Question 1

In the simple circular-flow diagram, who buys the factors of production?

Accepted Answer

A)  households only 
B)  firms only 
C)  both households and firms 
D)  neither households nor firms 
A)  households only 
B)  firms only 
C)  both households and firms 
D)  neither households nor firms

Question 2

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 3

Economists acting as scientists make positive statements, while economists acting as policy advisers make normative statements.

Accepted Answer

A) True 
 B)False

Question 4

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 5

An economic outcome is said to be efficient if the economy is

Accepted Answer

A)  using all of the scarce resources it has available. 
B)  conserving on resources, rather than using all available resources. 
C)  getting all it can get from the scarce resources it has available. 
D)  able to produce more than what is currently being produced without additional resources. 
A)  using all of the scarce resources it has available. 
B)  conserving on resources, rather than using all available resources. 
C)  getting all it can get from the scarce resources it has available. 
D)  able to produce more than what is currently being produced without additional resources.

Question 6

Figure 2-7  
-Refer to Figure 2-7. Inefficient production is represented by which point(s)?

Accepted Answer

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

Question 7

Which of the following is not an example of a positive, as opposed to normative, statement?

Accepted Answer

A)  Higher gasoline prices will reduce gasoline consumption. 
B)  Equality is more important than efficiency. 
C)  Trade restrictions lower our standard of living. 
D)  If a nation wants to avoid inflation, it will restrict the growth rate of the quantity of money. 
A)  Higher gasoline prices will reduce gasoline consumption. 
B)  Equality is more important than efficiency. 
C)  Trade restrictions lower our standard of living. 
D)  If a nation wants to avoid inflation, it will restrict the growth rate of the quantity of money.

Question 8

Figure 2-2  
-Refer to Figure 2-2. Devin works as an attorney for a corporation and is paid a salary in exchange for the legal services he performs. Juan owns office buildings and rents his buildings to companies in exchange for rent payments. If Devin's income is represented by a flow of dollars from Box D to Box B of this circular­flow diagram, then Juan's income is represented by a flow of dollars

Accepted Answer

A)  from Box A to Box C. 
B)  from Box C to Box A. 
C)  from Box B to Box D. 
D)  from Box D to Box B. 
A)  from Box A to Box C. 
B)  from Box C to Box A. 
C)  from Box B to Box D. 
D)  from Box D to Box B.

Question 9

Figure 2-3  
-Refer to Figure 2-3. What is the name of the model depicted in the figure?

Accepted Answer

The answer of Figure 2-3  
-Refer to Figure 2-3....

Question 10

Two variables that have a negative correlation move in opposite directions.

Accepted Answer

A) True 
 B)False

Question 11

A circular-flow diagram is a model that

Accepted Answer

A)  helps to explain how participants in the economy interact with one another. 
B)  helps to explain how the economy is organized. 
C)  incorporates all aspects of the real economy. 
D)  Both (a) and (b) are correct. 
A)  helps to explain how participants in the economy interact with one another. 
B)  helps to explain how the economy is organized. 
C)  incorporates all aspects of the real economy. 
D)  Both (a) and (b) are correct.

Question 12

Figure 2-5  
-Refer to Figure 2-5. Efficient production is represented by which point(s)?

Accepted Answer

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

Question 13

Economists regard events from the past as

Accepted Answer

A)  irrelevant, since history is unlikely to repeat itself. 
B)  of limited interest, since those events seldom provide any useful economic data. 
C)  interesting but not particularly valuable, since those events cannot be used to evaluate present-day economic theories. 
D)  interesting and valuable, since those events are capable of helping us to understand the past, the present, and the future. 
A)  irrelevant, since history is unlikely to repeat itself. 
B)  of limited interest, since those events seldom provide any useful economic data. 
C)  interesting but not particularly valuable, since those events cannot be used to evaluate present-day economic theories. 
D)  interesting and valuable, since those events are capable of helping us to understand the past, the present, and the future.

Question 14

Historical episodes are

Accepted Answer

A)  valuable to economists because they allow economists to see how the science of economics has evolved. 
B)  valuable to economists because they allow economists to evaluate economic theories. 
C)  not of concern to economists because economics is about predicting the future, not dwelling on the past. 
D)  not of concern to economists because the exact circumstances of historical episodes are unlikely to be observed again. 
A)  valuable to economists because they allow economists to see how the science of economics has evolved. 
B)  valuable to economists because they allow economists to evaluate economic theories. 
C)  not of concern to economists because economics is about predicting the future, not dwelling on the past. 
D)  not of concern to economists because the exact circumstances of historical episodes are unlikely to be observed again.

Question 15

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

Accepted Answer

A)  zero. 
B)  50 blankets. 
C)  60 pillows. 
D)  50 blankets and 60 pillows. 
A)  zero. 
B)  50 blankets. 
C)  60 pillows. 
D)  50 blankets and 60 pillows.

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. What is the opportunity cost of moving from point T to point R?

Accepted Answer

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

Question 17

Figure 2-15  
-Refer to Figure 2-15. Consider the production possibilities frontier for an economy that produces only sofas and cars. The opportunity cost of one sofa is

Accepted Answer

The answer of Figure 2-15  
-Refer to Figure 2-15....

Question 18

Figure 2-22  
-Refer to Figure 2-22. What is the slope of the line with points A, B, and C?

Accepted Answer

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

Question 19

The three main factors of production, or categories of inputs, used by firms to produce goods and services are

Accepted Answer

land, labo

Question 20

Points inside the production possibilities frontier represent inefficient levels of production.

Accepted Answer

A) True 
 B)False

Exam 2: Thinking Like an Economist

In the simple circular-flow diagram, who buys the factors of production?

The production possibilities frontier provides an illustration of the principle that

Economists acting as scientists make positive statements, while economists acting as policy advisers make normative statements.

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?

An economic outcome is said to be efficient if the economy is

Figure 2-7 -Refer to Figure 2-7. Inefficient production is represented by which point(s)?

Which of the following is not an example of a positive, as opposed to normative, statement?

Figure 2-3 -Refer to Figure 2-3. What is the name of the model depicted in the figure?

Two variables that have a negative correlation move in opposite directions.

A circular-flow diagram is a model that

Figure 2-5 -Refer to Figure 2-5. Efficient production is represented by which point(s)?

Economists regard events from the past as

Historical episodes are

Figure 2-6 -Refer to Figure 2-6. The opportunity cost of this economy moving from point K to point H 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 T to point R?

Figure 2-15 -Refer to Figure 2-15. Consider the production possibilities frontier for an economy that produces only sofas and cars. The opportunity cost of one sofa is

Figure 2-22 -Refer to Figure 2-22. What is the slope of the line with points A, B, and C?

The three main factors of production, or categories of inputs, used by firms to produce goods and services are

Points inside the production possibilities frontier represent inefficient levels of production.

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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