Question 1

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

Accepted Answer

A)  Following the most recent recession, the economy is recovering at a slower than usual pace. 
B)  To stimulate the economy during the most recent recession, the federal government increased spending. 
C)  In response to the most recent recession, the federal government extended the duration of unemployment benefits. 
D)  The federal government's responses to the most recent recession were insufficient. 
A)  Following the most recent recession, the economy is recovering at a slower than usual pace. 
B)  To stimulate the economy during the most recent recession, the federal government increased spending. 
C)  In response to the most recent recession, the federal government extended the duration of unemployment benefits. 
D)  The federal government's responses to the most recent recession were insufficient.

Question 2

When two variables have a negative correlation and the x-variable decreases,

Accepted Answer

A)  the y-variable increases. 
B)  the y-variable decreases. 
C)  the y-variable stays the same. 
D)  the x-variable can never be positive. 
A)  the y-variable increases. 
B)  the y-variable decreases. 
C)  the y-variable stays the same. 
D)  the x-variable can never be positive.

Question 3

Figure 2-10
Panel (a) Panel (b)
    
-Refer to Figure 2-10, Panel (a). Production is

Accepted Answer

A)  possible at points V, W, Y, and Z, but efficient only at points V, W, and Z. 
B)  possible at points V, W, Y, and Z, but efficient only at point Y. 
C)  possible at points U, V, W, and Z, but efficient only at points V, W, and Z. 
D)  possible at points U, V, W, and Z, but efficient only at point U. 
A)  possible at points V, W, Y, and Z, but efficient only at points V, W, and Z. 
B)  possible at points V, W, Y, and Z, but efficient only at point Y. 
C)  possible at points U, V, W, and Z, but efficient only at points V, W, and Z. 
D)  possible at points U, V, W, and Z, but efficient only at point U.

Question 4

The two loops in the circular-flow diagram represent

Accepted Answer

A)  the flow of goods and the flow of services. 
B)  the flow of dollars and the flow of financial assets. 
C)  the flow of inputs into production processes and the flow of outputs from production processes. 
D)  the flows of inputs and outputs and the flow of dollars. 
A)  the flow of goods and the flow of services. 
B)  the flow of dollars and the flow of financial assets. 
C)  the flow of inputs into production processes and the flow of outputs from production processes. 
D)  the flows of inputs and outputs and the flow of dollars.

Question 5

The y-coordinate is the

Accepted Answer

A)  first number of an ordered pair and represents the point's horizontal location. 
B)  second number of an ordered pair and represents the point's horizontal location. 
C)  first number of an ordered pair and represents the point's vertical location. 
D)  second number of an ordered pair and represents the point's vertical location. 
A)  first number of an ordered pair and represents the point's horizontal location. 
B)  second number of an ordered pair and represents the point's horizontal location. 
C)  first number of an ordered pair and represents the point's vertical location. 
D)  second number of an ordered pair and represents the point's vertical location.

Question 6

Economic growth causes a production possibilities frontier to shift outward.

Accepted Answer

A) True 
 B)False

Question 7

Economists believe that production possibilities frontiers rarely have a bowed shape.

Accepted Answer

A) True 
 B)False

Question 8

Figure 2-14   Consider the production possibilities curve for a country that can produce sweaters, apples (in bushels), or a combination of the two.
-Refer to Figure 2-14. What is the opportunity cost of moving from point R to point Q?

Accepted Answer

80 bushels

Question 9

Figure 2-8  
-Refer to Figure 2-8. Which point on the graph best represents the fact that, because resources are scarce, not every conceivable outcome is feasible?

Accepted Answer

A)  point J 
B)  point K 
C)  point L 
D)  point M 
A)  point J 
B)  point K 
C)  point L 
D)  point M

Question 10

Which of the following is one of the basic reasons why economists often appear to give conflicting advice to policymakers?

Accepted Answer

A)  similar opinions about the validity of economic theories 
B)  significant differences in education 
C)  differences in personal values 
D)  a reliance on normative statement for research theories 
A)  similar opinions about the validity of economic theories 
B)  significant differences in education 
C)  differences in personal values 
D)  a reliance on normative statement for research theories

Question 11

Which of these terms are used interchangeably?

Accepted Answer

A)  "goods and services" and "inputs" 
B)  "goods and services" and "factors of production" 
C)  "inputs" and "factors of production" 
D)  "land, labor, and capital" and "goods and services" 
A)  "goods and services" and "inputs" 
B)  "goods and services" and "factors of production" 
C)  "inputs" and "factors of production" 
D)  "land, labor, and capital" and "goods and services"

Question 12

The Council of Economic Advisers

Accepted Answer

A)  was created in 1946. 
B)  advises the president of the United States on economic policy matters. 
C)  writes the annual Economic Report of the President. 
D)  All of the above are correct. 
A)  was created in 1946. 
B)  advises the president of the United States on economic policy matters. 
C)  writes the annual Economic Report of the President. 
D)  All of the above are correct.

