Question 1

In the circular-flow diagram,

Accepted Answer

A)   profit flows from households to firms.
B)   labor flows from households to firms.
C)   services flow from households to firms.
D)   All of the above are correct.E) C) and D)
F) B) and C)

Question 2

Good assumptions simplify a problem without substantially affecting the answer.

Accepted Answer

A) True 
 B)False

Question 3

In the circular-flow diagram, another name for goods and services produced by firms is

Accepted Answer

A)   factors of production.
B)   output.
C)   inputs.
D)   resources.E) All of the above
F) A) and B)

Question 4

Sometimes economists disagree because their values differ. Which of the following instances best reflects this source of disagreement?

Accepted Answer

A)   One economist believes the North American Free Trade Agreement NAFT
A)   has led to a loss of American jobs; another economist disputes this claim.
B)   One economist believes that when income taxes are cut, people will increase their spending; another economist believes that when income taxes are cut, people will increase their saving.
C)   One economist advises against increases in sales taxes because she thinks such increases are unfair to low- income people; another economist disputes the idea that increases in sales taxes are unfair to low-income people.
D)   One economist believes that, prior to the Civil War, slavery contributed to economic growth in the South; another economist believes that slavery held back the South's economic growth.E) C) and D)
F) A) and B)

Question 5

The goal of an economist who formulates new theories is to

Accepted Answer

A)   provide an interesting framework of analysis, whether or not the framework turns out to be of much use in understanding how the world works.
B)   provoke stimulating debate in scientific journals.
C)   contribute to an understanding of how the world works.
D)   demonstrate that economists, like other scientists, can formulate testable theories.E) All of the above
F) B) and D)

Question 6

The production possibilities frontier shows the opportunity cost of one good as measured in terms of the other good.

Accepted Answer

A) True 
 B)False

Question 7

In the circular-flow diagram, which of the following items does not flow from households to firms?

Accepted Answer

A)   revenue
B)   land, labor, and capital
C)   factors of production
D)   profitE) C) and D)
F) A) and B)

Question 8

Economists believe that production possibilities frontiers

Accepted Answer

A)   never have a bowed shape.
B)   rarely have a bowed shape.
C)   often have a bowed shape.
D)   always have a bowed shape.E) C) and D)
F) B) and D)

Question 9

Figure 2-14  Consider the production possibilities curve for a country that can produce sweaters, apples in bushels), or a combination of the two.
-Refer to Figure 2-14. The bowed outward shape of the production possibilities curve indicates that opportunity cost of apples in terms of sweaters is

Accepted Answer

The answer of Figure 2-14  Consider the production possibilities...

Question 10

Figure 2-1 
-Refer to Figure 2-1. Which arrow represents the flow of goods and services?

Accepted Answer

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

Question 11

Which of the following allows you to provide information about the relationship between two variables?

Accepted Answer

A)   coordinate system.
B)   pie chart
C)   bar graph
D)   time-series graphE) A) and B)
F) A) and C)

Question 12

Alfonso has noticed that increases in unemployment insurance claims are associated with recessions, and therefore he advocates limits on unemployment insurance so as to prevent recessions. Mary has noticed that most drug addicts once attended schools, and therefore she advocates getting rid of schools so as to prevent drug addiction.

Accepted Answer

A)   The reasoning of both Alfonso and Mary suffers from the omitted variable problem.
B)   The reasoning of both Alfonso and Mary suffers from the reverse causality problem.
C)   Alfonso's reasoning suffers from the reverse causality problem, and Mary's reasoning suffers from the omitted variable problem.
D)   Mary's reasoning suffers from the reverse causality problem, and Alfonso's reasoning suffers from the omitted variable problem.E) None of the above
F) C) and D)

Question 13

Which of the following concepts cannot be illustrated by the production possibilities frontier?

Accepted Answer

A)   efficiency
B)   opportunity cost
C)   equality
D)   trade-offsE) All of the above
F) A) and C)

Question 14

When economists make

Accepted Answer

A)   positive statements, they are speaking not as policy advisers but as scientists.
B)   positive statements, they are speaking not as scientists but as forecasters.
C)   normative statements, they are speaking not as policy advisers but as scientists.
D)   normative statements, they are speaking not as policy advisers but as model-builders.E) B) and C)
F) A) and B)

Question 15

It is difficult for economists to make observations and develop theories, but it is easy for economists to run experiments to generate data to test their theories.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following statements is are)  correct?

Accepted Answer

A)   Relative to some other scientists, economists find it more difficult to conduct experiments.
B)   Theory and observation are important in economics as well as in other sciences.
C)   To obtain data, economists often rely upon the natural experiments offered by history.
D)   All of the above are correct.E) C) and D)
F) A) and B)

Question 17

If an economy can produce more of one good without giving up any of another good, then the economy's current production point is inefficient.

