Question 1

John Maynard Keynes observed that during rare times of deep financial and economic crisis,when the "invisible hand" has temporarily ceased to function,

Accepted Answer

A)  there is a more urgent need for government to play an active role in restoring markets to their healthy function. 
B)  government should avoid intervening in the market and wait patiently for proper market function to return. 
C)  economists need to re-evaluate all of their basic principles. 
D)  the economy can rely on entrepreneurs to take creative actions to end the crisis. 
A)  there is a more urgent need for government to play an active role in restoring markets to their healthy function. 
B)  government should avoid intervening in the market and wait patiently for proper market function to return. 
C)  economists need to re-evaluate all of their basic principles. 
D)  the economy can rely on entrepreneurs to take creative actions to end the crisis.

Question 2

Economists use one standard set of assumptions to answer all economic questions.

Accepted Answer

A) True 
 B)False

Question 3

Indiadesh is a country that produces two goods,textiles and computers.Last year,Indiadesh produced 500 textiles and 1300 computers.This year it produced 450 textiles and 1100 computers.Given no further information,which of the following events could explain this change?

Accepted Answer

A)  Indiadesh decreased unemployment. 
B)  Indiadesh experienced an improvement in textile-making technology. 
C)  Indiadesh experienced an improvement in computer-making technology. 
D)  Indiadesh experienced a reduction in resources. 
A)  Indiadesh decreased unemployment. 
B)  Indiadesh experienced an improvement in textile-making technology. 
C)  Indiadesh experienced an improvement in computer-making technology. 
D)  Indiadesh experienced a reduction in resources.

Question 4

Figure 2-2
  
-Refer to Figure 2-2.If households are buyers in the markets represented by Box C of this circular-flow diagram,then

Accepted Answer

A)  Box C must represent the markets for the factors of production. 
B)  Box D must represent the markets for goods and services. 
C)  firms are sellers in the markets represented by Box C. 
D)  All of the above are correct. 
A)  Box C must represent the markets for the factors of production. 
B)  Box D must represent the markets for goods and services. 
C)  firms are sellers in the markets represented by Box C. 
D)  All of the above are correct.

Question 5

If Erin's income decreases and,as a result,she chooses to buy fewer milkshakes per month at each price,then her demand curve will

Accepted Answer

A)  shift to the right. 
B)  shift to the left. 
C)  not shift; instead, Erin will move along her demand curve downward and to the right. 
D)  not shift; instead, Erin will move along her demand curve upward and to the left. 
A)  shift to the right. 
B)  shift to the left. 
C)  not shift; instead, Erin will move along her demand curve downward and to the right. 
D)  not shift; instead, Erin will move along her demand curve upward and to the left.

Question 6

Figure 2-4
  
-Refer to Figure 2-4.The opportunity cost of this economy moving from point Z to point Y is

Accepted Answer

A)  0 lamps. 
B)  10 lamps. 
C)  10 notepads. 
D)  20 lamps. 
A)  0 lamps. 
B)  10 lamps. 
C)  10 notepads. 
D)  20 lamps.

Question 7

The slope of a line is equal to

Accepted Answer

A)  the change in the value of x divided by the change in the value of y. 
B)  the change in the value of y divided by the change in the value of x. 
C)  the horizontal distance divided by the vertical distance. 
D)  the value of y divided by the value of x. 
A)  the change in the value of x divided by the change in the value of y. 
B)  the change in the value of y divided by the change in the value of x. 
C)  the horizontal distance divided by the vertical distance. 
D)  the value of y divided by the value of x.

Question 8

The scientific method can be applied to the study of economics.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following statements is correct about the roles of economists?

Accepted Answer

A)  Economists are best viewed as policy advisers. 
B)  Economists are best viewed as scientists. 
C)  In trying to explain the world, economists are policy advisers; in trying to improve the world, they are scientists. 
D)  In trying to explain the world, economists are scientists; in trying to improve the world, they are policy advisers. 
A)  Economists are best viewed as policy advisers. 
B)  Economists are best viewed as scientists. 
C)  In trying to explain the world, economists are policy advisers; in trying to improve the world, they are scientists. 
D)  In trying to explain the world, economists are scientists; in trying to improve the world, they are policy advisers.

Question 10

Economists speaking like policy advisers make

Accepted Answer

A)  positive statements. 
B)  descriptive statements. 
C)  claims about how the world is. 
D)  claims about how the world should be. 
A)  positive statements. 
B)  descriptive statements. 
C)  claims about how the world is. 
D)  claims about how the world should be.

Question 11

A circular-flow model and production possibilities frontier are similar in that

Accepted Answer

A)  neither allows economic analysis to occur. 
B)  neither can be represented visually on a graph. 
C)  both make use of assumptions. 
D)  both make use of complex equations to arrive at solutions. 
A)  neither allows economic analysis to occur. 
B)  neither can be represented visually on a graph. 
C)  both make use of assumptions. 
D)  both make use of complex equations to arrive at solutions.

Question 12

When a variable that is named on an axis of a graph changes,the curve shifts.

