

Accepted Answer

A) controlled experiments need to reflect the way things actually happen in real life 
B) there are often many factors in an analysis and it helps to focus our thinking 
C) every model is different and that must be explained clearly 
D) short-term effects differ from long-term effects 
A) controlled experiments need to reflect the way things actually happen in real life 
B) there are often many factors in an analysis and it helps to focus our thinking 
C) every model is different and that must be explained clearly 
D) short-term effects differ from long-term effects

Question 3

The art of scientific thinking involves:

Accepted Answer

A) deciding which assumptions to make 
B) understanding every scientific field: physics, biology and economics 
C) knowing how the major organs of the human body work 
D) being able to mathematically express natural forces 
A) deciding which assumptions to make 
B) understanding every scientific field: physics, biology and economics 
C) knowing how the major organs of the human body work 
D) being able to mathematically express natural forces

Question 4

Graph 2-3  
-Refer to Graph 2-3.On the production possibilities frontier shown, at which point or points is the economy inefficient?

Accepted Answer

A) A, B, C 
B) E, F 
C) B 
D) D 
A) A, B, C 
B) E, F 
C) B 
D) D

Question 5

Factors of production are:

Accepted Answer

A) inputs into the production process 
B) weather, social and political conditions that affect production 
C) the physical relationships between economic inputs and outputs 
D) the mathematical calculations firms make to determine production 
A) inputs into the production process 
B) weather, social and political conditions that affect production 
C) the physical relationships between economic inputs and outputs 
D) the mathematical calculations firms make to determine production

Question 6

In a simple circular-flow diagram, the two types of markets in which households and firms interact are the markets for goods and services and the markets for factors of production.

Accepted Answer

A) True 
 B)False

Question 7

An economy is said to be efficient if it is:

Accepted Answer

A) possible to produce more of all goods 
B) possible to produce more of one good without producing less of another 
C) not possible to produce more of one good without producing less of another 
D) not possible to produce more of one good at any cost 
A) possible to produce more of all goods 
B) possible to produce more of one good without producing less of another 
C) not possible to produce more of one good without producing less of another 
D) not possible to produce more of one good at any cost

Question 8

Graph 2-3  
-Refer to Graph 2-3.On the production possibilities frontier shown, at which point or points is the economy efficient?

Accepted Answer

A) A, B, C 
B) A, C, F 
C) E 
D) D 
A) A, B, C 
B) A, C, F 
C) E 
D) D

Question 9

Which is the best statement about the roles of economists?

Accepted Answer

A) economists are best viewed as policymakers 
B) economists are best viewed as scientists 
C) in trying to explain the world, economists are scientists; in trying to improve the world, they are policymakers 
D) in trying to explain the world, economists are policymakers; in trying to improve the world, they are scientists 
A) economists are best viewed as policymakers 
B) economists are best viewed as scientists 
C) in trying to explain the world, economists are scientists; in trying to improve the world, they are policymakers 
D) in trying to explain the world, economists are policymakers; in trying to improve the world, they are scientists

Question 10

Graph 2-7  
-Refer to Graph 2-7.In the production possibilities frontier shown, what is the opportunity cost to society of moving from point C to point E?

Accepted Answer

A) 150 pretzels 
B) 300 potato chips 
C) both A and B 
D) zero 
A) 150 pretzels 
B) 300 potato chips 
C) both A and B 
D) zero

Question 11

Which of the following is the most accurate statement about production possibilities?

Accepted Answer

A) an economy can produce only on the production possibilities frontier 
B) an economy can produce at any point inside or outside a production possibilities frontier 
C) an economy can produce at any point on or inside the production possibilities frontier, but not outside the frontier 
D) an economy can produce at any point inside the production possibilities frontier, but not on or outside the frontier 
A) an economy can produce only on the production possibilities frontier 
B) an economy can produce at any point inside or outside a production possibilities frontier 
C) an economy can produce at any point on or inside the production possibilities frontier, but not outside the frontier 
D) an economy can produce at any point inside the production possibilities frontier, but not on or outside the frontier

Question 12

Understanding how an economic system works is aided by the use of many complex and rigorous, true assumptions.