Accepted Answer

A) True 
 B)False

Question 18

Economists hold many positions advising the president and Congress including

Accepted Answer

A)   being a member of the Council of Economic Advisers.
B)   helping to enforce antitrust laws at the Department of Justice.
C)   conducting research at the Congressional Budget Office.
D)   All of these are possible positions that economists hold.E) B) and D)
F) A) and B)

Question 19

Draw a production possibilities frontier showing increasing opportunity cost of hammers in terms of horseshoes.
a. On the graph, identify the area of feasible outcomes and the area of infeasible outcomes.
b. On the graph, label a point that is efficient and a point that is inefficient.
c. On the graph, illustrate the effect of the discovery of a new vein of iron ore, a resource needed to make both horseshoes and hammers, on this economy.
d. On a second graph, illustrate the effect of a new computerized assembly line in the production of hammers on this economy.

Accepted Answer

The answer of Draw a production possibilities frontier showing increasing...

Question 20

In the circular flow diagram, who owns the factors of production and consumes all of the goods and services produced?

Accepted Answer

The answer of In the circular flow diagram, who owns...

Exam 2: Thinking Like an Economist

Figure 2-14 Consider the production possibilities curve for a country that can produce sweaters, apples in bushels), or a combination of the two. -Refer to Figure 2-14. The bowed outward shape of the production possibilities curve indicates that opportunity cost of apples in terms of sweaters is

Correct Answer
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In the circular-flow diagram, which of the following items does not flow from households to firms?

Correct Answer
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Figure 2-1 -Refer to Figure 2-1. Which arrow represents the flow of goods and services?

Correct Answer
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The goal of an economist who formulates new theories is to

Correct Answer
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Good assumptions simplify a problem without substantially affecting the answer.

Correct Answer
verified

The production possibilities frontier shows the opportunity cost of one good as measured in terms of the other good.

Correct Answer
verified

Sometimes economists disagree because their values differ. Which of the following instances best reflects this source of disagreement?

Correct Answer
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If an economy can produce more of one good without giving up any of another good, then the economy's current production point is inefficient.

Correct Answer
verified

Which of the following statements is are) correct?

Correct Answer
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Which of the following concepts cannot be illustrated by the production possibilities frontier?

Correct Answer
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Economists believe that production possibilities frontiers

Correct Answer
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In the circular-flow diagram,

Correct Answer
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When economists make

Correct Answer
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Correct Answer
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Which of the following allows you to provide information about the relationship between two variables?

Correct Answer
verified

It is difficult for economists to make observations and develop theories, but it is easy for economists to run experiments to generate data to test their theories.

Correct Answer
verified

In the circular-flow diagram, another name for goods and services produced by firms is

Correct Answer
verified

Economists hold many positions advising the president and Congress including

Correct Answer
verified

In the circular flow diagram, who owns the factors of production and consumes all of the goods and services produced?

Correct Answer
verified

Exam 2: Thinking Like an Economist

Figure 2-14 Consider the production possibilities curve for a country that can produce sweaters, apples in bushels), or a combination of the two. -Refer to Figure 2-14. The bowed outward shape of the production possibilities curve indicates that opportunity cost of apples in terms of sweaters is

Correct AnswerverifiedShow Answer

In the circular-flow diagram, which of the following items does not flow from households to firms?

Correct AnswerverifiedShow Answer

Figure 2-1 -Refer to Figure 2-1. Which arrow represents the flow of goods and services?

Correct AnswerverifiedShow Answer

The goal of an economist who formulates new theories is to

Correct AnswerverifiedShow Answer

Good assumptions simplify a problem without substantially affecting the answer.

Correct AnswerverifiedShow Answer

The production possibilities frontier shows the opportunity cost of one good as measured in terms of the other good.

Correct AnswerverifiedShow Answer

Sometimes economists disagree because their values differ. Which of the following instances best reflects this source of disagreement?

Correct AnswerverifiedShow Answer

If an economy can produce more of one good without giving up any of another good, then the economy's current production point is inefficient.

Correct AnswerverifiedShow Answer

Which of the following statements is are) correct?

Correct AnswerverifiedShow Answer

Which of the following concepts cannot be illustrated by the production possibilities frontier?

Correct AnswerverifiedShow Answer

Economists believe that production possibilities frontiers

Correct AnswerverifiedShow Answer

In the circular-flow diagram,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When economists make

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following allows you to provide information about the relationship between two variables?

Correct AnswerverifiedShow Answer

It is difficult for economists to make observations and develop theories, but it is easy for economists to run experiments to generate data to test their theories.

Correct AnswerverifiedShow Answer

In the circular-flow diagram, another name for goods and services produced by firms is

Correct AnswerverifiedShow Answer

Economists hold many positions advising the president and Congress including

Correct AnswerverifiedShow Answer

In the circular flow diagram, who owns the factors of production and consumes all of the goods and services produced?

Correct AnswerverifiedShow Answer

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