Question 1

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 2

A model can be accurately described as a

Accepted Answer

A)  theoretical abstraction with very little value. 
B)  device that is useful only to the people who created it. 
C)  realistic and carefully constructed theory. 
D)  simplification of reality. 
A)  theoretical abstraction with very little value. 
B)  device that is useful only to the people who created it. 
C)  realistic and carefully constructed theory. 
D)  simplification of reality.

Question 3

Because it is difficult for economists to use experiments to generate data, they generally must

Accepted Answer

A)  do without data. 
B)  substitute assumptions for data when data are unavailable. 
C)  rely upon hypothetical data that were previously concocted by other economists. 
D)  use whatever data the world gives them. 
A)  do without data. 
B)  substitute assumptions for data when data are unavailable. 
C)  rely upon hypothetical data that were previously concocted by other economists. 
D)  use whatever data the world gives them.

Question 4

Figure 2-6  
-Refer to Figure 2-6. The opportunity cost of this economy moving from point I to point H is

Accepted Answer

A)  120 pillows. 
B)  120 blankets. 
C)  120 blankets and 120 pillows. 
D)  200 blankets. 
A)  120 pillows. 
B)  120 blankets. 
C)  120 blankets and 120 pillows. 
D)  200 blankets.

Question 5

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

Accepted Answer

A)  Inflation is more harmful to the economy than unemployment is. 
B)  If welfare payments increase, the world will be a better place. 
C)  Prices rise when the government prints too much money. 
D)  When public policies are evaluated, the benefits to the economy of improved equality should be considered more important than the costs of reduced efficiency. 
A)  Inflation is more harmful to the economy than unemployment is. 
B)  If welfare payments increase, the world will be a better place. 
C)  Prices rise when the government prints too much money. 
D)  When public policies are evaluated, the benefits to the economy of improved equality should be considered more important than the costs of reduced efficiency.

Question 6

President Truman once said he wanted to find a one-armed economist because when he asked his economists for advice, they always answered, "On the one hand, ... On the other hand, ..." Truman's observation that economists' advice is not always straightforward

Accepted Answer

A)  is rooted in the principle that people face tradeoffs. 
B)  indicates that economists recognize that there are opportunity costs associated with policy decisions. 
C)  confirms that economists are not suited to be presidential advisers. 
D)  More than one of the above is correct. 
A)  is rooted in the principle that people face tradeoffs. 
B)  indicates that economists recognize that there are opportunity costs associated with policy decisions. 
C)  confirms that economists are not suited to be presidential advisers. 
D)  More than one of the above is correct.

Question 7

In the markets for goods and services in the circular-flow diagram,

Accepted Answer

A)  households and firms are both buyers. 
B)  households and firms are both sellers. 
C)  households are buyers and firms are sellers. 
D)  households are sellers and firms are buyers. 
A)  households and firms are both buyers. 
B)  households and firms are both sellers. 
C)  households are buyers and firms are sellers. 
D)  households are sellers and firms are buyers.

Question 8

In the simple circular flow diagram, the flow of money from the markets for goods and services to the firms 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 9

Figure 2-2  
-Refer to Figure 2-2. If the flow of goods and services is part of what is represented by the inner loop of this circular-flow diagram, then

Accepted Answer

A)  the flow of factors of production is also part of what is represented by the inner loop. 
B)  the flow of income paid to households is also part of what is represented by the inner loop. 
C)  the flow of revenue to firms is also part of what is represented by the inner loop. 
D)  households must be sellers of output. 
A)  the flow of factors of production is also part of what is represented by the inner loop. 
B)  the flow of income paid to households is also part of what is represented by the inner loop. 
C)  the flow of revenue to firms is also part of what is represented by the inner loop. 
D)  households must be sellers of output.

Question 10

Figure 2-7  
-Refer to Figure 2-7. This economy has the ability to produce at which points)?

Accepted Answer

A)  N, O, P 
B)  L, M 
C)  L, M, N, O, P 
D)  L, M, Q 
A)  N, O, P 
B)  L, M 
C)  L, M, N, O, P 
D)  L, M, Q

Question 11

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 12

Economic models

Accepted Answer

A)  are not useful because they omit many real-world details. 
B)  are usually composed of diagrams and equations. 
C)  are useful because they do not omit any real-world details. 
D)  are usually plastic representations of the economy. 
A)  are not useful because they omit many real-world details. 
B)  are usually composed of diagrams and equations. 
C)  are useful because they do not omit any real-world details. 
D)  are usually plastic representations of the economy.

