Question 1

An efficient outcome is one in which the economy is conserving the largest possible amount of resources,while still meeting the basic needs of society.

Accepted Answer

A) True 
 B)False

Question 2

Among economic models,the circular-flow diagram is unusual in that it

Accepted Answer

A) drastically simplifies the real world. 
B) features more than one type of market. 
C) features flows of dollars. 
D) does not involve mathematics. 
A) drastically simplifies the real world. 
B) features more than one type of market. 
C) features flows of dollars. 
D) does not involve mathematics.

Question 3

Figure 2-6
  
-Refer to Figure 2-6.If the economy moves from point C to point B,then which of the following statements is correct?

Accepted Answer

A) The economy benefited from a technological advance in the production of baseballs. 
B) The opportunity cost of each additional baseball is 2 bananas. 
C) The opportunity cost of each additional banana is 2 baseballs. 
D) The move involves no opportunity cost; it simply reflects the desires of the economy's citizens. 
A) The economy benefited from a technological advance in the production of baseballs. 
B) The opportunity cost of each additional baseball is 2 bananas. 
C) The opportunity cost of each additional banana is 2 baseballs. 
D) The move involves no opportunity cost; it simply reflects the desires of the economy's citizens.

Question 4

Which of the following statements about economic models is valid?

Accepted Answer

A) Economic models are built to mirror reality exactly. 
B) Economic models are useful, but they should not be used for the purpose of improving public policies. 
C) Because economic models omit many details, they allow us to see what is truly important. 
D) Economic models seldom incorporate equations or diagrams. 
A) Economic models are built to mirror reality exactly. 
B) Economic models are useful, but they should not be used for the purpose of improving public policies. 
C) Because economic models omit many details, they allow us to see what is truly important. 
D) Economic models seldom incorporate equations or diagrams.

Question 5

Which of these statements is a normative statement (as opposed to a positive statement)?

Accepted Answer

A) Gasoline prices ought to be lower than they are now. 
B) The federal government should raise taxes on wealthy people. 
C) The social security system is a good system and it deserves to be preserved as it is. 
D) All of the above are normative statements. 
A) Gasoline prices ought to be lower than they are now. 
B) The federal government should raise taxes on wealthy people. 
C) The social security system is a good system and it deserves to be preserved as it is. 
D) All of the above are normative statements.

Question 6

Which of the following items is not a factor of production?

Accepted Answer

A) labor 
B) land 
C) capital 
D) money 
A) labor 
B) land 
C) capital 
D) money

Question 7

Figure 2-6
  
-Refer to Figure 2-6.If the economy moves from point A to point B,then which of the following statements is correct?

Accepted Answer

A) The economy has moved from a point of inefficient production to a point of efficient production. 
B) The economy has experienced economic growth. 
C) The opportunity cost of each additional banana produced is 50 baseballs. 
D) None of the above is correct. 
A) The economy has moved from a point of inefficient production to a point of efficient production. 
B) The economy has experienced economic growth. 
C) The opportunity cost of each additional banana produced is 50 baseballs. 
D) None of the above is correct.

Question 8

Bill has noticed that increases in unemployment insurance claims are associated with recessions,and therefore he advocates limits on unemployment insurance so as to prevent recessions.Martha has noticed that most drug addicts once attended schools,and therefore she advocates getting rid of schools so as to prevent drug addiction.

Accepted Answer

A) The reasoning of both Bill and Martha suffers from the omitted variable problem. 
B) The reasoning of both Bill and Martha suffers from the reverse causality problem. 
C) Bill's reasoning suffers from the reverse causality problem and Martha's reasoning suffers from the omitted variable problem. 
D) Martha's reasoning suffers from the reverse causality problem and Bill's reasoning suffers from the omitted variable problem. 
A) The reasoning of both Bill and Martha suffers from the omitted variable problem. 
B) The reasoning of both Bill and Martha suffers from the reverse causality problem. 
C) Bill's reasoning suffers from the reverse causality problem and Martha's reasoning suffers from the omitted variable problem. 
D) Martha's reasoning suffers from the reverse causality problem and Bill's reasoning suffers from the omitted variable problem.

