Question 1

In the circular-flow diagram,which of the following items does not flow from households to firms?

Accepted Answer

A)  revenue 
B)  land,labor,and capital 
C)  factors of production 
D)  profit 
A)  revenue 
B)  land,labor,and capital 
C)  factors of production 
D)  profit

Question 2

Figure 2-1  
-Refer to Figure 2-1.Which arrow represents the flow of land,labor,and capital?

Accepted Answer

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

Question 3

Economists may disagree about the validity of alternative positive theories about how the world works.

Accepted Answer

A) True 
 B)False

Question 4

Figure 2-1  
-Refer to Figure 2-1.Which arrow represents the flow of spending by households?

Accepted Answer

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

Question 5

"Other things equal,an increase in supply causes a decrease in price" is a normative statement,not a positive statement.

Accepted Answer

A) True 
 B)False

Question 6

Economists make use of assumptions,some of which are unrealistic,for the purpose of

Accepted Answer

A)  teaching economics to people who have never before studied economics. 
B)  advancing their political agendas. 
C)  developing models when the scientific method cannot be used. 
D)  focusing their thinking. 
A)  teaching economics to people who have never before studied economics. 
B)  advancing their political agendas. 
C)  developing models when the scientific method cannot be used. 
D)  focusing their thinking.

Question 7

Suppose an economy produces two goods,food and machines.This economy always operates on its production possibilities frontier.Last year,it produced 50 units of food and 30 machines.This year it experienced a technological advance in its machine-making industry.As a result,this year the society wants to produce 55 units of food and 30 machines.Which of the following statements is correct?

Accepted Answer

A)  Because the technological advance occurred in the machine-making industry,it will not be possible to increase food production without reducing machine production below 30. 
B)  Because the technological advance occurred in the machine-making industry,increases in output can only occur in the machine industry. 
C)  In order to increase food production in these circumstances without reducing machine production,the economy must reduce inefficiencies. 
D)  The technological advance reduced the amount of resources needed to produce 30 machines,so these resources could be used to produce more food. 
A)  Because the technological advance occurred in the machine-making industry,it will not be possible to increase food production without reducing machine production below 30. 
B)  Because the technological advance occurred in the machine-making industry,increases in output can only occur in the machine industry. 
C)  In order to increase food production in these circumstances without reducing machine production,the economy must reduce inefficiencies. 
D)  The technological advance reduced the amount of resources needed to produce 30 machines,so these resources could be used to produce more food.

Question 8

In the ordered pair (17,75),75 is the

Accepted Answer

A)  horizontal location of the point. 
B)  the slope. 
C)  the x-coordinate. 
D)  the y-coordinate. 
A)  horizontal location of the point. 
B)  the slope. 
C)  the x-coordinate. 
D)  the y-coordinate.

Question 9

Changes in one variable on a graph might be caused by the other variable on the graph or by a third omitted variable.

Accepted Answer

A) True 
 B)False

Question 10

Draw a production possibilities frontier showing increasing opportunity cost of hammers in terms of horseshoes.
a.
On the graph,identify the area of feasible outcomes and the area of infeasible outcomes.
b.
On the graph,label a point that is efficient and a point that is inefficient.
c.
On the graph,illustrate the effect of the discovery of a new vein of iron ore,a resource needed to make both horseshoes and hammers,on this economy.
d.
On a second graph,illustrate the effect of a new computerized assembly line in the production of hammers on this economy.

Accepted Answer

The answer of Draw a production possibilities frontier showing increasing...

Question 11

A duty of economists at the Department of Labor is to

Accepted Answer

A)  analyze data on workers. 
B)  schedule federal holidays. 
C)  enforce the nation's antitrust laws. 
D)  All of the above are correct. 
A)  analyze data on workers. 
B)  schedule federal holidays. 
C)  enforce the nation's antitrust laws. 
D)  All of the above are correct.

Question 12

Figure 2-6  
-Refer to Figure 2-6.If this economy moved from point C to point F,then

Accepted Answer

A)  it still would not be producing efficiently. 
B)  there would be no gain in either bathtubs or barrels. 
C)  it would be producing more barrels and more bathtubs than at point C. 
D)  It is not possible for this economy to move from point C to point F without additional resources. 
A)  it still would not be producing efficiently. 
B)  there would be no gain in either bathtubs or barrels. 
C)  it would be producing more barrels and more bathtubs than at point C. 
D)  It is not possible for this economy to move from point C to point F without additional resources.

