Question 1

John Maynard Keynes believed the ideas of economists to be

Accepted Answer

A)  generally incorrect. 
B)  powerful. 
C)  academic and without practical application. 
D)  rantings of madmen. 
A)  generally incorrect. 
B)  powerful. 
C)  academic and without practical application. 
D)  rantings of madmen.

Question 2

Which of the following is an example of a normative,as opposed to 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 3

A certain production possibilities frontier shows production possibilities for two goods: wheat and shirts.Which of the following concepts cannot be illustrated by this model?

Accepted Answer

A)  the flow of dollars between sellers of wheat and shirts and buyers of wheat and shirts 
B)  the tradeoff between production of wheat and production of shirts 
C)  the opportunity cost of shirts in terms of wheat 
D)  the effect of economic growth on production possibilities involving wheat and shirts 
A)  the flow of dollars between sellers of wheat and shirts and buyers of wheat and shirts 
B)  the tradeoff between production of wheat and production of shirts 
C)  the opportunity cost of shirts in terms of wheat 
D)  the effect of economic growth on production possibilities involving wheat and shirts

Question 4

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

Accepted Answer

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

Question 5

Figure 2-11  
-Refer to Figure 2-11.Which of the following would most likely have caused the production possibilities frontier to shift outward from A to B?

Accepted Answer

A)  a decrease in unemployment 
B)  a technological advance in the consumer goods industries 
C)  a general technological advance 
D)  an increase in the availability of capital-producing resources 
A)  a decrease in unemployment 
B)  a technological advance in the consumer goods industries 
C)  a general technological advance 
D)  an increase in the availability of capital-producing resources

Question 6

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 7

Which of the following is not correct?

Accepted Answer

A)  Economists use some familiar words in specialized ways. 
B)  Economics has its own language and its own way of thinking,but few other fields of study do. 
C)  Supply,demand,elasticity,comparative advantage,consumer surplus,and deadweight loss are all terms that are part of the economist's language. 
D)  The value of the economist's language lies in its ability to provide you with a new and useful way of thinking about the world in which you live. 
A)  Economists use some familiar words in specialized ways. 
B)  Economics has its own language and its own way of thinking,but few other fields of study do. 
C)  Supply,demand,elasticity,comparative advantage,consumer surplus,and deadweight loss are all terms that are part of the economist's language. 
D)  The value of the economist's language lies in its ability to provide you with a new and useful way of thinking about the world in which you live.

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

A relatively steep demand curve indicates that

Accepted Answer

A)  quantity demanded will adjust only slightly to a price change. 
B)  quantity demanded will adjust significantly to a price change. 
C)  quantity demanded will not adjust to a price change. 
D)  the change in quantity demanded will exactly equal a change in price. 
A)  quantity demanded will adjust only slightly to a price change. 
B)  quantity demanded will adjust significantly to a price change. 
C)  quantity demanded will not adjust to a price change. 
D)  the change in quantity demanded will exactly equal a change in price.

Question 10

Unemployment causes production levels to be inefficient.

Accepted Answer

A) True 
 B)False

Question 11

In the markets for the factors of production in the circular-flow diagram,

Accepted Answer

A)  households are sellers and firms are buyers. 
B)  households are buyers and firms are sellers. 
C)  households and firms are both buyers. 
D)  households and firms are both sellers. 
A)  households are sellers and firms are buyers. 
B)  households are buyers and firms are sellers. 
C)  households and firms are both buyers. 
D)  households and firms are both sellers.

Question 12

Which of the following statements about economic models is correct?

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 13

If a production possibilities frontier is bowed outward,then the opportunity cost of producing more of the first good is highest when

Accepted Answer

A)  the economy is producing much of the first good and little of the second good. 
B)  the economy is producing equal amounts of the first and second goods. 
C)  the economy is producing little of the first good and much of the second good. 
D)  None of the above is correct because the opportunity cost of producing more of the first good is constant. 
A)  the economy is producing much of the first good and little of the second good. 
B)  the economy is producing equal amounts of the first and second goods. 
C)  the economy is producing little of the first good and much of the second good. 
D)  None of the above is correct because the opportunity cost of producing more of the first good is constant.