Question 9

The author of your textbook for this course,N.Gregory Mankiw,worked in the administration of President George W.Bush from 2003 to 2005.Specifically,he served as the

Accepted Answer

A) Secretary of Commerce. 
B) Secretary of the Treasury. 
C) Chairman of the Council of Economic Advisers. 
D) Chairman of the Federal Reserve System. 
A) Secretary of Commerce. 
B) Secretary of the Treasury. 
C) Chairman of the Council of Economic Advisers. 
D) Chairman of the Federal Reserve System.

Question 10

A survey which sought the opinion of academic,business,and government economists on ten propositions about economic policy found that

Accepted Answer

A) the respondents were almost equally divided on the propositions. 
B) the respondents favored the propositions by a slight margin. 
C) the respondents disagreed with the propositions by a slight margin. 
D) there was overwhelming endorsement of the propositions among the respondents. 
A) the respondents were almost equally divided on the propositions. 
B) the respondents favored the propositions by a slight margin. 
C) the respondents disagreed with the propositions by a slight margin. 
D) there was overwhelming endorsement of the propositions among the respondents.

Question 11

Figure 2-1
  
-Refer to Figure 2-1.Juan buys a new pair of shoes at a shoe store.To which of the arrows does this purchase 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 12

Microeconomics is best described as the study of

Accepted Answer

A) economy-wide phenomena. 
B) how households and firms make decisions and how they interact in specific markets. 
C) the flows of dollars between households and firms. 
D) markets for land, labor, and capital. 
A) economy-wide phenomena. 
B) how households and firms make decisions and how they interact in specific markets. 
C) the flows of dollars between households and firms. 
D) markets for land, labor, and capital.

Question 13

Figure 2-6
  
-Refer to Figure 2-6.If this economy put one-half of its available resources into the production of baseballs and the other half into the production of bananas,it could produce

Accepted Answer

A) 100 baseballs and 200 bananas. 
B) 100 baseballs and 300 bananas. 
C) 150 baseballs and 200 bananas. 
D) We would have to know the details of the economy's technology in order to determine this. 
A) 100 baseballs and 200 bananas. 
B) 100 baseballs and 300 bananas. 
C) 150 baseballs and 200 bananas. 
D) We would have to know the details of the economy's technology in order to determine this.

Question 14

Figure 2-8
  
-Refer to Figure 2-8.Which of the following combinations can this economy not produce?

Accepted Answer

A) 30 barrels and 6 bathtubs 
B) 25 barrels and 12 bathtubs 
C) 20 barrels and 8 bathtubs 
D) 10 barrels and 14 bathtubs 
A) 30 barrels and 6 bathtubs 
B) 25 barrels and 12 bathtubs 
C) 20 barrels and 8 bathtubs 
D) 10 barrels and 14 bathtubs

Question 15

In a circular-flow diagram,one loop shows the flow of goods,services and factors of production,and the other loop shows the corresponding flow of dollars.

Accepted Answer

A) True 
 B)False

Question 16

President Ronald Reagan once joked that a Trivial Pursuit game for economists would

Accepted Answer

A) have no questions but hundreds of answers. 
B) have 100 questions and 3,000 answers. 
C) have 1,000 questions but no answers. 
D) never produce a winner. 
A) have no questions but hundreds of answers. 
B) have 100 questions and 3,000 answers. 
C) have 1,000 questions but no answers. 
D) never produce a winner.

