Question 1

In a simple circular-flow diagram, firms have to hire or purchase factors of production from households in order to produce goods and services.

Accepted Answer

A) True 
 B)False  True

Question 2

For economists, positive statements are:

Accepted Answer

A)  descriptive, making a claim about how the world is 
B)  optimistic, putting the best possible interpretation on things 
C)  affirmative, justifying existing economic policy 
D)  prescriptive, making a claim about how the world ought to be 
A)  descriptive, making a claim about how the world is 
B)  optimistic, putting the best possible interpretation on things 
C)  affirmative, justifying existing economic policy 
D)  prescriptive, making a claim about how the world ought to be A

Question 3

Which of the following statements is correct?

Accepted Answer

A)  the x-coordinate tells us the horizontal location of a point on a graph, and the y-coordinate tells us the vertical location of the point 
B)  the origin of a graph is the point with both a maximum x-coordinate and a maximum y-coordinate 
C)  the x-coordinate tells us the vertical location of a point on a graph, and the y-coordinate tells us the horizontal location of the point 
D)  the origin of a graph is represented by an x-coordinate equal to 1 and a y-coordinate equal to 1 
A)  the x-coordinate tells us the horizontal location of a point on a graph, and the y-coordinate tells us the vertical location of the point 
B)  the origin of a graph is the point with both a maximum x-coordinate and a maximum y-coordinate 
C)  the x-coordinate tells us the vertical location of a point on a graph, and the y-coordinate tells us the horizontal location of the point 
D)  the origin of a graph is represented by an x-coordinate equal to 1 and a y-coordinate equal to 1 A

Question 4

Graph 2-8
  
-Refer to Graph 2-8. Which of the graphs shown is a bar graph?

Accepted Answer

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

Question 5

If the y-axis label is price, and the x-axis label is quantity, what would occur, if there was a change in price?

Accepted Answer

As the variable that

Question 6

The scientific method can best be defined as:

Accepted Answer

A)  the use of modern laboratory equipment to discover scientific laws 
B)  the careful design of controlled experiments to test theories about how the world works 
C)  the unbiased development of and testing of theories about how the world works 
D)  the selective and deliberate search for evidence that supports preconceived theories of how the world works 
A)  the use of modern laboratory equipment to discover scientific laws 
B)  the careful design of controlled experiments to test theories about how the world works 
C)  the unbiased development of and testing of theories about how the world works 
D)  the selective and deliberate search for evidence that supports preconceived theories of how the world works

Question 7

Graph 2-2
  
-Refer to Graph 2-2. In the circular-flow diagram shown, which arrow shows the flow of goods and services?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 8

Graph 2-1
  
-Refer to Graph 2-1. In the graph shown, points A, B and C represent feasible or attainable outcomes for society.

Accepted Answer

A) True 
 B)False

Question 9

The production possibilities frontier illustrates that it is not feasible for an economy to produce an output that is outside the frontier.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is an example of a positive statement?

Accepted Answer

A)  if welfare payments increase, the world will be a better place 
B)  prices rise when the government prints too much money 
C)  inflation is more harmful to the economy than unemployment 
D)  the benefits to the economy of improved equity are greater than the costs of reduced efficiency 
A)  if welfare payments increase, the world will be a better place 
B)  prices rise when the government prints too much money 
C)  inflation is more harmful to the economy than unemployment 
D)  the benefits to the economy of improved equity are greater than the costs of reduced efficiency

Question 11

Graph 2-6
  
-Refer to Graph 2-6. According to the graph, the shift of the production possibilities frontier from frontier A to frontier B was most likely caused by which of the following?

Accepted Answer

A)  an improvement in the technology of producing capital goods 
B)  an improvement in the technology of producing consumer goods 
C)  a general improvement in technology 
D)  a reduction in the availability of resources 
A)  an improvement in the technology of producing capital goods 
B)  an improvement in the technology of producing consumer goods 
C)  a general improvement in technology 
D)  a reduction in the availability of resources

Question 12

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 13

Which of the following is the most accurate statement about economic models?