Question 13

Figure 2-14  
-Refer to Figure 2-14.It is possible for this economy to produce 75 doghouses.

Accepted Answer

A) True 
 B)False

Question 14

When two variables have a positive correlation,

Accepted Answer

A)  they tend to move in opposite directions. 
B)  they tend to move in the same direction. 
C)  one variable will move while the other remains constant. 
D)  the variables' values are never negative. 
A)  they tend to move in opposite directions. 
B)  they tend to move in the same direction. 
C)  one variable will move while the other remains constant. 
D)  the variables' values are never negative.

Question 15

Figure 2-9
Panel (a)Panel (b)    
-Refer to Figure 2-9,Panel (a).Production is

Accepted Answer

A)  possible at points Q,R,S,and T,but efficient only at points Q,S,and T. 
B)  possible at points Q,R,S,and T,but efficient only at point R. 
C)  possible at points Q,S,T,and U,but efficient only at points Q,S,and T. 
D)  possible at points Q,S,T,and U,but efficient only at point U. 
A)  possible at points Q,R,S,and T,but efficient only at points Q,S,and T. 
B)  possible at points Q,R,S,and T,but efficient only at point R. 
C)  possible at points Q,S,T,and U,but efficient only at points Q,S,and T. 
D)  possible at points Q,S,T,and U,but efficient only at point U.

Question 16

Figure 2-14  
-Refer to Figure 2-14.Points B and C represent infeasible outcomes for this economy.

Accepted Answer

A) True 
 B)False

Question 17

The duties of the Council of Economic Advisers are to advise the president of the United States and to determine U.S.monetary policy.

Accepted Answer

A) True 
 B)False

Question 18

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 19

"Society would be better off if the welfare system were abolished" is a normative statement,not a positive statement.

Accepted Answer

A) True 
 B)False

Question 20

A survey of professional economists revealed that more than three-fourths of them agreed with fourteen economic propositions.Which of the following is not one of those propositions?

Accepted Answer

A)  A ceiling on rents reduces the quantity and quality of housing available. 
B)  Fiscal policy has a significant stimulative impact on a less than fully employed economy. 
C)  The gap between Social Security funds and expenditures will become unsustainably large within the next fifty years if current policies remain unchanged. 
D)  The United States should implement universal health care for its citizens. 
A)  A ceiling on rents reduces the quantity and quality of housing available. 
B)  Fiscal policy has a significant stimulative impact on a less than fully employed economy. 
C)  The gap between Social Security funds and expenditures will become unsustainably large within the next fifty years if current policies remain unchanged. 
D)  The United States should implement universal health care for its citizens.

Exam 2: Thinking Like an Economist

In the circular-flow diagram,which of the following items does not flow from households to firms?

Figure 2-1 -Refer to Figure 2-1.Which arrow represents the flow of land,labor,and capital?

Economists may disagree about the validity of alternative positive theories about how the world works.

Figure 2-1 -Refer to Figure 2-1.Which arrow represents the flow of spending by households?

"Other things equal,an increase in supply causes a decrease in price" is a normative statement,not a positive statement.

Economists make use of assumptions,some of which are unrealistic,for the purpose of

In the ordered pair (17,75),75 is the

Changes in one variable on a graph might be caused by the other variable on the graph or by a third omitted variable.

A duty of economists at the Department of Labor is to

Figure 2-6 -Refer to Figure 2-6.If this economy moved from point C to point F,then

Figure 2-14 -Refer to Figure 2-14.It is possible for this economy to produce 75 doghouses.

When two variables have a positive correlation,

Figure 2-9 Panel (a)Panel (b) -Refer to Figure 2-9,Panel (a).Production is

Figure 2-14 -Refer to Figure 2-14.Points B and C represent infeasible outcomes for this economy.

The duties of the Council of Economic Advisers are to advise the president of the United States and to determine U.S.monetary policy.

Where can an economy not produce?

"Society would be better off if the welfare system were abolished" is a normative statement,not a positive statement.

A survey of professional economists revealed that more than three-fourths of them agreed with fourteen economic propositions.Which of the following is not one of those propositions?

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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