Question 1

A certain production possibilities frontier shows production possibilities for two goods, jewelry and clothing. Which of the following concepts cannot be illustrated by this model?

Accepted Answer

A)  the flow of dollars between sellers of jewelry and clothing and buyers of jewelry and clothing
B)  the tradeoff between production of jewelry and production of clothing
C)  the opportunity cost of clothing in terms of jewelry
D)  the effect of economic growth on production possibilities involving jewelry and clothingE) A) and D)
F) A) and C)

Question 2

A macroeconomist - as opposed to a microeconomist - might study

Accepted Answer

A)  the effect of agricultural price support programs on the cotton industry
B)  the effect on U.S. steel producers of an import quota imposed on foreign steel
C)  the effect of an increasing inflation rate on national living standards
D)  the effect of an increase in the price of imported coffee beans on the U.S. coffee industryE) All of the above
F) A) and B)

Question 3

Figure 2-15
Relationship between Price and Cups of Coffee 
-Refer to Figure 2-15. A movement from point A to point B is called

Accepted Answer

A)  a shift in demand.
B)  a movement along the demand curve.
C)  a shift in supply.
D)  a movement along the supply curve.E) None of the above
F) A) and C)

Question 4

The argument that purchases of minivans cause large families is an example of

Accepted Answer

A)  omitted variables.
B)  normative statements.
C)  reverse causality.
D)  bias.E) A) and C)
F) None of the above

Question 5

Policymaking in a representative democracy

Accepted Answer

A)  is straightforward and does not involve any disagreement.
B)  benefits from the input of economists, even if their advice is not always followed.
C)  is conducted without the input of economists.
D)  is always based exclusively on the results of economic analysis.E) C) and D)
F) B) and D)

Question 6

Figure 2-5 
-Refer to Figure 2-5. If this economy moves from point A to point B, then which of the following statements is correct?

Accepted Answer

A)  This economy has moved from a point of inefficient production to a point of efficient production.
B)  This economy has experienced economic growth.
C)  This economy has experienced an increase in employment.
D)  None of the above is correct.E) A) and D)
F) A) and C)

Question 7

The use of the coordinate system allows

Accepted Answer

A)  for the display of the flows of dollars, goods and services, and factors of production in an economic system.
B)  for the display of how labor and other resources are organized in the production process.
C)  for the display of two variables on a single graph.
D)  for the creation of pie charts and bar graphs.E) All of the above
F) A) and D)

Question 8

When two variables have a negative correlation and the x-variable decreases,

Accepted Answer

A)  the y-variable increases.
B)  the y-variable decreases.
C)  the y-variable stays the same.
D)  the x-variable can never be positive.E) A) and B)
F) A) and C)

Question 9

Figure 2-5 
-Refer to Figure 2-5. The opportunity cost of this economy moving from point A to point C is

Accepted Answer

A)  75 soccer balls.
B)  125 soccer balls.
C)  125 soccer balls and 240 sweaters.
D)  240 sweaters.E) B) and C)
F) A) and C)

Question 10

Which of the following is a correct statement about production possibilities frontiers?

Accepted Answer

A)  An economy can produce only on the production possibilities frontier.
B)  An economy can produce at any point inside or outside a production possibilities frontier.
C)  An economy can produce at any point on or inside the production possibilities frontier, but not outside the frontier.
D)  An economy can produce at any point inside the production possibilities frontier, but not on or outside the frontier.E) B) and C)
F) A) and B)

Question 11

Positive statements can be evaluated using data alone, but normative statements cannot.

Accepted Answer

A) True 
 B)False

Question 12

The production possibilities frontier illustrates

Accepted Answer

A)  the trade-off between efficiency and equality.
B)  the combination of output that an economy should produce.
C)  the combination of output that each member of society should consume.
D)  None of the above is correct.E) A) and B)
F) A) and C)

Question 13

Congress relies on economists at the Congressional Budget Office to

Accepted Answer

A)  enforce the nation's antitrust laws.
B)  set the nation's monetary policy.
C)  provide evidence that incumbent members of Congress are performing well in their jobs.
D)  provide independent evaluations of policy proposals.E) B) and C)
F) C) and D)

Question 14

In the circular-flow diagram, which of the following items flows from firms to households 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 profitE) B) and C)
F) All of the above

Question 15

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.E) B) and D)
F) B) and C)

Question 16

A production possibilities frontier has a bowed shape if the opportunity cost is constant at all levels of output.

Accepted Answer

A) True 
 B)False

Question 17

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.E) B) and C)
F) None of the above

Question 18

Economic models are most often composed of diagrams and equations.

Accepted Answer

A) True 
 B)False

Question 19

Two variables that have a positive correlation move in the same direction.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following statements about the circular-flow diagram is correct?

Accepted Answer

A)  One must imagine that the economy operates without money in order to make sense of the diagram.
B)  The diagram leaves out details that are not essential for understanding the economic transactions that occur between households and firms.
C)  The government cannot be excluded as a decision maker in a circular-flow diagram.
D)  All of the above are correct.E) A) and B)
F) C) and D)

Exam 2: Thinking Like an Economist

Policymaking in a representative democracy

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Positive statements can be evaluated using data alone, but normative statements cannot.

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A macroeconomist - as opposed to a microeconomist - might study

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When two variables have a negative correlation and the x-variable decreases,

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The argument that purchases of minivans cause large families is an example of

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The use of the coordinate system allows

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Congress relies on economists at the Congressional Budget Office to

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Which of the following statements about the circular-flow diagram is correct?

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A production possibilities frontier has a bowed shape if the opportunity cost is constant at all levels of output.

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Economic models are most often composed of diagrams and equations.

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Two variables that have a positive correlation move in the same direction.

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A certain production possibilities frontier shows production possibilities for two goods, jewelry and clothing. Which of the following concepts cannot be illustrated by this model?

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Which of the following is a correct statement about production possibilities frontiers?

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Figure 2-5 -Refer to Figure 2-5. The opportunity cost of this economy moving from point A to point C is

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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

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Figure 2-15 Relationship between Price and Cups of Coffee -Refer to Figure 2-15. A movement from point A to point B is called

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Normative statements are not

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The production possibilities frontier illustrates

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Figure 2-5 -Refer to Figure 2-5. If this economy moves from point A to point B, then which of the following statements is correct?

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

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