Question 1

Graph 2-2
  
-Refer to Graph 2-2. In the circular-flow diagram shown, which arrow shows the flow of the factors of production?

Accepted Answer

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

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

On a production possibilities frontier, production is inefficient if the production point is:

Accepted Answer

A)  inside the frontier 
B)  outside the frontier 
C)  on or outside the frontier 
D)  on the frontier 
A)  inside the frontier 
B)  outside the frontier 
C)  on or outside the frontier 
D)  on the frontier

Question 4

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 5

Graph 2-4
  
-Refer to Graph 2-4. On the production possibilities frontier shown, the opportunity cost of moving from point A to point D is:

Accepted Answer

A)  five bikes and 40 roller blades 
B)  zero bikes and 20 roller blades 
C)  five bikes and 20 roller blades 
D)  zero bikes and 40 roller blades 
A)  five bikes and 40 roller blades 
B)  zero bikes and 20 roller blades 
C)  five bikes and 20 roller blades 
D)  zero bikes and 40 roller blades

Question 6

Treating everyone equitably is a common value shared by all economists.

Accepted Answer

A) True 
 B)False

Question 7

If computers become easier to produce because of technological improvements, then producing more computers will mean a larger trade-off in the production of other goods.

Accepted Answer

A) True 
 B)False

Question 8

The circular-flow diagram is a type of simple model that:

Accepted Answer

A)  illustrates the carbon-cycle in forestry economic models 
B)  illustrates how an economy is organised between key sectors 
C)  shows how fish stocks grow and replenish from harvest 
D)  shows the money flows that are managed by the banking system 
A)  illustrates the carbon-cycle in forestry economic models 
B)  illustrates how an economy is organised between key sectors 
C)  shows how fish stocks grow and replenish from harvest 
D)  shows the money flows that are managed by the banking system

Question 9

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 10

The art in scientific thinking is in deciding which assumptions to make.

Accepted Answer

A) True 
 B)False

Question 11

Both of the main political parties in Erehwon employ economists. When formulating a carbon tax policy, the economists disagree. Explain why this may be the case.

Accepted Answer

Advocates of a carbon tax believed that

Question 12

Economic models:

Accepted Answer

A)  are of limited use because they cannot be tested empirically 
B)  are limited to variables that are positively related to one another 
C)  emphasise basic economic relationships by abstracting from the complexities of the real world 
D)  are unrealistic and therefore of no practical consequence 
A)  are of limited use because they cannot be tested empirically 
B)  are limited to variables that are positively related to one another 
C)  emphasise basic economic relationships by abstracting from the complexities of the real world 
D)  are unrealistic and therefore of no practical consequence

Question 13

Graph 2-7
  
-Refer to Graph 2-7. In the production possibilities frontier shown, the movement from point C to point E was most likely caused by:

Accepted Answer

A)  an increase in society's preference for pretzels 
B)  a decrease in society's preference for potato chips 
C)  unemployment 
D)  both A and B 
A)  an increase in society's preference for pretzels 
B)  a decrease in society's preference for potato chips 
C)  unemployment 
D)  both A and B

Question 14

Normative statements are essentially value judgements about the issue being considered.

Accepted Answer

A) True 
 B)False

Question 15

Graph 2-9
  
-Refer to Graph 2-9. In the graph shown, the slope of the curve between points A and B is:

Accepted Answer

A)  -2 
B)  -1/2 
C)  1/2 
D)  2 
A)  -2 
B)  -1/2 
C)  1/2 
D)  2

Question 16

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 17

Graph 2-5
  
-Refer to Graph 2-5. In the production possibilities frontier shown, the shift of the frontier from A to B was most likely caused by which of the following?

Accepted Answer

A)  more capital available in the economy 
B)  more labour available in the economy 
C)  a general technological breakthrough 
D)  technological improvement in the production of clothing 
A)  more capital available in the economy 
B)  more labour available in the economy 
C)  a general technological breakthrough 
D)  technological improvement in the production of clothing

Question 18

The degree of agreement among economists on policy matters is usually greater than it appears to the public.

Accepted Answer

A) True 
 B)False

Question 19

The circular-flow diagram and the production possibilities frontier both illustrate such concepts as opportunity cost, economic growth and efficiency.

Accepted Answer

A) True 
 B)False

Question 20

In the markets for goods and services, as in the markets for the factors of production, households are buyers and firms are sellers.

Accepted Answer

A) True 
 B)False

Exam 2: Thinking Like an Economist

Graph 2-2 -Refer to Graph 2-2. In the circular-flow diagram shown, which arrow shows the flow of the factors of production?

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

On a production possibilities frontier, production is inefficient if the production point is:

The art of scientific thinking involves:

Graph 2-4 -Refer to Graph 2-4. On the production possibilities frontier shown, the opportunity cost of moving from point A to point D is:

Treating everyone equitably is a common value shared by all economists.

If computers become easier to produce because of technological improvements, then producing more computers will mean a larger trade-off in the production of other goods.

The circular-flow diagram is a type of simple model that:

An economy is said to be efficient if it is:

The art in scientific thinking is in deciding which assumptions to make.

Both of the main political parties in Erehwon employ economists. When formulating a carbon tax policy, the economists disagree. Explain why this may be the case.

Economic models:

Graph 2-7 -Refer to Graph 2-7. In the production possibilities frontier shown, the movement from point C to point E was most likely caused by:

Normative statements are essentially value judgements about the issue being considered.

Graph 2-9 -Refer to Graph 2-9. In the graph shown, the slope of the curve between points A and B is:

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

Graph 2-5 -Refer to Graph 2-5. In the production possibilities frontier shown, the shift of the frontier from A to B was most likely caused by which of the following?

The degree of agreement among economists on policy matters is usually greater than it appears to the public.

The circular-flow diagram and the production possibilities frontier both illustrate such concepts as opportunity cost, economic growth and efficiency.

In the markets for goods and services, as in the markets for the factors of production, households are buyers and firms are sellers.

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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