Accepted Answer

A) True 
 B)False

Question 13

Figure 2-5
  
-Refer to Figure 2-5.If this economy moves from point A to point B,then which of the following statements is correct?

Accepted Answer

A)  This economy has moved from a point of inefficient production to a point of efficient production. 
B)  This economy has experienced economic growth. 
C)  This economy has experienced an increase in employment. 
D)  None of the above is correct. 
A)  This economy has moved from a point of inefficient production to a point of efficient production. 
B)  This economy has experienced economic growth. 
C)  This economy has experienced an increase in employment. 
D)  None of the above is correct.

Question 14

In the 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 15

Economic models can help us understand reality only when they include all details of the economy.

Accepted Answer

A) True 
 B)False

Question 16

Figure 2-1
  
-Refer to Figure 2-1.Ali buys a new pair of shoes at a shoe store.To which of the arrows does this transaction directly contribute?

Accepted Answer

A)  A only 
B)  A and B 
C)  C only 
D)  C and D 
A)  A only 
B)  A and B 
C)  C only 
D)  C and D

Question 17

Erma and Wayne are both economists.Erma thinks that taxing consumption,rather than income,would result in higher household saving because income that is saved would not be taxed.Wayne does not think that household saving would respond much to a change in the tax laws.In this example,Erma and Wayne

Accepted Answer

A)  have different normative views about tax policy. 
B)  disagree about the validity of a positive theory. 
C)  must both be incorrect because economists always agree on policy issues. 
D)  None of the above is correct. 
A)  have different normative views about tax policy. 
B)  disagree about the validity of a positive theory. 
C)  must both be incorrect because economists always agree on policy issues. 
D)  None of the above is correct.

Question 18

Figure 2-8

-Refer to Figure 2-8,Panel (a).The opportunity cost of moving from point J to point L is

Accepted Answer

A)  2 donuts. 
B)  2 donuts and 2 cups of coffee. 
C)  2 cups of coffee. 
D)  6 cups of coffee. 
A)  2 donuts. 
B)  2 donuts and 2 cups of coffee. 
C)  2 cups of coffee. 
D)  6 cups of coffee.

Question 19

Identify each of the following topics as being part of microeconomics or macroeconomics:
a.the impact of a change in consumer income on the purchase of luxury automobiles
b.the effect of a change in the price of Coke on the purchase of Pepsi
c.the impact of a war in the Middle East on the rate of inflation in the United States
d.factors influencing the rate of economic growth
e.factors influencing the demand for tractors
f.the impact of tax policy on national saving
g.the effect of pollution taxes on the U.S.copper industry
h.the degree of competition in the cable television industry
i.the effect of a balanced-budget amendment on economic stability
j.the impact of deregulation on the savings and loan industry

Accepted Answer

a,b,e,g,h,and j are

Question 20

One thing economists do to help them understand how the real world works is

Accepted Answer

A)  make assumptions. 
B)  ignore the past. 
C)  try to capture every aspect of the real world in the models they construct. 
D)  All of the above are correct. 
A)  make assumptions. 
B)  ignore the past. 
C)  try to capture every aspect of the real world in the models they construct. 
D)  All of the above are correct.

Exam 2: Thinking Like an Economist.

John Maynard Keynes observed that during rare times of deep financial and economic crisis,when the "invisible hand" has temporarily ceased to function,

Economists use one standard set of assumptions to answer all economic questions.

Indiadesh is a country that produces two goods,textiles and computers.Last year,Indiadesh produced 500 textiles and 1300 computers.This year it produced 450 textiles and 1100 computers.Given no further information,which of the following events could explain this change?

Figure 2-2 -Refer to Figure 2-2.If households are buyers in the markets represented by Box C of this circular-flow diagram,then

If Erin's income decreases and,as a result,she chooses to buy fewer milkshakes per month at each price,then her demand curve will

Figure 2-4 -Refer to Figure 2-4.The opportunity cost of this economy moving from point Z to point Y is

The slope of a line is equal to

The scientific method can be applied to the study of economics.

Which of the following statements is correct about the roles of economists?

Economists speaking like policy advisers make

A circular-flow model and production possibilities frontier are similar in that

When a variable that is named on an axis of a graph changes,the curve shifts.

Figure 2-5 -Refer to Figure 2-5.If this economy moves from point A to point B,then which of the following statements is correct?

In the 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.

Economic models can help us understand reality only when they include all details of the economy.

Figure 2-1 -Refer to Figure 2-1.Ali buys a new pair of shoes at a shoe store.To which of the arrows does this transaction directly contribute?

Erma and Wayne are both economists.Erma thinks that taxing consumption,rather than income,would result in higher household saving because income that is saved would not be taxed.Wayne does not think that household saving would respond much to a change in the tax laws.In this example,Erma and Wayne

Figure 2-8 -Refer to Figure 2-8,Panel (a).The opportunity cost of moving from point J to point L is

One thing economists do to help them understand how the real world works is

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 Market For the Factors of Production.

Earnings and Discrimination.

Income Inequality and Poverty.

The Theory of Consumer Choice.

Frontiers in Microeconomics.

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