Question 1

In the circular-flow diagram,

Accepted Answer

A)  taxes flow from households to firms, and transfer payments flow from firms to households. 
B)  income payments flow from firms to households, and sales revenue flows from households to firms. 
C)  resources flow from firms to households, and goods and services flow from households to firms. 
D)  inputs and outputs flow in the same direction as the flow of dollars, from firms to households. 
A)  taxes flow from households to firms, and transfer payments flow from firms to households. 
B)  income payments flow from firms to households, and sales revenue flows from households to firms. 
C)  resources flow from firms to households, and goods and services flow from households to firms. 
D)  inputs and outputs flow in the same direction as the flow of dollars, from firms to households. B

Question 2

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 D

Question 3

For economists, historical episodes

Accepted Answer

A)  are not worthy of study because they offer few insights into current economic events and problems. 
B)  are not worthy of study because laboratory experiments provide more reliable data. 
C)  are worthy of study because economists rely entirely on observation, rather than on theory. 
D)  are worthy of study because they serve as valuable substitutes for laboratory experiments. 
A)  are not worthy of study because they offer few insights into current economic events and problems. 
B)  are not worthy of study because laboratory experiments provide more reliable data. 
C)  are worthy of study because economists rely entirely on observation, rather than on theory. 
D)  are worthy of study because they serve as valuable substitutes for laboratory experiments. D

Question 4

Figure 2-2  
-Refer to Figure 2-2. If households are buyers in the markets represented by Box C of this circular-flow diagram, then

Accepted Answer

A)  Box C must represent the markets for the factors of production. 
B)  Box D must represent the markets for goods and services. 
C)  firms are sellers in the markets represented by Box C. 
D)  All of the above are correct. 
A)  Box C must represent the markets for the factors of production. 
B)  Box D must represent the markets for goods and services. 
C)  firms are sellers in the markets represented by Box C. 
D)  All of the above are correct.

Question 5

Joe and Fred are economists. Joe thinks that the wealthiest 10% of the US population should be taxed a rate higher than the rest of society because they can better afford it. Fred thinks that everyone should be taxed at the same rate because that is the fairest scenario and the wealthy should not be penalized for their success. In this example, Joe and Fred

Accepted Answer

A)  disagree about the validity of a positive theory. 
B)  have different normative views about tax policy. 
C)  must both be incorrect because tax policy is never that simple. 
D)  None of the above is correct. 
A)  disagree about the validity of a positive theory. 
B)  have different normative views about tax policy. 
C)  must both be incorrect because tax policy is never that simple. 
D)  None of the above is correct.

Question 6

Figure 2-9
Panel a) Panel b)
    
-Refer to Figure 2-9, Panel a). The opportunity cost of moving from point M to point L is

Accepted Answer

A)  2 donuts. 
B)  2 donuts and 4 cups of coffee. 
C)  4 donuts. 
D)  4 cups of coffee. 
A)  2 donuts. 
B)  2 donuts and 4 cups of coffee. 
C)  4 donuts. 
D)  4 cups of coffee.

Question 7

In the markets for goods and services in the circular-flow diagram, households are buyers and firms are sellers.

Accepted Answer

A) True 
 B)False

Question 8

Positive statements can be evaluated using data alone, but normative statements cannot.

Accepted Answer

A) True 
 B)False

Question 9

The point where both x and y are zero is known as the

Accepted Answer

A)  origin. 
B)  null. 
C)  zero coordinate. 
D)  center. 
A)  origin. 
B)  null. 
C)  zero coordinate. 
D)  center.

Question 10

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

Accepted Answer

A)  When the minimum wage is increased, unemployment is a predictable consequence. 
B)  The income tax rate should be increased to offset the budget deficit. 
C)  Increasing government spending is the best way to help the economy move out of a recession. 
D)  More than one of the above are positive statements. 
A)  When the minimum wage is increased, unemployment is a predictable consequence. 
B)  The income tax rate should be increased to offset the budget deficit. 
C)  Increasing government spending is the best way to help the economy move out of a recession. 
D)  More than one of the above are positive statements.

Question 11

In the circular-flow diagram, in the markets for

Accepted Answer

A)  goods and services, households and firms are both sellers. 
B)  goods and services, households are sellers and firms are buyers. 
C)  the factors of production, households are sellers and firms are buyers. 
D)  the factors of production, households and firms are both buyers. 
A)  goods and services, households and firms are both sellers. 
B)  goods and services, households are sellers and firms are buyers. 
C)  the factors of production, households are sellers and firms are buyers. 
D)  the factors of production, households and firms are both buyers.

Question 12

A demand curve shows the relationship between price and

Accepted Answer

A)  income. 
B)  quantity demanded. 
C)  production. 
D)  income and quantity demanded. 
A)  income. 
B)  quantity demanded. 
C)  production. 
D)  income and quantity demanded.