Question 14

If new government regulations designed to protect wetlands remove very productive farmland from production,then the production possibilities frontier will shift inward.

Accepted Answer

A) True 
 B)False

Question 15

Figure 2-8
Panel (a)Panel (b)    
-Refer to Figure 2-8,Panel (a).The movement from point M to point K could be caused by

Accepted Answer

A)  an advance in production technology. 
B)  an improvement in efficiency. 
C)  economic growth. 
D)  unemployment. 
A)  an advance in production technology. 
B)  an improvement in efficiency. 
C)  economic growth. 
D)  unemployment.

Question 16

You know an economist has crossed the line from policy adviser to scientist when he or she

Accepted Answer

A)  claims that the problem at hand is widely misunderstood by non-economists. 
B)  makes positive statements. 
C)  talks about values. 
D)  makes a claim about how the world should be. 
A)  claims that the problem at hand is widely misunderstood by non-economists. 
B)  makes positive statements. 
C)  talks about values. 
D)  makes a claim about how the world should be.

Question 17

Microeconomics is the study of how households and firms make decisions and how they interact in specific markets.

Accepted Answer

A) True 
 B)False

Question 18

Figure 2-7  
-Refer to Figure 2-7.Inefficient production is represented by which point(s)?

Accepted Answer

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

Question 19

When constructing a production possibilities frontier,which of the following assumptions is not made?

Accepted Answer

A)  The economy produces only two goods or two types of goods. 
B)  Firms produce goods using factors of production. 
C)  The technology available to firms is given. 
D)  The quantities of the factors of production that are available are increasing over the relevant time period. 
A)  The economy produces only two goods or two types of goods. 
B)  Firms produce goods using factors of production. 
C)  The technology available to firms is given. 
D)  The quantities of the factors of production that are available are increasing over the relevant time period.

Question 20

One way to characterize the difference between positive statements and normative statements is as follows:

Accepted Answer

A)  Positive statements tend to reflect optimism about the economy and its future,whereas normative statements tend to reflect pessimism about the economy and its future. 
B)  Positive statements offer descriptions of the way things are,whereas normative statements offer opinions on how things ought to be. 
C)  Positive statements involve advice on policy matters,whereas normative statements are supported by scientific theory and observation. 
D)  Economists outside of government tend to make normative statements,whereas government-employed economists tend to make positive statements. 
A)  Positive statements tend to reflect optimism about the economy and its future,whereas normative statements tend to reflect pessimism about the economy and its future. 
B)  Positive statements offer descriptions of the way things are,whereas normative statements offer opinions on how things ought to be. 
C)  Positive statements involve advice on policy matters,whereas normative statements are supported by scientific theory and observation. 
D)  Economists outside of government tend to make normative statements,whereas government-employed economists tend to make positive statements.

Exam 2: Thinking Like an Economist

John Maynard Keynes believed the ideas of economists to be

Which of the following is an example of a normative,as opposed to positive,statement?

A certain production possibilities frontier shows production possibilities for two goods: wheat and shirts.Which of the following concepts cannot be illustrated by this model?

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

Figure 2-11 -Refer to Figure 2-11.Which of the following would most likely have caused the production possibilities frontier to shift outward from A to B?

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

Which of the following is not correct?

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

A relatively steep demand curve indicates that

Unemployment causes production levels to be inefficient.

In the markets for the factors of production in the circular-flow diagram,

Which of the following statements about economic models is correct?

If a production possibilities frontier is bowed outward,then the opportunity cost of producing more of the first good is highest when

If new government regulations designed to protect wetlands remove very productive farmland from production,then the production possibilities frontier will shift inward.

Figure 2-8 Panel (a)Panel (b) -Refer to Figure 2-8,Panel (a).The movement from point M to point K could be caused by

You know an economist has crossed the line from policy adviser to scientist when he or she

Microeconomics is the study of how households and firms make decisions and how they interact in specific markets.

Figure 2-7 -Refer to Figure 2-7.Inefficient production is represented by which point(s)?

When constructing a production possibilities frontier,which of the following assumptions is not made?

One way to characterize the difference between positive statements and normative statements is as follows:

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 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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