Question 1

Normative statements describe how the world is, while positive statements prescribe how the world should be.

Accepted Answer

A) True 
 B)False  False

Question 2

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. B

Question 3

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. C

Question 4

When two variables move in the same direction, the curve relating them is

Accepted Answer

A)  upward sloping, and we say the variables are positively related. 
B)  upward sloping, and we say the variables are negatively related. 
C)  downward sloping, and we say the variables are positively related. 
D)  downward sloping, and we say the variables are negatively related. 
A)  upward sloping, and we say the variables are positively related. 
B)  upward sloping, and we say the variables are negatively related. 
C)  downward sloping, and we say the variables are positively related. 
D)  downward sloping, and we say the variables are negatively related.

Question 5

Sir Isaac Newton's development of the theory of gravity after observing an apple fall from a tree is an example of

Accepted Answer

A)  a controlled experiment that lead to the formulation of a scientific theory. 
B)  being in the right place at the right time. 
C)  an idea whose time had come. 
D)  the interplay between observation and theory in science. 
A)  a controlled experiment that lead to the formulation of a scientific theory. 
B)  being in the right place at the right time. 
C)  an idea whose time had come. 
D)  the interplay between observation and theory in science.

Question 6

Economists at the Department of the Treasury

Accepted Answer

A)  design U.S. currency and coins. 
B)  provide Congress with the annual budget. 
C)  enforce the U.S. antitrust laws. 
D)  provide advice on tax policy to the President. 
A)  design U.S. currency and coins. 
B)  provide Congress with the annual budget. 
C)  enforce the U.S. antitrust laws. 
D)  provide advice on tax policy to the President.

Question 7

The opportunity cost of something is what you give up to get it.

Accepted Answer

A) True 
 B)False

Question 8

Figure 2-19
In the following graph the x-axis shows the number of times a commuter rail train stops at a station per hour and the y-axis shows the number of commuter rail passengers per hour.
Commuter Rail Passengers by Frequency of Service  
-Refer to Figure 2-19. A policymaker observes this graph and concludes that increasing the frequency of commuter rail service is a certain way to get more commuters to choose the commuter rail instead of driving their own cars. You warn the policymaker about making a reverse causality mistake with which of the following statements?

Accepted Answer

A)  Higher gas prices are causing more people to choose the commuter rail over driving. 
B)  The service frequency was increased in response to an increase in the number of passengers per hour. 
C)  There is a positive relationship between frequency of stops and number of passengers. 
D)  None of the above is correct. 
A)  Higher gas prices are causing more people to choose the commuter rail over driving. 
B)  The service frequency was increased in response to an increase in the number of passengers per hour. 
C)  There is a positive relationship between frequency of stops and number of passengers. 
D)  None of the above is correct.

Question 9

In the circular-flow diagram,

Accepted Answer

A)  firms own the factors of production. 
B)  the factors of production are labor, land, and capital. 
C)  the factors of production are also called "output." 
D)  All of the above are correct. 
A)  firms own the factors of production. 
B)  the factors of production are labor, land, and capital. 
C)  the factors of production are also called "output." 
D)  All of the above are correct.

Question 10

The slope of a line is equal to the change in the x-variable divided by the change in the y-variable.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following statements is correct?

Accepted Answer

A)  Few economic models incorporate assumptions. 
B)  Different economic models employ different sets of assumptions. 
C)  Good economic models attempt to mimic reality as closely as possible. 
D)  Economic models, to be accepted, must be tested by conducting experiments. 
A)  Few economic models incorporate assumptions. 
B)  Different economic models employ different sets of assumptions. 
C)  Good economic models attempt to mimic reality as closely as possible. 
D)  Economic models, to be accepted, must be tested by conducting experiments.

Question 12

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 13

If new government regulations designed to protect wetlands remove very productive farmland from production, then the production possibilities frontier will shift inward.

Accepted Answer

A) True 
 B)False

Question 14

Figure 2-17  
-Refer to Figure 2-17. The movement from point A to point B is a(n)

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 15

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 16

Figure 2-23  
-Refer to Figure 2-23. It is possible for this economy to produce 30 doghouses and 20 dishwashers.

Accepted Answer

A) True 
 B)False

Question 17

Graphs such as bar graphs and pie charts are limited in that they

Accepted Answer

A)  can only show variables that are positively related. 
B)  can only show variables that have a negative correlation. 
C)  provide information on only one variable. 
D)  provide information on no more than two variables. 
A)  can only show variables that are positively related. 
B)  can only show variables that have a negative correlation. 
C)  provide information on only one variable. 
D)  provide information on no more than two variables.

Question 18

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

Accepted Answer

A)  goods 
B)  services 
C)  capital 
D)  profit 
A)  goods 
B)  services 
C)  capital 
D)  profit

Question 19

President Ronald Reagan once joked that a Trivial Pursuit game designed for economists would

Accepted Answer

A)  have no questions but hundreds of answers. 
B)  have 100 questions and 3,000 answers. 
C)  have 1,000 questions but no answers. 
D)  never produce a winner. 
A)  have no questions but hundreds of answers. 
B)  have 100 questions and 3,000 answers. 
C)  have 1,000 questions but no answers. 
D)  never produce a winner.

Question 20

When an economy is operating inside its production possibilities frontier, we know that

Accepted Answer

A)  there are unused resources or inefficiencies in the economy. 
B)  all of the economy's resources are fully employed. 
C)  economic growth would have to occur in order for the economy to move to a point on the frontier. 
D)  in order to produce more of one good, the economy would have to give up some of the other good. 
A)  there are unused resources or inefficiencies in the economy. 
B)  all of the economy's resources are fully employed. 
C)  economic growth would have to occur in order for the economy to move to a point on the frontier. 
D)  in order to produce more of one good, the economy would have to give up some of the other good.

Exam 2: Thinking Like an Economist

Normative statements describe how the world is, while positive statements prescribe how the world should be.

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

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

When two variables move in the same direction, the curve relating them is

Sir Isaac Newton's development of the theory of gravity after observing an apple fall from a tree is an example of

Economists at the Department of the Treasury

The opportunity cost of something is what you give up to get it.

In the circular-flow diagram,

The slope of a line is equal to the change in the x-variable divided by the change in the y-variable.

Which of the following statements is correct?

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

If new government regulations designed to protect wetlands remove very productive farmland from production, then the production possibilities frontier will shift inward.

Figure 2-17 -Refer to Figure 2-17. The movement from point A to point B is a(n)

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. It is possible for this economy to produce 30 doghouses and 20 dishwashers.

Graphs such as bar graphs and pie charts are limited in that they

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

President Ronald Reagan once joked that a Trivial Pursuit game designed for economists would

When an economy is operating inside its production possibilities frontier, we know 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 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

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

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