Accepted Answer

A)  economic models attempt to mirror reality exactly 
B)  economic models are useful, but should not be used for policymaking 
C)  economic models cannot be used in the real world because they omit details 
D)  economic models omit many details to allow us to see what is truly important 
A)  economic models attempt to mirror reality exactly 
B)  economic models are useful, but should not be used for policymaking 
C)  economic models cannot be used in the real world because they omit details 
D)  economic models omit many details to allow us to see what is truly important

Question 14

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 15

The parameters chosen by economists may be a reason why differences of judgements result from the same issue.

Accepted Answer

A) True 
 B)False

Question 16

Which is the best statement about the way economists study the economy?

Accepted Answer

A)  they study the past but do not try to predict the future 
B)  they devise theories, collect data, then analyse the data to test the theories 
C)  they use a probability approach based on correlations between economic events 
D)  they use controlled experiments in much the same way a biologist or physicist does 
A)  they study the past but do not try to predict the future 
B)  they devise theories, collect data, then analyse the data to test the theories 
C)  they use a probability approach based on correlations between economic events 
D)  they use controlled experiments in much the same way a biologist or physicist does

Question 17

Consider the statement 'banning the export of live parrots from Australia has resulted in the black market price for cockatoos rising and an increase in poaching'. This is an example of a normative statement.

Accepted Answer

A) True 
 B)False

Question 18

Show how each of the following concepts can be illustrated using a production possibilities frontier:
a. efficiency.
b. opportunity cost.
c. economic growth.

Accepted Answer

a. efficiency is any point on

Question 19

An economy is being efficient if it is impossible to produce more of one good without producing less of another.

Accepted Answer

A) True 
 B)False

Question 20

The slope of a line is defined as:

Accepted Answer

A)  the ratio of the horizontal distance covered to the vertical distance covered as we move along the line 
B)  the rise divided by the run 
C)  the ratio of the vertical distance covered to the horizontal distance covered as we move along the line 
D)  both B and C 
A)  the ratio of the horizontal distance covered to the vertical distance covered as we move along the line 
B)  the rise divided by the run 
C)  the ratio of the vertical distance covered to the horizontal distance covered as we move along the line 
D)  both B and C

Exam 2: Thinking Like an Economist

In a simple circular-flow diagram, firms have to hire or purchase factors of production from households in order to produce goods and services.

For economists, positive statements are:

Which of the following statements is correct?

Graph 2-8 -Refer to Graph 2-8. Which of the graphs shown is a bar graph?

If the y-axis label is price, and the x-axis label is quantity, what would occur, if there was a change in price?

The scientific method can best be defined as:

Graph 2-2 -Refer to Graph 2-2. In the circular-flow diagram shown, which arrow shows the flow of goods and services?

Graph 2-1 -Refer to Graph 2-1. In the graph shown, points A, B and C represent feasible or attainable outcomes for society.

The production possibilities frontier illustrates that it is not feasible for an economy to produce an output that is outside the frontier.

Which of the following is an example of a positive statement?

Graph 2-6 -Refer to Graph 2-6. According to the graph, the shift of the production possibilities frontier from frontier A to frontier B was most likely caused by which of the following?

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:

Which of the following is the most accurate statement about economic models?

Factors of production are:

The parameters chosen by economists may be a reason why differences of judgements result from the same issue.

Which is the best statement about the way economists study the economy?

Consider the statement 'banning the export of live parrots from Australia has resulted in the black market price for cockatoos rising and an increase in poaching'. This is an example of a normative statement.

Show how each of the following concepts can be illustrated using a production possibilities frontier: a. efficiency. b. opportunity cost. c. economic growth.

An economy is being efficient if it is impossible to produce more of one good without producing less of another.

The slope of a line is defined as:

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

Business Strategy

Competition Policy

Monopolistic Competition

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

Five Debates Over Macroeconomic Policy

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