Question 1

The inner loop of the circular-flow diagram represents the flows of inputs and outputs. Which of the following does not appear on the inner loop?

Accepted Answer

A)  wages 
B)  land 
C)  capital 
D)  goods and services sold 
A)  wages 
B)  land 
C)  capital 
D)  goods and services sold

Question 2

A circular-flow model and production possibilities frontier are similar in that

Accepted Answer

A)  neither allows economic analysis to occur. 
B)  neither can be represented visually on a graph. 
C)  both make use of assumptions. 
D)  both make use of complex equations to arrive at solutions. 
A)  neither allows economic analysis to occur. 
B)  neither can be represented visually on a graph. 
C)  both make use of assumptions. 
D)  both make use of complex equations to arrive at solutions.

Question 3

Which of the following statements about economic models is correct?

Accepted Answer

A)  Economic models are built to mirror reality exactly. 
B)  Economic models are useful, but they should not be used for the purpose of improving public policies. 
C)  Because economic models omit many details, they allow us to see what is truly important. 
D)  Economic models seldom incorporate equations or diagrams. 
A)  Economic models are built to mirror reality exactly. 
B)  Economic models are useful, but they should not be used for the purpose of improving public policies. 
C)  Because economic models omit many details, they allow us to see what is truly important. 
D)  Economic models seldom incorporate equations or diagrams.

Question 4

Figure 2-23  
-Refer to Figure 2-23. It is possible for this economy to produce 45 doghouses and 30 dishwashers.

Accepted Answer

A) True 
 B)False

Question 5

Figure 2-23  
-Refer to Figure 2-23. Point B represents an inefficient outcome for this economy.

Accepted Answer

A) True 
 B)False

Question 6

Economists devise theories, collect data, and then analyze these data in an attempt to verify or refute their theories.

Accepted Answer

A) True 
 B)False

Question 7

Analysis of data on workers and those looking for work is conducted by economists at the

Accepted Answer

A)  Office of Management and Budget. 
B)  Department of Labor. 
C)  Congressional Budget Office. 
D)  Department of the Treasury. 
A)  Office of Management and Budget. 
B)  Department of Labor. 
C)  Congressional Budget Office. 
D)  Department of the Treasury.

Question 8

Is the following a positive or normative statement? The United States government should mandate that every citizen purchases health insurance.

Accepted Answer

The answer of Is the following a positive or normative...

Question 9

Normative statements are not

Accepted Answer

A)  descriptive. 
B)  prescriptive. 
C)  claims about how the world should be. 
D)  made by economists speaking as policy advisers. 
A)  descriptive. 
B)  prescriptive. 
C)  claims about how the world should be. 
D)  made by economists speaking as policy advisers.

Question 10

Economists believe that production possibilities frontiers rarely have a bowed shape.

Accepted Answer

A) True 
 B)False

Question 11

When income increases the slope of an individual's demand curve, the demand curve

Accepted Answer

A)  turns positive. 
B)  becomes undefined. 
C)  remains negative. 
D)  becomes infinite. 
A)  turns positive. 
B)  becomes undefined. 
C)  remains negative. 
D)  becomes infinite.

Question 12

The field of economics is traditionally divided into two broad subfields,

Accepted Answer

A)  national economics and international economics. 
B)  consumer economics and producer economics. 
C)  private sector economics and public sector economics. 
D)  microeconomics and macroeconomics. 
A)  national economics and international economics. 
B)  consumer economics and producer economics. 
C)  private sector economics and public sector economics. 
D)  microeconomics and macroeconomics.

Question 13

Which of the following transactions takes place in the markets for the factors of production in the circular-flow diagram?

Accepted Answer

A)  Dylan receives a salary for his work as a financial analyst for an investment firm. 
B)  Kristin buys two business suits to wear to her job as a Chief Information Officer. 
C)  Jim receives clean water in his home in exchange for paying his water bill. 
D)  Caroline owns a nail salon and receives payments from her clients for her services. 
A)  Dylan receives a salary for his work as a financial analyst for an investment firm. 
B)  Kristin buys two business suits to wear to her job as a Chief Information Officer. 
C)  Jim receives clean water in his home in exchange for paying his water bill. 
D)  Caroline owns a nail salon and receives payments from her clients for her services.