Accepted Answer

A) True 
 B)False

Question 13

In the circular-flow diagram:

Accepted Answer

A) firms are sellers in the resource market and the product market 
B) households are sellers in the resource market 
C) firms are buyers in the product market 
D) spending on goods and services flow from firms to households 
A) firms are sellers in the resource market and the product market 
B) households are sellers in the resource market 
C) firms are buyers in the product market 
D) spending on goods and services flow from firms to households

Question 14

A production possibilities frontier is a graph that shows the various combinations of outputs the economy can possibly produce, given its factors of production and technology.

Accepted Answer

A) True 
 B)False

Question 15

Graph 2-9  
-Refer to Graph 2-9.In the graph shown, the movement from point A to point C could have been caused by:

Accepted Answer

A) inflation 
B) a change in income 
C) a change in the price of CDs 
D) a change in the cost of producing CDs 
A) inflation 
B) a change in income 
C) a change in the price of CDs 
D) a change in the cost of producing CDs

Question 16

Graph 2-1  
-Refer to Graph 2-1.In the graph shown, points A, B and D represent efficient outcomes for society.

Accepted Answer

A) True 
 B)False

Question 17

The single most important purpose of an Economics Principles text and course is to help students learn the economist's way of thinking.

Accepted Answer

A) True 
 B)False

Question 18

If an economist develops a theory about international trade based on the assumption that there are only two countries and two goods:

Accepted Answer

A) the theory can be useful only in situations involving two countries and two goods 
B) it is a total waste of time, since the actual world has many countries trading many goods 
C) the theory can be useful in helping economists understand the complex world of international trade involving many countries and many goods 
D) the theory can be useful in the classroom, but has no use in the real world 
A) the theory can be useful only in situations involving two countries and two goods 
B) it is a total waste of time, since the actual world has many countries trading many goods 
C) the theory can be useful in helping economists understand the complex world of international trade involving many countries and many goods 
D) the theory can be useful in the classroom, but has no use in the real world

Question 19

An inefficient outcome on the production possibilities frontier might be characterised by:

Accepted Answer

A) equity 
B) unemployment 
C) increased output 
D) a reduction in the production of computers 
A) equity 
B) unemployment 
C) increased output 
D) a reduction in the production of computers

Question 20

Microeconomics approaches the study of economics from the viewpoint of:

Accepted Answer

A) consumer behaviour 
B) the labour market 
C) government taxation and spending policies 
D) the entire economy 
A) consumer behaviour 
B) the labour market 
C) government taxation and spending policies 
D) the entire economy

Exam 2: Thinking Like an Economist

Select the statement below that is an example of a microeconomic issue?

Assumptions are sometimes necessary because:

The art of scientific thinking involves:

Graph 2-3 -Refer to Graph 2-3.On the production possibilities frontier shown, at which point or points is the economy inefficient?

Factors of production are:

In a simple circular-flow diagram, the two types of markets in which households and firms interact are the markets for goods and services and the markets for factors of production.

An economy is said to be efficient if it is:

Graph 2-3 -Refer to Graph 2-3.On the production possibilities frontier shown, at which point or points is the economy efficient?

Which is the best statement about the roles of economists?

Graph 2-7 -Refer to Graph 2-7.In the production possibilities frontier shown, what is the opportunity cost to society of moving from point C to point E?

Which of the following is the most accurate statement about production possibilities?

Understanding how an economic system works is aided by the use of many complex and rigorous, true assumptions.

In the circular-flow diagram:

A production possibilities frontier is a graph that shows the various combinations of outputs the economy can possibly produce, given its factors of production and technology.

Graph 2-9 -Refer to Graph 2-9.In the graph shown, the movement from point A to point C could have been caused by:

Graph 2-1 -Refer to Graph 2-1.In the graph shown, points A, B and D represent efficient outcomes for society.

The single most important purpose of an Economics Principles text and course is to help students learn the economist's way of thinking.

If an economist develops a theory about international trade based on the assumption that there are only two countries and two goods:

An inefficient outcome on the production possibilities frontier might be characterised by:

Microeconomics approaches the study of economics from the viewpoint of:

Ten Lessons From 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

Business Strategy and Oligopoly

Competition Policy

The Markets for the Factors of Production

Earnings, Unions and Discrimination

Income Inequity and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment and the Financial System

The Natural Rate of Unemployment

The Monetary System

Inflation: Its Causes and Costs

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Global Financial Crisis of 2008 and Beyond

Five Debates Over Macroeconomic Policy

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