Question 13

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

Accepted Answer

A)  Americans deserve a cleaner environment. 
B)  Reducing emissions reduces days missed from school due to asthma. 
C)  All Americans are entitled to quality health care. 
D)  Economic policies should focus on improving equality. 
A)  Americans deserve a cleaner environment. 
B)  Reducing emissions reduces days missed from school due to asthma. 
C)  All Americans are entitled to quality health care. 
D)  Economic policies should focus on improving equality.

Question 14

Almost all economists agree that tariffs and import quotas

Accepted Answer

A)  reduces general economic welfare. 
B)  increases general economic welfare. 
C)  have no effect on general economic welfare. 
D)  stimulate a less than fully employed economy. 
A)  reduces general economic welfare. 
B)  increases general economic welfare. 
C)  have no effect on general economic welfare. 
D)  stimulate a less than fully employed economy.

Question 15

In economics, graphs serve two purposes: they offer a way to visually express ideas, and they provide a way of finding and interpreting patterns when analyzing economic data.

Accepted Answer

A) True 
 B)False

Question 16

John Maynard Keynes described economics as an easy subject at which very few excel. Which of the following is not one of the reasons Keynes gave for why so few people excel at the study of economics?

Accepted Answer

A)  An economist must also be a mathematician, historian, statesman, and philosopher in some degree. 
B)  An economist must understand symbols and speak in words. 
C)  An economist must be purposeful and disinterested in a simultaneous mood. 
D)  An economist must understand environmental science, regulation, and political science. 
A)  An economist must also be a mathematician, historian, statesman, and philosopher in some degree. 
B)  An economist must understand symbols and speak in words. 
C)  An economist must be purposeful and disinterested in a simultaneous mood. 
D)  An economist must understand environmental science, regulation, and political science.

Question 17

Efficiency is illustrated by

Accepted Answer

A)  both the production possibilities frontier and the circular-flow diagram. 
B)  neither the production possibilities frontier nor the circular-flow diagram. 
C)  the production possibilities frontier only. 
D)  the circular-flow diagram only. 
A)  both the production possibilities frontier and the circular-flow diagram. 
B)  neither the production possibilities frontier nor the circular-flow diagram. 
C)  the production possibilities frontier only. 
D)  the circular-flow diagram only.

Question 18

Figure 2-22  
-Refer to Figure 2-22. Is a move from point A to point R considered a shift of the curve or a movement along the curve?

Accepted Answer

The answer of Figure 2-22  
-Refer to Figure 2-22....

Question 19

In the simple circular flow diagram, the flow of money from the firms to the markets for factors of production is called

Accepted Answer

A)  spending. 
B)  revenue. 
C)  income. 
D)  wages, rent, and profit. 
A)  spending. 
B)  revenue. 
C)  income. 
D)  wages, rent, and profit.

Question 20

Figure 2-15  
-Refer to Figure 2-15. Consider the production possibilities frontier for an economy that produces only sofas and cars. When society moves from point A to point B,

Accepted Answer

A)  the opportunity cost is the same as when society moves from point B to point C. 
B)  it is giving up cars to get sofas. 
C)  the opportunity cost is increasing. 
D)  it moves from an inefficient point to an efficient point. 
A)  the opportunity cost is the same as when society moves from point B to point C. 
B)  it is giving up cars to get sofas. 
C)  the opportunity cost is increasing. 
D)  it moves from an inefficient point to an efficient point.

Exam 2: Thinking Like an Economist

In the circular-flow diagram,

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

For economists, historical episodes

Figure 2-2 -Refer to Figure 2-2. If households are buyers in the markets represented by Box C of this circular-flow diagram, then

Figure 2-9 Panel a) Panel b) -Refer to Figure 2-9, Panel a). The opportunity cost of moving from point M to point L is

In the markets for goods and services in the circular-flow diagram, households are buyers and firms are sellers.

Positive statements can be evaluated using data alone, but normative statements cannot.

The point where both x and y are zero is known as the

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

In the circular-flow diagram, in the markets for

A demand curve shows the relationship between price and

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

Almost all economists agree that tariffs and import quotas

In economics, graphs serve two purposes: they offer a way to visually express ideas, and they provide a way of finding and interpreting patterns when analyzing economic data.

John Maynard Keynes described economics as an easy subject at which very few excel. Which of the following is not one of the reasons Keynes gave for why so few people excel at the study of economics?

Efficiency is illustrated by

Figure 2-22 -Refer to Figure 2-22. Is a move from point A to point R considered a shift of the curve or a movement along the curve?

In the simple circular flow diagram, the flow of money from the firms to the markets for factors of production is called

Figure 2-15 -Refer to Figure 2-15. Consider the production possibilities frontier for an economy that produces only sofas and cars. When society moves from point A to point B,

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 Costs of Production

Firms in Competitive Markets

Monopoly

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

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

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