Question 14

Economists may disagree about the validity of alternative positive theories about how the world works.

Accepted Answer

A) True 
 B)False

Question 15

Figure 2-16  
-Refer to Figure 2-16. Taking cause and effect into account, which of the following interpretations would be most reasonable regarding the relationship between coffee and hours without sleep?

Accepted Answer

A)  The less coffee a person drinks per day, the more time he can go without sleep. 
B)  There is no relationship between how much coffee per day a person drinks and how long he can go without sleep. 
C)  The more coffee a person drinks per day, the more time he can go without sleep. 
D)  The more coffee a person drinks per day, the less time he can go without sleep. 
A)  The less coffee a person drinks per day, the more time he can go without sleep. 
B)  There is no relationship between how much coffee per day a person drinks and how long he can go without sleep. 
C)  The more coffee a person drinks per day, the more time he can go without sleep. 
D)  The more coffee a person drinks per day, the less time he can go without sleep.

Question 16

When two variables move in the same direction, the curve relating them is downward sloping, and we say the variables are negatively related.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following statements about models is correct?

Accepted Answer

A)  The more details a model includes, the better the model. 
B)  Models assume away irrelevant details. 
C)  Models cannot be used to explain how the economy functions. 
D)  Models cannot be used to make predictions. 
A)  The more details a model includes, the better the model. 
B)  Models assume away irrelevant details. 
C)  Models cannot be used to explain how the economy functions. 
D)  Models cannot be used to make predictions.

Question 18

The y-coordinate of an ordered pair specifies the

Accepted Answer

A)  diagonal location of the point. 
B)  vertical location of the point. 
C)  horizontal location of the point. 
D)  quadrant location in which the point is located. 
A)  diagonal location of the point. 
B)  vertical location of the point. 
C)  horizontal location of the point. 
D)  quadrant location in which the point is located.

Question 19

While the scientific method is applicable to studying natural sciences, it is not applicable to studying a nation's economy.

Accepted Answer

A) True 
 B)False

Question 20

Figure 2-8  
-Refer to Figure 2-8. Inefficient production is represented by which point(s)?

Accepted Answer

A)  K, M 
B)  L 
C)  L, M 
D)  M 
A)  K, M 
B)  L 
C)  L, M 
D)  M

Exam 2: Thinking Like an Economist

The inner loop of the circular-flow diagram represents the flows of inputs and outputs. Which of the following does not appear on the inner loop?

A circular-flow model and production possibilities frontier are similar in that

Which of the following statements about economic models is correct?

Figure 2-23 -Refer to Figure 2-23. It is possible for this economy to produce 45 doghouses and 30 dishwashers.

Figure 2-23 -Refer to Figure 2-23. Point B represents an inefficient outcome for this economy.

Economists devise theories, collect data, and then analyze these data in an attempt to verify or refute their theories.

Analysis of data on workers and those looking for work is conducted by economists at the

Is the following a positive or normative statement? The United States government should mandate that every citizen purchases health insurance.

Normative statements are not

Economists believe that production possibilities frontiers rarely have a bowed shape.

When income increases the slope of an individual's demand curve, the demand curve

The field of economics is traditionally divided into two broad subfields,

Which of the following transactions takes place in the markets for the factors of production in the circular-flow diagram?

Economists may disagree about the validity of alternative positive theories about how the world works.

Figure 2-16 -Refer to Figure 2-16. Taking cause and effect into account, which of the following interpretations would be most reasonable regarding the relationship between coffee and hours without sleep?

When two variables move in the same direction, the curve relating them is downward sloping, and we say the variables are negatively related.

Which of the following statements about models is correct?

The y-coordinate of an ordered pair specifies the

While the scientific method is applicable to studying natural sciences, it is not applicable to studying a nation's economy.

Figure 2-8 -Refer to Figure 2-8. Inefficient production is represented by which point(s)?

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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