Question 1

The ordered pair that represents the origin on a graph is

Accepted Answer

A)   (1, 1) .
B)   (0, 0) .
C)   (-1, -1) .
D)   (∞, ∞) .E) C) and D)
F) B) and C)

Question 2

In the circular-flow diagram, the two types of markets in which households and firms interact are the markets for goods and services and the markets for factors of production.

Accepted Answer

A) True 
 B)False

Question 3

Instead of conducting laboratory experiments to generate data to test their theories, economists often

Accepted Answer

A)   ask winners of the Nobel Prize in Economics to evaluate their theories.
B)   argue that data is impossible to collect in economics.
C)   gather data from historical episodes of economic change.
D)   assume that data would support their theories.E) A) and D)
F) A) and C)

Question 4

Figure 2-21 
-Refer to Figure 2-21. Your friend John created the graph above to illustrate that snowstorms are caused by more snowblowers being sold. You inform him that his interpretation is incorrect due to

Accepted Answer

A)   omitted variable bias.
B)   reverse causality.
C)   slope mismatch.
D)   shifting versus moving along a curve.E) None of the above
F) B) and C)

Question 5

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) None of the above
F) A) and C)

Question 6

Which markets are represented in the simple circular-flow diagram?

Accepted Answer

A)   markets for goods and services and markets for financial assets
B)   markets for factors of production and markets for financial assets
C)   markets for goods and services and markets for factors of production
D)   markets for goods and services and markets for imports and exportsE) All of the above
F) C) and D)

Question 7

The production possibilities frontier is a graph that shows the various combinations of outputs that the economy can possibly produce given the available factors of production and the available production technology.

Accepted Answer

A) True 
 B)False

Question 8

The Council of Economic Advisers' Economic Report of the President discusses recent developments in the economy and presents the council's analysis of current policy issues.

Accepted Answer

A) True 
 B)False

Question 9

The slope of a line that passes through the points (5, 8)  and (12, 12)  is

Accepted Answer

A)   -4/7.
B)   4/7.
C)   7/4.
D)   -7/4.E) A) and B)
F) A) and C)

Question 10

Which of the following statements best captures the relationship between microeconomics and macroeconomics?

Accepted Answer

A)   For the most part, microeconomists are unconcerned with macroeconomics, and macroeconomists are unconcerned with microeconomics.
B)   Microeconomists study markets for small products, whereas macroeconomists study markets for large products.
C)   Microeconomics and macroeconomics are distinct from one another, yet they are closely related.
D)   Microeconomics is oriented toward policy studies, whereas macroeconomics is oriented toward theoretical studies.E) C) and D)
F) B) and D)

Question 11

Figure 2-5 
-Refer to Figure 2-5. It is possible for this economy to produce

Accepted Answer

A)   60 dryers and 50 washers.
B)   60 dryers and 60 washers.
C)   80 dryers and 50 washers.
D)   All of the above.E) B) and C)
F) A) and D)

Question 12

Which of the following is the best explanation for why President Harry Truman once said that he wanted to find a one-armed economist?

Accepted Answer

A)   President Truman received input from so many economists that he only wanted one view from each.
B)   President Truman thought economists should analyze policies but not make or enforce them.
C)   Economists understand that most policy decisions involve trade-offs so they are likely to present multiple views of policies.
D)   A one-armed economist would conduct only positive analysis and no normative analysis.E) C) and D)
F) B) and D)

Question 13

John Maynard Keynes believed the ideas of economists to be

Accepted Answer

A)   generally incorrect.
B)   powerful.
C)   academic and without practical application.
D)   rantings of madmen.E) C) and D)
F) All of the above

Question 14

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

Accepted Answer

A)   The discount rate is the interest rate the Federal Reserve charges banks to borrow funds.
B)   The US income tax rate increases with the amount of income earned.
C)   The government should increase the tax on gasoline.
D)   The US unemployment rate increased to 10 percent in 2009.E) None of the above
F) A) and D)

Question 15

The circular-flow diagram explains, in general terms, how the economy is organized and how participants in the economy interact with one another.

Accepted Answer

A) True 
 B)False

Question 16

Figure 2-12 
-Refer to Figure 2-12. Which of the following would most likely have caused the production possibilities frontier to shift outward from A to B?

Accepted Answer

A)   a decrease in unemployment
B)   a technological advance in the consumer goods industries
C)   a general technological advance
D)   an increase in the availability of capital-producing resourcesE) None of the above
F) A) and B)

Question 17

When a production possibilities frontier is bowed outward, the opportunity cost of the first good in terms of the second good increases as more of the second good is produced.

Accepted Answer

A) True 
 B)False

Question 18

Economists believe that production possibilities frontiers are often bowed because

Accepted Answer

A)   trade-offs inevitably create unemployment.
B)   resources are not completely adaptable.
C)   opportunity costs are constant.
D)   of improvements in technology.E) A) and B)
F) A) and C)

Question 19

Figure 2-3 
-Refer to Figure 2-3. What does the arrow going from oval B to rectangle 2 represent in the figure?

Accepted Answer

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

Question 20

Economists make assumptions to

Accepted Answer

A)   provide issues for political discussion.
B)   make a complex world easier to understand.
C)   make it easier to teach economic concepts and analysis.
D)   create policy alternatives that are incomplete or subject to criticism.E) B) and C)
F) C) and D)

Exam 2: Thinking Like an Economist

In the circular-flow diagram, the two types of markets in which households and firms interact are the markets for goods and services and the markets for factors of production.

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When a production possibilities frontier is bowed outward, the opportunity cost of the first good in terms of the second good increases as more of the second good is produced.

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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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Which markets are represented in the simple circular-flow diagram?

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The slope of a line that passes through the points (5, 8) and (12, 12) is

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Economists believe that production possibilities frontiers are often bowed because

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John Maynard Keynes believed the ideas of economists to be

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Figure 2-5 -Refer to Figure 2-5. It is possible for this economy to produce

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Which of the following is the best explanation for why President Harry Truman once said that he wanted to find a one-armed economist?

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The circular-flow diagram explains, in general terms, how the economy is organized and how participants in the economy interact with one another.

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Figure 2-12 -Refer to Figure 2-12. Which of the following would most likely have caused the production possibilities frontier to shift outward from A to B?

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Which of the following statements best captures the relationship between microeconomics and macroeconomics?

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The production possibilities frontier is a graph that shows the various combinations of outputs that the economy can possibly produce given the available factors of production and the available production technology.

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The Council of Economic Advisers' Economic Report of the President discusses recent developments in the economy and presents the council's analysis of current policy issues.

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Instead of conducting laboratory experiments to generate data to test their theories, economists often

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Economists make assumptions to

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The ordered pair that represents the origin on a graph is

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Figure 2-3 -Refer to Figure 2-3. What does the arrow going from oval B to rectangle 2 represent in the figure?

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Figure 2-21 -Refer to Figure 2-21. Your friend John created the graph above to illustrate that snowstorms are caused by more snowblowers being sold. You inform him that his interpretation is incorrect due to

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

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