Question 1

For an economist, the idea of making assumptions is regarded generally as a

Accepted Answer

A)  bad idea, since doing so leads to the omission of important ideas and variables from economic models. 
B)  bad idea, since doing so invariably leads to data-collection problems. 
C)  good idea, since doing so helps to simplify the complex world and make it easier to understand. 
D)  good idea, since economic analysis without assumptions leads to complicated results that the general public finds hard to understand. 
A)  bad idea, since doing so leads to the omission of important ideas and variables from economic models. 
B)  bad idea, since doing so invariably leads to data-collection problems. 
C)  good idea, since doing so helps to simplify the complex world and make it easier to understand. 
D)  good idea, since economic analysis without assumptions leads to complicated results that the general public finds hard to understand.

Question 2

Suppose an economist develops a theory that higher food prices arise from higher gas prices. According to the scientific method, which of the following is the economist's next step?

Accepted Answer

A)  Collect and analyze data. 
B)  Go to a laboratory and generate data to test the theory. 
C)  Publish the theory without testing it. 
D)  Consult with other economists to see they agree with the theory. 
A)  Collect and analyze data. 
B)  Go to a laboratory and generate data to test the theory. 
C)  Publish the theory without testing it. 
D)  Consult with other economists to see they agree with the theory.

Question 3

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 4

Positive statements are not

Accepted Answer

A)  descriptive. 
B)  prescriptive. 
C)  claims about how the world is. 
D)  made by economists speaking as scientists. 
A)  descriptive. 
B)  prescriptive. 
C)  claims about how the world is. 
D)  made by economists speaking as scientists.

Question 5

Figure 2-1  
-Refer to Figure 2-1. Harvey receives his first paycheck for working as an ice cream vendor. To which of the arrows does this transaction directly contribute?

Accepted Answer

A)  B only 
B)  A and B 
C)  C only 
D)  C and D 
A)  B only 
B)  A and B 
C)  C only 
D)  C and D

Question 6

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 7

Economic models

Accepted Answer

A)  are people who act out the behavior of firms and households so that economists can study this behavior. 
B)  are usually detailed replications of reality. 
C)  incorporate simplifying assumptions that often contradict reality, but also help economists better understand reality. 
D)  are useful to researchers but not to teachers because economic models omit many details of the real-world economy. 
A)  are people who act out the behavior of firms and households so that economists can study this behavior. 
B)  are usually detailed replications of reality. 
C)  incorporate simplifying assumptions that often contradict reality, but also help economists better understand reality. 
D)  are useful to researchers but not to teachers because economic models omit many details of the real-world economy.

Question 8

A technological advance in the production of the first good increases the opportunity cost of the first good in terms of the second good.

Accepted Answer

A) True 
 B)False

Question 9

When a production possibilities frontier is bowed outward, the opportunity cost of the second good in terms of the first good increases as more of the second good is produced.

Accepted Answer

A) True 
 B)False

Question 10

Figure 2-10
Panel a) Panel b)
    
-Refer to Figure 2-10, Panel a). To gain 2 tractors by moving from point W to point V, society must sacrifice

Accepted Answer

A)  12 sofas. 
B)  employment. 
C)  efficiency. 
D)  More than one of the above is correct. 
A)  12 sofas. 
B)  employment. 
C)  efficiency. 
D)  More than one of the above is correct.

Question 11

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

Accepted Answer

A)  possible at points J, K, L, and M, but efficient only at points J, L, and M. 
B)  possible at points J, K, L, and M, but efficient only at point K. 
C)  possible at points J, L, M, and N, but efficient only at points J, L, and M. 
D)  possible at points J, L, M, and N, but efficient only at point N. 
A)  possible at points J, K, L, and M, but efficient only at points J, L, and M. 
B)  possible at points J, K, L, and M, but efficient only at point K. 
C)  possible at points J, L, M, and N, but efficient only at points J, L, and M. 
D)  possible at points J, L, M, and N, but efficient only at point N.

Question 12

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 13

Figure 2-23  
-Refer to Figure 2-23. The opportunity cost of moving from point B to point D is 15 doghouses.

