Question 1

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.E) All of the above
F) A) and C)

Question 2

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.E) A) and B)
F) B) and D)

Question 3

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.E) A) and B)
F) All of the above

Question 4

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.E) None of the above
F) All of the above

Question 5

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 6

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, QE) None of the above
F) B) and C)

Question 7

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 8

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

Question 9

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.E) A) and B)
F) A) and C)

Question 10

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

Question 11

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.E) A) and B)
F) A) and C)

Question 12

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.E) A) and B)
F) A) and C)

Question 13

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 ME) A) and B)
F) B) and D)

Question 14

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.E) All of the above
F) A) and D)

Question 15

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

Question 16

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

Question 17

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

Question 18

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 19

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) C) and D)
F) A) and D)

Question 20

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 profitE) None of the above
F) All of the above

Exam 2: Thinking Like an Economist

A model can be accurately described as a

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

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Factors of production are

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The production possibilities frontier provides an illustration of the principle that

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

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

Correct Answer
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Economic models

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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?

Correct Answer
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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

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

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

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

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

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

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

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

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

Correct Answer
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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

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

Correct Answer
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Exam 2: Thinking Like an Economist

A model can be accurately described as a

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

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Factors of production are

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The production possibilities frontier provides an illustration of the principle that

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Economic models

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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?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

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

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

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

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

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

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

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

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

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