Question 1

Economists at the Department of Justice

Accepted Answer

A)  track the behavior of the nation's money supply.
B)  advise Congress on economic matters.
C)  help enforce the nation's antitrust laws.
D)  prepare the federal budget.E) A) and D)
F) B) and C)

Question 2

A survey of professional economists revealed that more than three-fourths of them agreed with fourteen economic propositions. Which of the following is not one of those propositions?

Accepted Answer

A)  A ceiling on rents reduces the quantity and quality of housing available.
B)  Fiscal policy has a significant stimulative impact on a less than fully employed economy.
C)  The gap between Social Security funds and expenditures will become unsustainably large within the next fifty years if current policies remain unchanged.
D)  The United States should implement universal health care for its citizens.E) None of the above
F) C) and D)

Question 3

Economists make use of assumptions, some of which are unrealistic, for the purpose of

Accepted Answer

A)  teaching economics to people who have never before studied economics.
B)  advancing their political agendas.
C)  developing models when the scientific method cannot be used.
D)  focusing their thinking.E) All of the above
F) A) and B)

Question 4

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 D)
F) B) and D)

Question 5

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

Question 6

Irregular fluctuations in economic activity are known as the

Accepted Answer

A)  business cycle.
B)  broken window fallacy.
C)  tradeoff between inflation and unemployment.
D)  ten principles of economics.E) B) and D)
F) All of the above

Question 7

In the simple circular flow diagram, the flow of money from the firms to the markets for factors of production is called

Accepted Answer

A)  spending.
B)  revenue.
C)  income.
D)  wages, rent, and profit.E) B) and C)
F) None of the above

Question 8

Production possibilities frontiers are usually bowed outward. This is because

Accepted Answer

A)  the more resources a society uses to produce one good, the fewer resources it has available to produce another good.
B)  the opportunity cost of producing a good decreases as more and more of that good is produced.
C)  of the effects of technological change.
D)  resources are specialized; that is, some are better at producing particular goods rather than other goods.E) All of the above
F) A) and B)

Question 9

Figure 2-16​ 
-Refer to Figure 2-16. Which of the following statements is true about the opportunity cost of obtaining approximately 20 additional gadgets by moving from point B to point C?

Accepted Answer

A)  The opportunity cost is the 70 gadgets that are no longer produced.
B)  The opportunity cost is zero because the economy does not give up producing widgets to go from producing at point B to point C.
C)  The opportunity cost is greater than zero widgets but less than 70 gadgets.
D)  The opportunity cost is greater than 70 gadgets.E) C) and D)
F) A) and B)

Question 10

The point where both x and y are zero is known as the

Accepted Answer

A)  origin.
B)  null.
C)  zero coordinate.
D)  center.E) None of the above
F) B) and C)

Question 11

You know an economist has crossed the line from policy adviser to scientist when he or she

Accepted Answer

A)  claims that the problem at hand is widely misunderstood by non-economists.
B)  makes positive statements.
C)  talks about values.
D)  makes a claim about how the world should be.E) C) and D)
F) None of the above

Question 12

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 B)
F) A) and C)

Question 13

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

Question 14

In the circular-flow diagram, households and firms are the decision makers.

Accepted Answer

A) True 
 B)False

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

Question 16

A model that shows how dollars flow through markets among households and firms is called the

Accepted Answer

A)  production possibilities frontier.
B)  circular-flow diagram.
C)  demand and supply diagram.
D)  comparative advantage model.E) C) and D)
F) B) and C)

Question 17

Figure 2-2 
-Refer to Figure 2-2. If the flow of goods and services is part of what is represented by the inner loop of this circular-flow diagram, then

Accepted Answer

A)  the flow of factors of production is also part of what is represented by the inner loop.
B)  the flow of income paid to households is also part of what is represented by the inner loop.
C)  the flow of revenue to firms is also part of what is represented by the inner loop.
D)  households must be sellers of output.E) None of the above
F) A) and C)

Question 18

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

Question 19

An example of a price that changes only infrequently is the price of

Accepted Answer

A)  stocks on the New York Stock Exchange.
B)  crude oil.
C)  residential real estate.
D)  magazines sold at newsstands.E) B) and C)
F) A) and C)

Question 20

The argument that purchases of minivans cause large families is an example of

Accepted Answer

A)  omitted variables.
B)  normative statements.
C)  reverse causality.
D)  bias.E) A) and B)
F) All of the above

Exam 2: Thinking Like an Economist

In the simple circular flow diagram, the flow of money from the firms to the markets for factors of production is called

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The point where both x and y are zero is known as the

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Figure 2-2 -Refer to Figure 2-2. If the flow of goods and services is part of what is represented by the inner loop of this circular-flow diagram, then

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An example of a price that changes only infrequently is the price of

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

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A survey of professional economists revealed that more than three-fourths of them agreed with fourteen economic propositions. Which of the following is not one of those propositions?

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Irregular fluctuations in economic activity are known as the

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A production possibilities frontier shifts outward when

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Economists at the Department of Justice

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

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A relatively steep demand curve indicates that

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In the circular-flow diagram, households and firms are the decision makers.

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The argument that purchases of minivans cause large families is an example of

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Economists make use of assumptions, some of which are unrealistic, for the purpose of

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Figure 2-16​ -Refer to Figure 2-16. Which of the following statements is true about the opportunity cost of obtaining approximately 20 additional gadgets by moving from point B to point C?

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A model that shows how dollars flow through markets among households and firms is called the

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You know an economist has crossed the line from policy adviser to scientist when he or she

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In the circular-flow diagram, in the markets for

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Where can an economy not produce?

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Production possibilities frontiers are usually bowed outward. This is because

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Figure 2-16 -Refer to Figure 2-16. Which of the following statements is true about the opportunity cost of obtaining approximately 20 additional gadgets by moving from point B to point C?

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