Question 1

A circular-flow diagram is a visual model of the economy.

Accepted Answer

A) True 
 B)False

Question 2

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

Question 3

A production point is said to be efficient if there is no way for the economy to produce more of one good without producing less of another.

Accepted Answer

A) True 
 B)False

Question 4

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) B) and C)

Question 5

The x-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.E) A) and B)
F) B) and C)

Question 6

Which of the following transactions does not take place in the markets for the factors of production in the circular-flow diagram?

Accepted Answer

A)  Jason provides plumbing services for a plumbing company and receives an hourly wage from the company for his services.
B)  Jennifer works as a marriage counselor and her clients pay her on a per-hour basis for her services.
C)  Brody owns several shopping malls and receives rent payments from the companies that operate those malls.
D)  Bree sells advertising for a newspaper and receives a commission from the newspaper company for each advertisement that she sells.E) C) and D)
F) A) and B)

Question 7

When studying the effects of changes in public policy, economists believe that

Accepted Answer

A)  it is important to distinguish between the short run and the long run.
B)  the assumptions used in studying those effects should be the same for the short run as for the long run.
C)  the short-run effects of those changes are always more beneficial to society than are the long-run effects.
D)  the long-run effects of those changes are always more beneficial to society than are the short-run effects.E) C) and D)
F) A) and D)

Question 8

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

Accepted Answer

A)  households provide firms with savings for investment.
B)  households provide firms with labor, land, and capital.
C)  firms provide households with output.
D)  firms provide households with profit.E) A) and B)
F) B) and D)

Question 9

Which of the following statements is correct about the roles of economists?

Accepted Answer

A)  Economists are best viewed as policy advisers.
B)  Economists are best viewed as scientists.
C)  In trying to explain the world, economists are policy advisers; in trying to improve the world, they are scientists.
D)  In trying to explain the world, economists are scientists; in trying to improve the world, they are policy advisers.E) None of the above
F) All of the above

Question 10

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

Question 11

"Allowing all individuals access to Medicare and Medicaid for health insurance is the fair thing to do" is an example of a

Accepted Answer

A)  contradiction in economic theory.
B)  positive economic statement.
C)  negative economic statement.
D)  normative economic statement.E) B) and C)
F) A) and B)

Question 12

It is possible for an economy to increase its production of both goods if the economy

Accepted Answer

A)  moves downward and to the right along its production possibilities frontier and the frontier is bowed outward.
B)  moves upward and to the left along its production possibilities frontier and the frontier is bowed outward.
C)  moves in either direction along its production possibilities frontier and the frontier is a straight line.
D)  moves from a situation of inefficient production to a situation of efficient production.E) A) and B)
F) None of the above

Question 13

A production possibilities frontier shifts outward when

Accepted Answer

A)  the economy experiences economic growth.
B)  the desires of the economy's citizens change.
C)  at least one of the basic principles of economics is violated.
D)  opportunity costs are lessened.E) A) and C)
F) A) and D)

Question 14

In the circular-flow diagram, firms consume all the goods and services that they produce.

Accepted Answer

A) True 
 B)False

Question 15

Figure 2-5 
-Refer to Figure 2-5. If this economy devotes one-half of its available resources to the production of soccer balls and the other half to the production of sweaters, it could produce

Accepted Answer

A)  150 sweaters and 100 soccer balls.
B)  150 sweaters and 150 soccer balls.
C)  300 sweaters and 200 soccer balls.
D)  We would have to know the details of this economy's technology in order to determine this.E) A) and B)
F) A) and D)

Question 16

In the circular-flow diagram, in the markets for

Accepted Answer

A)  goods and services, households and firms are both sellers.
B)  goods and services, households are buyers and firms are sellers.
C)  the factors of production, households are buyers and firms are sellers.
D)  the factors of production, households and firms are both buyers.E) None of the above
F) C) and D)

Question 17

A relatively steep demand curve indicates that

Accepted Answer

A)  quantity demanded will adjust only slightly to a price change.
B)  quantity demanded will adjust significantly to a price change.
C)  quantity demanded will not adjust to a price change.
D)  the change in quantity demanded will exactly equal a change in price.E) C) and D)
F) None of the above

Question 18

Figure 2-4 
-Refer to Figure 2-4. The opportunity cost of obtaining 10 additional lamps by moving from point W to point Z is

Accepted Answer

A)  0 notepads.
B)  10 notepads.
C)  50 notepads.
D)  None of the above; the economy cannot move from point W to point Z.E) B) and D)
F) A) and D)

Question 19

If a major union goes on strike, then the country would be operating inside its production possibilities frontier.

Accepted Answer

A) True 
 B)False

Question 20

Figure 2-14 
-Refer to Figure 2-14. The opportunity cost of an additional doghouse increases as more doghouses are produced.

Accepted Answer

A) True 
 B)False

Exam 2: Thinking Like an Economist

It is possible for an economy to increase its production of both goods if the economy

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John Maynard Keynes believed the ideas of economists to be

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A production possibilities frontier shifts outward when

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Which of the following transactions does not take place in the markets for the factors of production in the circular-flow diagram?

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A circular-flow diagram is a visual model of the economy.

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A production point is said to be efficient if there is no way for the economy to produce more of one good without producing less of another.

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In the circular-flow diagram, in the markets for

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

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When studying the effects of changes in public policy, economists believe that

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Figure 2-5 -Refer to Figure 2-5. If this economy devotes one-half of its available resources to the production of soccer balls and the other half to the production of sweaters, it could produce

Correct AnswerverifiedShow Answer

The x-coordinate of an ordered pair specifies the

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Which of the following statements about models is correct?

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Figure 2-4 -Refer to Figure 2-4. The opportunity cost of obtaining 10 additional lamps by moving from point W to point Z is

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In the circular-flow diagram, firms consume all the goods and services that they produce.

Correct AnswerverifiedShow Answer

"Allowing all individuals access to Medicare and Medicaid for health insurance is the fair thing to do" is an example of a

Correct AnswerverifiedShow Answer

A relatively steep demand curve indicates that

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following statements is correct about the roles of economists?

Correct AnswerverifiedShow Answer

If a major union goes on strike, then the country would be operating inside its production possibilities frontier.

Correct AnswerverifiedShow Answer

Figure 2-14 -Refer to Figure 2-14. The opportunity cost of an additional doghouse increases as more doghouses are produced.

Correct AnswerverifiedShow Answer

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