Accepted Answer

A) True 
 B)False

Question 14

Figure 2-6  
-Refer to Figure 2-6. If this economy devotes all of its resources to the production of blankets, then it will produce

Accepted Answer

A)  0 blankets and 360 pillows. 
B)  200 blankets and 240 pillows. 
C)  320 blankets and 120 pillows. 
D)  360 blankets and 0 pillows. 
A)  0 blankets and 360 pillows. 
B)  200 blankets and 240 pillows. 
C)  320 blankets and 120 pillows. 
D)  360 blankets and 0 pillows.

Question 15

In the circular-flow diagram, one loop represents the flow of goods and services, and the other loop represents the flow of factors of production.

Accepted Answer

A) True 
 B)False

Question 16

Figure 2-10
Panel a) Panel b)
    
-Refer to Figure 2-10, Panel a). Production at point Y is

Accepted Answer

A)  impossible and inefficient. 
B)  impossible but efficient. 
C)  possible but inefficient. 
D)  possible and efficient. 
A)  impossible and inefficient. 
B)  impossible but efficient. 
C)  possible but inefficient. 
D)  possible and efficient.

Question 17

If a line passes through the points 20,5) and 10,10), then the slope of the line is 1/2.

Accepted Answer

A) True 
 B)False

Question 18

Figure 2-18
Relationship between Price and Restaurant Meals  
-Refer to Figure 2-18. Which of the following could result in a movement from point A to point B?

Accepted Answer

A)  a change in income 
B)  a change in the cost of producing a restaurant meal 
C)  a change in the price of restaurant meals 
D)  a change in the price of movies 
A)  a change in income 
B)  a change in the cost of producing a restaurant meal 
C)  a change in the price of restaurant meals 
D)  a change in the price of movies

Question 19

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

Accepted Answer

A)  One economist believes everyone should pay the same percentage of their income in taxes; another economist believes that wealthier citizens should pay a higher percentage of their income in taxes. 
B)  One economist believes that manufacturing firms should face greater regulation to preserve the environment; another economist believes the government should not intervene in free markets. 
C)  One economist believes that equality should be valued over efficiency in policy decisions; another economist believes that efficiency should be valued over equality in policy decisions. 
D)  One economist believes the government should tax a household's income; another economist believes the government should tax a household's consumption. 
A)  One economist believes everyone should pay the same percentage of their income in taxes; another economist believes that wealthier citizens should pay a higher percentage of their income in taxes. 
B)  One economist believes that manufacturing firms should face greater regulation to preserve the environment; another economist believes the government should not intervene in free markets. 
C)  One economist believes that equality should be valued over efficiency in policy decisions; another economist believes that efficiency should be valued over equality in policy decisions. 
D)  One economist believes the government should tax a household's income; another economist believes the government should tax a household's consumption.

Question 20

A relatively flat 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.

Exam 2: Thinking Like an Economist

For an economist, the idea of making assumptions is regarded generally as a

Suppose an economist develops a theory that higher food prices arise from higher gas prices. According to the scientific method, which of the following is the economist's next step?

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

Positive statements are not

Figure 2-1 -Refer to Figure 2-1. Harvey receives his first paycheck for working as an ice cream vendor. To which of the arrows does this transaction directly contribute?

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?

Economic models

A technological advance in the production of the first good increases the opportunity cost of the first good in terms of the second good.

When a production possibilities frontier is bowed outward, the opportunity cost of the second good in terms of the first good increases as more of the second good is produced.

Figure 2-10 Panel a) Panel b) -Refer to Figure 2-10, Panel a). To gain 2 tractors by moving from point W to point V, society must sacrifice

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

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 2-23 -Refer to Figure 2-23. The opportunity cost of moving from point B to point D is 15 doghouses.

Figure 2-6 -Refer to Figure 2-6. If this economy devotes all of its resources to the production of blankets, then it will produce

In the circular-flow diagram, one loop represents the flow of goods and services, and the other loop represents the flow of factors of production.

Figure 2-10 Panel a) Panel b) -Refer to Figure 2-10, Panel a). Production at point Y is

If a line passes through the points 20,5) and 10,10), then the slope of the line is 1/2.

Figure 2-18 Relationship between Price and Restaurant Meals -Refer to Figure 2-18. Which of the following could result in a movement from point A to point B?

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

A relatively flat demand curve indicates that

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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