Question 1

Which of the following allows you to provide information about the relationship between two variables?

Accepted Answer

A)  coordinate system. 
B)  pie chart 
C)  bar graph 
D)  time-series graph 
A)  coordinate system. 
B)  pie chart 
C)  bar graph 
D)  time-series graph

Question 2

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 3

Good assumptions simplify a problem without substantially affecting the answer.

Accepted Answer

A) True 
 B)False

Question 4

If an economy can produce more of one good without giving up any of another good, then the economy's current production point is inefficient.

Accepted Answer

A) True 
 B)False

Question 5

Economists hold many positions advising the president and Congress including

Accepted Answer

A)  being a member of the Council of Economic Advisers. 
B)  helping to enforce antitrust laws at the Department of Justice. 
C)  conducting research at the Congressional Budget Office. 
D)  All of these are possible positions that economists hold. 
A)  being a member of the Council of Economic Advisers. 
B)  helping to enforce antitrust laws at the Department of Justice. 
C)  conducting research at the Congressional Budget Office. 
D)  All of these are possible positions that economists hold.

Question 6

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 7

Which of the following statements is are) correct?

Accepted Answer

A)  Relative to some other scientists, economists find it more difficult to conduct experiments. 
B)  Theory and observation are important in economics as well as in other sciences. 
C)  To obtain data, economists often rely upon the natural experiments offered by history. 
D)  All of the above are correct. 
A)  Relative to some other scientists, economists find it more difficult to conduct experiments. 
B)  Theory and observation are important in economics as well as in other sciences. 
C)  To obtain data, economists often rely upon the natural experiments offered by history. 
D)  All of the above are correct.

Question 8

In the circular-flow diagram, another name for goods and services produced by firms is

Accepted Answer

A)  factors of production. 
B)  output. 
C)  inputs. 
D)  resources. 
A)  factors of production. 
B)  output. 
C)  inputs. 
D)  resources.

Question 9

The goal of an economist who formulates new theories is to

Accepted Answer

A)  provide an interesting framework of analysis, whether or not the framework turns out to be of much use in understanding how the world works. 
B)  provoke stimulating debate in scientific journals. 
C)  contribute to an understanding of how the world works. 
D)  demonstrate that economists, like other scientists, can formulate testable theories. 
A)  provide an interesting framework of analysis, whether or not the framework turns out to be of much use in understanding how the world works. 
B)  provoke stimulating debate in scientific journals. 
C)  contribute to an understanding of how the world works. 
D)  demonstrate that economists, like other scientists, can formulate testable theories.

Question 10

In the circular-flow diagram,

Accepted Answer

A)  profit flows from households to firms. 
B)  labor flows from households to firms. 
C)  services flow from households to firms. 
D)  All of the above are correct. 
A)  profit flows from households to firms. 
B)  labor flows from households to firms. 
C)  services flow from households to firms. 
D)  All of the above are correct.

Question 11

Economists believe that production possibilities frontiers

Accepted Answer

A)  never have a bowed shape. 
B)  rarely have a bowed shape. 
C)  often have a bowed shape. 
D)  always have a bowed shape. 
A)  never have a bowed shape. 
B)  rarely have a bowed shape. 
C)  often have a bowed shape. 
D)  always have a bowed shape.

Question 12

In the circular flow diagram, who owns the factors of production and consumes all of the goods and services produced?

Accepted Answer

The answer of In the circular flow diagram, who owns...

Question 13

The production possibilities frontier shows the opportunity cost of one good as measured in terms of the other good.

Accepted Answer

A) True 
 B)False

Question 14

Figure 2-1  
-Refer to Figure 2-1. Which arrow represents the flow of goods and services?

Accepted Answer

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

Question 15

Sometimes economists disagree because their values differ. Which of the following instances best reflects this source of disagreement?

Accepted Answer

A)  One economist believes the North American Free Trade Agreement NAFT
A)  has led to a loss of American jobs; another economist disputes this claim. 
B)  One economist believes that when income taxes are cut, people will increase their spending; another economist believes that when income taxes are cut, people will increase their saving. 
C)  One economist advises against increases in sales taxes because she thinks such increases are unfair to low- income people; another economist disputes the idea that increases in sales taxes are unfair to low-income people. 
D)  One economist believes that, prior to the Civil War, slavery contributed to economic growth in the South; another economist believes that slavery held back the South's economic growth. 
A)  One economist believes the North American Free Trade Agreement NAFT
A)  has led to a loss of American jobs; another economist disputes this claim. 
B)  One economist believes that when income taxes are cut, people will increase their spending; another economist believes that when income taxes are cut, people will increase their saving. 
C)  One economist advises against increases in sales taxes because she thinks such increases are unfair to low- income people; another economist disputes the idea that increases in sales taxes are unfair to low-income people. 
D)  One economist believes that, prior to the Civil War, slavery contributed to economic growth in the South; another economist believes that slavery held back the South's economic growth.

Question 16

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. The bowed outward shape of the production possibilities curve indicates that opportunity cost of apples in terms of sweaters is

Accepted Answer

The answer of Figure 2-14   Consider the production...

Question 17

It is difficult for economists to make observations and develop theories, but it is easy for economists to run experiments to generate data to test their theories.

Accepted Answer

A) True 
 B)False

Question 18

When economists make

Accepted Answer

A)  positive statements, they are speaking not as policy advisers but as scientists. 
B)  positive statements, they are speaking not as scientists but as forecasters. 
C)  normative statements, they are speaking not as policy advisers but as scientists. 
D)  normative statements, they are speaking not as policy advisers but as model-builders. 
A)  positive statements, they are speaking not as policy advisers but as scientists. 
B)  positive statements, they are speaking not as scientists but as forecasters. 
C)  normative statements, they are speaking not as policy advisers but as scientists. 
D)  normative statements, they are speaking not as policy advisers but as model-builders.

Question 19

Which of the following concepts cannot be illustrated by the production possibilities frontier?

Accepted Answer

A)  efficiency 
B)  opportunity cost 
C)  equality 
D)  trade-offs 
A)  efficiency 
B)  opportunity cost 
C)  equality 
D)  trade-offs

Question 20

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...

Exam 2: Thinking Like an Economist

Which of the following allows you to provide information about the relationship between two variables?

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.

If an economy can produce more of one good without giving up any of another good, then the economy's current production point is inefficient.

Economists hold many positions advising the president and Congress including

Which of the following statements is are) correct?

In the circular-flow diagram, another name for goods and services produced by firms is

The goal of an economist who formulates new theories is to

In the circular-flow diagram,

Economists believe that production possibilities frontiers

In the circular flow diagram, who owns the factors of production and consumes all of the goods and services produced?

The production possibilities frontier shows the opportunity cost of one good as measured in terms of the other good.

Figure 2-1 -Refer to Figure 2-1. Which arrow represents the flow of goods and services?

Sometimes economists disagree because their values differ. Which of the following instances best reflects this source of disagreement?

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. The bowed outward shape of the production possibilities curve indicates that opportunity cost of apples in terms of sweaters is

It is difficult for economists to make observations and develop theories, but it is easy for economists to run experiments to generate data to test their theories.

When economists make

Which of the following concepts cannot be illustrated by the production possibilities frontier?

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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