Question 13

In the circular-flow diagram, which of the following is not a factor of production?

Accepted Answer

A)  labor 
B)  land 
C)  capital 
D)  money 
A)  labor 
B)  land 
C)  capital 
D)  money

Question 14

Table 2-5
  
-Refer to Table 2-5. Table 2-5 shows one set of production possibilities. Which of the following statements is correct?

Accepted Answer

A)  The opportunity cost of a bushel of corn does not depend on how many bushels of wheat are being produced. 
B)  The opportunity cost of a bushel of corn increases as more corn is produced. 
C)  The opportunity cost of a bushel of corn decreases as more corn is produced. 
D)  The opportunity cost of a bushel of wheat decreases as more wheat is produced. 
A)  The opportunity cost of a bushel of corn does not depend on how many bushels of wheat are being produced. 
B)  The opportunity cost of a bushel of corn increases as more corn is produced. 
C)  The opportunity cost of a bushel of corn decreases as more corn is produced. 
D)  The opportunity cost of a bushel of wheat decreases as more wheat is produced.

Question 15

Which of the following is not an example of a natural experiment an economist might use to evaluate a theory?

Accepted Answer

A)  Transit ridership increased in Atlanta following an increase in gas prices. 
B)  Federal tax revenue increased following a decrease in the tax rate. 
C)  Students in a principles of microeconomics course are asked to play a game with classmates to determine what decisions they make under certain circumstances. 
D)  Following the imposition of austerity measures, the growth rate of the economy in Greece slowed. 
A)  Transit ridership increased in Atlanta following an increase in gas prices. 
B)  Federal tax revenue increased following a decrease in the tax rate. 
C)  Students in a principles of microeconomics course are asked to play a game with classmates to determine what decisions they make under certain circumstances. 
D)  Following the imposition of austerity measures, the growth rate of the economy in Greece slowed.

Question 16

Economists devise theories, collect data, and then analyze these data in an attempt to verify or refute their theories.

Accepted Answer

A) True 
 B)False

Question 17

Alfonso has noticed that increases in unemployment insurance claims are associated with recessions, and therefore he advocates limits on unemployment insurance so as to prevent recessions. Mary has noticed that most drug addicts once attended schools, and therefore she advocates getting rid of schools so as to prevent drug addiction.

Accepted Answer

A)  The reasoning of both Alfonso and Mary suffers from the omitted variable problem. 
B)  The reasoning of both Alfonso and Mary suffers from the reverse causality problem. 
C)  Alfonso's reasoning suffers from the reverse causality problem, and Mary's reasoning suffers from the omitted variable problem. 
D)  Mary's reasoning suffers from the reverse causality problem, and Alfonso's reasoning suffers from the omitted variable problem. 
A)  The reasoning of both Alfonso and Mary suffers from the omitted variable problem. 
B)  The reasoning of both Alfonso and Mary suffers from the reverse causality problem. 
C)  Alfonso's reasoning suffers from the reverse causality problem, and Mary's reasoning suffers from the omitted variable problem. 
D)  Mary's reasoning suffers from the reverse causality problem, and Alfonso's reasoning suffers from the omitted variable problem.

Question 18

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 19

Good assumptions simplify a problem without substantially affecting the answer.

Accepted Answer

A) True 
 B)False

Question 20

The most common data for testing economic theories come from

Accepted Answer

A)  carefully controlled and conducted laboratory experiments. 
B)  computer models of economies. 
C)  historical episodes of economic change. 
D)  centrally planned economies. 
A)  carefully controlled and conducted laboratory experiments. 
B)  computer models of economies. 
C)  historical episodes of economic change. 
D)  centrally planned economies.

Exam 2: Thinking Like an Economist

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

When two variables have a negative correlation and the x-variable decreases,

Figure 2-10 Panel (a) Panel (b) -Refer to Figure 2-10, Panel (a). Production is

The two loops in the circular-flow diagram represent

The y-coordinate is the

Economic growth causes a production possibilities frontier to shift outward.

Economists believe that production possibilities frontiers rarely have a bowed shape.

Figure 2-14 Consider the production possibilities curve for a country that can produce sweaters, apples (in bushels), or a combination of the two. -Refer to Figure 2-14. What is the opportunity cost of moving from point R to point Q?

Figure 2-8 -Refer to Figure 2-8. Which point on the graph best represents the fact that, because resources are scarce, not every conceivable outcome is feasible?

Which of the following is one of the basic reasons why economists often appear to give conflicting advice to policymakers?

Which of these terms are used interchangeably?

The Council of Economic Advisers

In the circular-flow diagram, which of the following is not a factor of production?

Table 2-5 -Refer to Table 2-5. Table 2-5 shows one set of production possibilities. Which of the following statements is correct?

Which of the following is not an example of a natural experiment an economist might use to evaluate a theory?

Economists devise theories, collect data, and then analyze these data in an attempt to verify or refute their theories.

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

Good assumptions simplify a problem without substantially affecting the answer.

The most common data for testing economic theories come from

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

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