Question 13

In the ordered pair 10,30), 10 is the horizontal location of the point and 30 is the vertical location of the point.

Accepted Answer

A) True 
 B)False

Question 14

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 15

Figure 2-17  
-Refer to Figure 2-17. The movement from point A to point B is an)

Accepted Answer

A)  shift of the demand curve. 
B)  indication of a change in preferences for grapes. 
C)  movement along the demand curve. 
D)  indication of an increase in income. 
A)  shift of the demand curve. 
B)  indication of a change in preferences for grapes. 
C)  movement along the demand curve. 
D)  indication of an increase in income.

Question 16

Figure 2-13  
-Refer to Figure 2-13. Which of the following statements is true about point G for this economy?

Accepted Answer

A)  Point G is currently unattainable. 
B)  Point G is efficient. 
C)  At point G, more cakes are produced than cookies. 
D)  There is unemployment at point G. 
A)  Point G is currently unattainable. 
B)  Point G is efficient. 
C)  At point G, more cakes are produced than cookies. 
D)  There is unemployment at point G.

Question 17

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

Accepted Answer

A)  goods and services 
B)  land, labor, and capital 
C)  dollars spent on goods and services 
D)  wages, rent, and profit 
A)  goods and services 
B)  land, labor, and capital 
C)  dollars spent on goods and services 
D)  wages, rent, and profit

Question 18

The production possibilities frontier provides an illustration of the principle that

Accepted Answer

A)  trade can make everyone better off. 
B)  governments can sometimes improve market outcomes. 
C)  people face trade-offs. 
D)  people respond to incentives. 
A)  trade can make everyone better off. 
B)  governments can sometimes improve market outcomes. 
C)  people face trade-offs. 
D)  people respond to incentives.

Question 19

Figure 2-20
Relationship Between Years of Education and Annual Income  
-Refer to Figure 2-20. Senator Smith observes the graph and concludes that people who earn higher incomes attend school for more years. Senator Jones observes the graph and concludes that people who attend school for more years earn higher incomes. Who is correct?

Accepted Answer

A)  Senator Smith is correct. 
B)  Senator Jones is correct. 
C)  It is difficult to say which senator might be correct due to the reverse causality problem. 
D)  It is difficult to say which senator might be correct due to omitted variable bias. 
A)  Senator Smith is correct. 
B)  Senator Jones is correct. 
C)  It is difficult to say which senator might be correct due to the reverse causality problem. 
D)  It is difficult to say which senator might be correct due to omitted variable bias.

Question 20

Factors of production are

Accepted Answer

A)  the mathematical calculations firms make in determining their optimal production levels. 
B)  social and political conditions that affect production. 
C)  the physical relationships between economic inputs and outputs. 
D)  inputs into the production process. 
A)  the mathematical calculations firms make in determining their optimal production levels. 
B)  social and political conditions that affect production. 
C)  the physical relationships between economic inputs and outputs. 
D)  inputs into the production process.

Exam 2: Thinking Like an Economist

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?

A model can be accurately described as a

Because it is difficult for economists to use experiments to generate data, they generally must

Figure 2-6 -Refer to Figure 2-6. The opportunity cost of this economy moving from point I to point H is

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

President Truman once said he wanted to find a one-armed economist because when he asked his economists for advice, they always answered, "On the one hand, ... On the other hand, ..." Truman's observation that economists' advice is not always straightforward

In the markets for goods and services in the circular-flow diagram,

In the simple circular flow diagram, the flow of money from the markets for goods and services to the firms is called

Figure 2-2 -Refer to Figure 2-2. If the flow of goods and services is part of what is represented by the inner loop of this circular-flow diagram, then

Figure 2-7 -Refer to Figure 2-7. This economy has the ability to produce at which points)?

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

Economic models

In the ordered pair 10,30), 10 is the horizontal location of the point and 30 is the vertical location of the point.

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

Figure 2-17 -Refer to Figure 2-17. The movement from point A to point B is an)

Figure 2-13 -Refer to Figure 2-13. Which of the following statements is true about point G for this economy?

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

The production possibilities frontier provides an illustration of the principle that

Factors of production are

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

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

Six Debates Over Macroeconomic Policy

Filters