Question 1

When economists make normative statements, they are

Accepted Answer

A) speaking as scientists. 
B) speaking as policy advisers. 
C) making claims about how the world is. 
D) revealing that they are very liberal in their views of how the world works. 
A) speaking as scientists. 
B) speaking as policy advisers. 
C) making claims about how the world is. 
D) revealing that they are very liberal in their views of how the world works.

Question 2

Figure 2-17
Relationship Between Years of Education and Annual Income  
-Refer to Figure 2-17. 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.

Question 3

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 4

In the ordered pair (10,30), 10 is the y-coordinate and 30 is the z-coordinate.

Accepted Answer

A) True 
 B)False

Question 5

Figure 2-14  
-Refer to Figure 2-14. The opportunity cost of moving from point B to point D is 15 doghouses.

Accepted Answer

A) True 
 B)False

Question 6

Which types of models are built with assumptions?

Accepted Answer

A) economic models, but not models in other disciplines such as physics and biology 
B) economic models as well as models in other disciplines such as physics and biology 
C) models that are built for teaching purposes but not for research purposes 
D) bad models 
A) economic models, but not models in other disciplines such as physics and biology 
B) economic models as well as models in other disciplines such as physics and biology 
C) models that are built for teaching purposes but not for research purposes 
D) bad models

Question 7

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

Accepted Answer

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

Question 8

A normative economic statement such as "The minimum wage should be abolished"

Accepted Answer

A) would likely be made by an economist acting as a scientist. 
B) would require values and data in order to be evaluated. 
C) would require data but not values in order to be evaluated. 
D) could not be evaluated by economists acting as policy advisers. 
A) would likely be made by an economist acting as a scientist. 
B) would require values and data in order to be evaluated. 
C) would require data but not values in order to be evaluated. 
D) could not be evaluated by economists acting as policy advisers.

Question 9

Unemployment causes production levels to be inefficient.

Accepted Answer

A) True 
 B)False

Question 10

An economic model can accurately explain how the economy is organized because it is designed to include, to the extent possible, all features of the real world.

Accepted Answer

A) True 
 B)False

Question 11

In a certain economy, jam and bread are produced, and the economy currently operates on its production possibilities frontier. Which of the following events would allow the economy to produce more jam and more bread, relative to the quantities of those goods that are being produced now?

Accepted Answer

A) Unemployed labor is put to work producing jam and bread. 
B) The economy puts its idle capital to work producing jam and bread. 
C) The economy experiences economic growth. 
D) All of the above are correct. 
A) Unemployed labor is put to work producing jam and bread. 
B) The economy puts its idle capital to work producing jam and bread. 
C) The economy experiences economic growth. 
D) All of the above are correct.

Question 12

Where can an economy not produce?

Accepted Answer

A) inside its production possibilities frontier 
B) on its production possibilities frontier 
C) outside its production possibilities frontier 
D) at the endpoints of its production possibilities frontier 
A) inside its production possibilities frontier 
B) on its production possibilities frontier 
C) outside its production possibilities frontier 
D) at the endpoints of its production possibilities frontier

Question 13

The scientific method is

Accepted Answer

A) the use of modern technology to understand the way the world works. 
B) the use of controlled laboratory experiments to understand the way the world works. 
C) the dispassionate development and testing of theories about how the world works. 
D) the search for evidence to support preconceived theories about how the world works. 
A) the use of modern technology to understand the way the world works. 
B) the use of controlled laboratory experiments to understand the way the world works. 
C) the dispassionate development and testing of theories about how the world works. 
D) the search for evidence to support preconceived theories about how the world works.

Question 14

An assumption an economist might make while studying international trade is

Accepted Answer

A) there are only two countries. 
B) countries only produce two goods. 
C) technology does not change. 
D) All of the above are possible assumptions. 
A) there are only two countries. 
B) countries only produce two goods. 
C) technology does not change. 
D) All of the above are possible assumptions.

Question 15

Table 2-4
Production Possibilities for Batterland
 $$\begin{array} { | c | c } 
\hline \text { Pancakas } & \text { Waffles } \
\hline \text { 600 } & 0 \
\hline 450 & 150 \
\hline 300 & 250 \
\hline 150 & 325 \
\hline 0 & 375 \
\hline
\end{array}$$
-Refer to Table 2-4. What is the opportunity cost to Batterland of increasing the production of pancakes from 150 to 300?

Accepted Answer

A) 75 waffles 
B) 150 waffles 
C) 250 waffles 
D) 325 waffles 
A) 75 waffles 
B) 150 waffles 
C) 250 waffles 
D) 325 waffles

Question 16

Figure 2-15
Relationship between Price and Cups of Coffee  
-Refer to Figure 2-15. Which of the following could result in a movement from point B to point Z?

Accepted Answer

A) a change in the price of coffee 
B) a change in the number of cups of coffee demanded 
C) a change in income 
D) More than one of the above is correct. 
A) a change in the price of coffee 
B) a change in the number of cups of coffee demanded 
C) a change in income 
D) More than one of the above is correct.

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

Figure 2-14  
-Refer to Figure 2-14. The movement from point A to point B is a(n)

Accepted Answer

A) shift of the demand curve. 
B) indication of a change in preferences for grapes. 
C) movement along the demand curve. 
D) indication of an increase in income. 
A) shift of the demand curve. 
B) indication of a change in preferences for grapes. 
C) movement along the demand curve. 
D) indication of an increase in income.

Question 19

Figure 2-14  
-Refer to Figure 2-14. The slope of the curve between points A and B is

Accepted Answer

A) -5 
B) -1/5 
C) 1/5 
D) 5 
A) -5 
B) -1/5 
C) 1/5 
D) 5

Question 20

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.

Exam 2: Thinking Like an Economist

When economists make normative statements, they are

In the ordered pair (10,30), 10 is the y-coordinate and 30 is the z-coordinate.

Figure 2-14 -Refer to Figure 2-14. The opportunity cost of moving from point B to point D is 15 doghouses.

Which types of models are built with assumptions?

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

A normative economic statement such as "The minimum wage should be abolished"

Unemployment causes production levels to be inefficient.

An economic model can accurately explain how the economy is organized because it is designed to include, to the extent possible, all features of the real world.

In a certain economy, jam and bread are produced, and the economy currently operates on its production possibilities frontier. Which of the following events would allow the economy to produce more jam and more bread, relative to the quantities of those goods that are being produced now?

Where can an economy not produce?

The scientific method is

An assumption an economist might make while studying international trade is

Table 2-4 Production Possibilities for Batterland Pancakas Waffles 600 0 450 150 300 250 150 325 0 375 -Refer to Table 2-4. What is the opportunity cost to Batterland of increasing the production of pancakes from 150 to 300?

Figure 2-15 Relationship between Price and Cups of Coffee -Refer to Figure 2-15. Which of the following could result in a movement from point B to point Z?

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

Figure 2-14 -Refer to Figure 2-14. The movement from point A to point B is a(n)

Figure 2-14 -Refer to Figure 2-14. The slope of the curve between points A and B is

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

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

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 Macroeconomic Models

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

Six Debates Over Macroeconomic Policy

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