Question 1

In the circular-flow diagram,

Accepted Answer

A)   firms are buyers in the markets for goods and services.
B)   households are sellers in the markets for the factors of production.
C)   firms are sellers in the markets for factors of production and in the markets for goods and services.
D)   dollars that are spent on goods and services flow directly from firms to households.E) B) and C)
F) All of the above

Question 2

With respect to how economists study the economy,which of the following statements is most accurate?

Accepted Answer

A)   Economists study the past,but they do not try to predict the future.
B)   Economists use "rules of thumb" to predict the future.
C)   Economists devise theories,collect data,and analyze the data to test the theories.
D)   Economists use controlled experiments in much the same way that biologists and physicists do.E) A) and B)
F) C) and D)

Question 3

John Maynard Keynes observed that during rare times of deep financial and economic crisis,when the "invisible hand" has temporarily ceased to function,

Accepted Answer

A)   there is a more urgent need for government to play an active role in restoring markets to their healthy function.
B)   government should avoid intervening in the market and wait patiently for proper market function to return.
C)   economists need to re-evaluate all of their basic principles.
D)   the economy can rely on entrepreneurs to take creative actions to end the crisis.E) A) and D)
F) All of the above

Question 4

Figure 2-3 
-Refer to Figure 2-3.Inefficient production is represented by which point(s) ?

Accepted Answer

A)   J,L
B)   J,L,M
C)   K,N
D)   ME) A) and B)
F) C) and D)

Question 5

The art in scientific thinking -- whether in chemistry,economics,or biology -- is

Accepted Answer

A)   the design and implementation of laboratory experiments.
B)   knowing when to stop collecting data and when to start analyzing the data.
C)   deciding which assumptions to make.
D)   being able to mathematically model natural phenomena.E) B) and D)
F) A) and D)

Question 6

Figure 2-10 
-Refer to Figure 2-10.The shift of the production possibilities frontier from A to B illustrates

Accepted Answer

A)   simultaneous technological advances in the book and DVD industries.
B)   a reallocation of resources away from the production of DVDs and toward the production of books.
C)   economic growth.
D)   All of the above are correct.E) B) and D)
F) All of the above

Question 7

A positive economic statement such as "Pollution taxes decrease the quantity of pollution generated by firms"

Accepted Answer

A)   would likely be made by an economist acting as a policy advisor.
B)   would require values and data in order to be evaluated.
C)   would require data but not values in order to be evaluated.
D)   could not be evaluated by economists acting as scientists.E) A) and D)
F) A) and C)

Question 8

An assumption an economist might make while studying international trade is

Accepted Answer

A)   there are only two countries.
B)   countries only produce two goods.
C)   technology does not change.
D)   All of the above are possible assumptions.E) None of the above
F) B) and C)

Question 9

The 1990 amendment to the Clean Air Act

Accepted Answer

A)   banned all forms of pollution.
B)   implemented tradable allowances for acid rain.
C)   created a research council on asthma.
D)   made global warming a national priority.E) All of the above
F) B) and D)

Question 10

When a variable that is not named on either axis of a graph changes,we read the change as a movement along the curve.

Accepted Answer

A) True 
 B)False

Question 11

Economic models

Accepted Answer

A)   cannot be useful if they are based on false assumptions.
B)   were once thought to be useful,but that is no longer true.
C)   must incorporate all aspects of the economy if they are to be useful.
D)   can be useful,even if they are not particularly realistic.E) A) and C)
F) A) and B)

Question 12

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

Question 13

Economists face an obstacle that many other scientists do not face.What is that obstacle?

Accepted Answer

A)   It is often difficult to formulate theories in economics.
B)   It is often difficult and sometimes impossible to perform experiments in economics.
C)   Economics cannot be addressed objectively; it must be addressed subjectively.
D)   The scientific method cannot be applied to the study of economics.E) All of the above
F) B) and C)

Question 14

A microeconomist - as opposed to a macroeconomist - might study

Accepted Answer

A)   the effect of borrowing by the federal government on the inflation rate.
B)   the effect of rising oil prices on employment in the airline industry.
C)   changes in the nation's unemployment rate over short periods of time.
D)   alternative policies to promote higher living standards throughout the nation.E) A) and C)
F) A) and B)

Question 15

Figure 2-1 
-Refer to Figure 2-1.Which arrow represents the flow of land,labor,and capital?

Accepted Answer

A)   A
B)   B
C)   C
D)   DE) None of the above
F) A) and B)

Question 16

For economists,statements about the world are of two types:

Accepted Answer

A)   assumptions and theories.
B)   true statements and false statements.
C)   specific statements and general statements.
D)   positive statements and normative statements.E) B) and D)
F) None of the above

Question 17

Figure 2-14 
-Refer to Figure 2-14.The opportunity cost of moving from point B to point D is 15 doghouses.

Accepted Answer

A) True 
 B)False

Question 18

Figure 2-1 
-Refer to Figure 2-1.Which arrow represents the flow of income payments?

Accepted Answer

A)   A
B)   B
C)   C
D)   DE) A) and D)
F) None of the above

Question 19

The design of tax policy is one of the responsibilities of economists who work at the

Accepted Answer

A)   Council of Economic Advisers.
B)   Federal Reserve.
C)   Department of the Treasury.
D)   Congressional Budget Office.E) A) and D)
F) None of the above

Question 20

The outer loop of the circular-flow diagram represents the flows of dollars in the economy.Which of the following does not appear on the outer loop?

Accepted Answer

A)   Wages
B)   Income
C)   Capital
D)   RentE) B) and C)
F) A) and C)

Exam 2: Thinking Like an Economist

An assumption an economist might make while studying international trade is

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In the circular-flow diagram,

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The 1990 amendment to the Clean Air Act

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The design of tax policy is one of the responsibilities of economists who work at the

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Figure 2-3 -Refer to Figure 2-3.Inefficient production is represented by which point(s) ?

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Economic models

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Figure 2-14 -Refer to Figure 2-14.The opportunity cost of moving from point B to point D is 15 doghouses.

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Figure 2-1 -Refer to Figure 2-1.Which arrow represents the flow of land,labor,and capital?

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Figure 2-10 -Refer to Figure 2-10.The shift of the production possibilities frontier from A to B illustrates

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A microeconomist - as opposed to a macroeconomist - might study

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For economists,statements about the world are of two types:

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The outer loop of the circular-flow diagram represents the flows of dollars in the economy.Which of the following does not appear on the outer loop?

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Figure 2-1 -Refer to Figure 2-1.Which arrow represents the flow of income payments?

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With respect to how economists study the economy,which of the following statements is most accurate?

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When a variable that is not named on either axis of a graph changes,we read the change as a movement along the curve.

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The art in scientific thinking -- whether in chemistry,economics,or biology -- is

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Economists face an obstacle that many other scientists do not face.What is that obstacle?

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John Maynard Keynes observed that during rare times of deep financial and economic crisis,when the "invisible hand" has temporarily ceased to function,

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A positive economic statement such as "Pollution taxes decrease the quantity of pollution generated by firms"

Correct AnswerverifiedShow Answer

Economists regard events from the past as

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