Question 17

Figure 2-4
  
-Refer to Figure 2-4.The opportunity cost of obtaining 10 additional toasters by moving from point B to point A is

Accepted Answer

A) 10 toothbrushes. 
B) 20 toothbrushes. 
C) 30 toothbrushes. 
D) zero, since the economy has the additional resources to produce 10 additional toasters. 
A) 10 toothbrushes. 
B) 20 toothbrushes. 
C) 30 toothbrushes. 
D) zero, since the economy has the additional resources to produce 10 additional toasters.

Question 18

A production possibilities frontier shifts outward when

Accepted Answer

A) the economy experiences economic growth. 
B) the desires of the economy's citizens change. 
C) at least one of the basic principles of economics is violated. 
D) opportunity costs are lessened. 
A) the economy experiences economic growth. 
B) the desires of the economy's citizens change. 
C) at least one of the basic principles of economics is violated. 
D) opportunity costs are lessened.

Question 19

Which of the following transactions does not take place in a market for a factor of production?

Accepted Answer

A) Karl provides plumbing services for a plumbing company and receives an hourly wage from the company for his services. 
B) Juanita works as a marriage counselor and her clients pay her on a per-hour basis for her services. 
C) Trish owns several shopping malls and receives rent payments from the companies that operate those malls. 
D) Ben sells advertising for a newspaper and receives a commission from the newspaper company for each advertisement that he sells. 
A) Karl provides plumbing services for a plumbing company and receives an hourly wage from the company for his services. 
B) Juanita works as a marriage counselor and her clients pay her on a per-hour basis for her services. 
C) Trish owns several shopping malls and receives rent payments from the companies that operate those malls. 
D) Ben sells advertising for a newspaper and receives a commission from the newspaper company for each advertisement that he sells.

Question 20

Which of the following would be considered a topic of study in macroeconomics?

Accepted Answer

A) the effect of agricultural price support programs on the cotton industry 
B) the effect on U.S.steel producers of an import quota imposed on foreign steel 
C) the effect of an increasing inflation rate on national living standards 
D) the effect of an increase in the price of imported coffee beans on the U.S.coffee industry 
A) the effect of agricultural price support programs on the cotton industry 
B) the effect on U.S.steel producers of an import quota imposed on foreign steel 
C) the effect of an increasing inflation rate on national living standards 
D) the effect of an increase in the price of imported coffee beans on the U.S.coffee industry

Exam 2: Thinking Like an Economist

An efficient outcome is one in which the economy is conserving the largest possible amount of resources,while still meeting the basic needs of society.

Among economic models,the circular-flow diagram is unusual in that it

Figure 2-6 -Refer to Figure 2-6.If the economy moves from point C to point B,then which of the following statements is correct?

Which of the following statements about economic models is valid?

Which of these statements is a normative statement (as opposed to a positive statement)?

Which of the following items is not a factor of production?

Figure 2-6 -Refer to Figure 2-6.If the economy moves from point A to point B,then which of the following statements is correct?

The author of your textbook for this course,N.Gregory Mankiw,worked in the administration of President George W.Bush from 2003 to 2005.Specifically,he served as the

A survey which sought the opinion of academic,business,and government economists on ten propositions about economic policy found that

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

Microeconomics is best described as the study of

Figure 2-6 -Refer to Figure 2-6.If this economy put one-half of its available resources into the production of baseballs and the other half into the production of bananas,it could produce

Figure 2-8 -Refer to Figure 2-8.Which of the following combinations can this economy not produce?

In a circular-flow diagram,one loop shows the flow of goods,services and factors of production,and the other loop shows the corresponding flow of dollars.

President Ronald Reagan once joked that a Trivial Pursuit game for economists would

Figure 2-4 -Refer to Figure 2-4.The opportunity cost of obtaining 10 additional toasters by moving from point B to point A is

A production possibilities frontier shifts outward when

Which of the following transactions does not take place in a market for a factor of production?

Which of the following would be considered a topic of study in macroeconomics?

Ten Principles of Economics

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Applications

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

Oligopoly

Monopolistic Competition

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality 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 Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

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

Five Debates Over Macroeconomic Policy

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