Question 1

Economists at the Department of the Treasury

Accepted Answer

A)   design U.S.currency and coins.
B)   provide Congress with the annual budget.
C)   enforce the U.S.antitrust laws.
D)   provide advice on tax policy to the President.E) All of the above
F) A) and C)

Question 2

Suppose a nation is currently producing at a point inside its production possibilities frontier.We know that

Accepted Answer

A)   the nation is producing beyond its capacity,so inflation will occur.
B)   the nation is not using all available resources or is using inferior technology or both.
C)   the nation is producing an efficient combination of goods.
D)   there will be a large opportunity cost if the nation tries to increase production of any good.E) A) and D)
F) A) and C)

Question 3

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

Question 4

Which of the following areas of study typifies microeconomics as opposed to macroeconomics?

Accepted Answer

A)   the impact of minimum-wage laws on employment in the fast food industry
B)   the effect of changes in household saving rates on the growth rate of national income
C)   the impact of faster money growth on the rate of inflation
D)   a comparison of alternative tax policies and their respective impacts on the rate of the nation's economic growthE) A) and C)
F) A) and D)

Question 5

When two variables have a positive correlation,

Accepted Answer

A)   they tend to move in opposite directions.
B)   they tend to move in the same direction.
C)   one variable will move while the other remains constant.
D)   the variables' values are never negative.E) A) and D)
F) C) and D)

Question 6

Economists acting as scientists make positive statements,while economists acting as policy advisers make normative statements.

Accepted Answer

A) True 
 B)False

Question 7

Two variables that have a positive correlation move in the same direction.

Accepted Answer

A) True 
 B)False

Question 8

Which types of models are built with assumptions?

Accepted Answer

A)   economic models,but not models in other disciplines such as physics and biology
B)   economic models as well as models in other disciplines such as physics and biology
C)   models that are built for teaching purposes but not for research purposes
D)   bad modelsE) A) and B)
F) A) and C)

Question 9

In conducting their research,economists often substitute historical events and historical episodes for

Accepted Answer

A)   theories and observations.
B)   laboratory experiments.
C)   models.
D)   assumptions.E) All of the above
F) A) and B)

Question 10

The Economic Report of the President

Accepted Answer

A)   discusses recent developments in the economy and presents analysis of current policy issues.
B)   is written by the Council of Economic Advisers.
C)   is the responsibility of the economists at the Office of Management and Budget.
D)   Both a and b are correct.E) All of the above
F) B) and C)

Question 11

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

Question 12

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

Question 13

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

Question 14

Where can an economy not produce?

Accepted Answer

A)   inside its production possibilities frontier
B)   on its production possibilities frontier
C)   outside its production possibilities frontier
D)   at the endpoints of its production possibilities frontierE) A) and B)
F) A) and C)

Question 15

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 sellers and firms are buyers.
C)   the factors of production,households are sellers and firms are buyers.
D)   the factors of production,households and firms are both buyers.E) B) and D)
F) C) and D)

Question 16

Economists sometimes give conflicting advice because

Accepted Answer

A)   graduate students in economics are encouraged to argue with each other.
B)   economists have different values and scientific judgment.
C)   economists acting as scientists do not like to agree with economists acting as policy advisers.
D)   economics is more of a belief system than a science.E) None of the above
F) A) and D)

Question 17

Figure 2-15
Relationship between Price and Cups of Coffee 
-Refer to Figure 2-15.Which of the following could result in a movement from point A to point B?

Accepted Answer

A)   a change in income
B)   a change in preferences
C)   a change in the price of coffee
D)   a change in the price of teaE) A) and B)
F) B) and D)

Question 18

In surveys of professional economists,fourteen propositions were endorsed by an overwhelming majority of respondents.

Accepted Answer

A) True 
 B)False

Question 19

In the simple circular-flow diagram,the participants in the economy are

Accepted Answer

A)   firms and government.
B)   households and firms.
C)   households and government.
D)   households,firms,and government.E) B) and C)
F) B) and D)

Question 20

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

Exam 2: Thinking Like an Economist

In the circular-flow diagram,in the markets for

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Factors of production are

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Which of the following areas of study typifies microeconomics as opposed to macroeconomics?

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Figure 2-15 Relationship between Price and Cups of Coffee -Refer to Figure 2-15.Which of the following could result in a movement from point A to point B?

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Economists sometimes give conflicting advice because

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Economists at the Department of the Treasury

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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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The production possibilities frontier provides an illustration of the principle that

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Where can an economy not produce?

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In conducting their research,economists often substitute historical events and historical episodes for

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When two variables have a positive correlation,

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The goal of an economist who formulates new theories is to

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In the simple circular-flow diagram,the participants in the economy are

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Two variables that have a positive correlation move in the same direction.

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Which types of models are built with assumptions?

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Economists believe that production possibilities frontiers are often bowed because

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Economists acting as scientists make positive statements,while economists acting as policy advisers make normative statements.

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The Economic Report of the President

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Suppose a nation is currently producing at a point inside its production possibilities frontier.We know that

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In surveys of professional economists,fourteen propositions were endorsed by an overwhelming majority of respondents.

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