Question 1

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 2

Suppose an economy produces two goods, food and machines. This economy always operates on its production possibilities frontier. Last year, it produced 1000 units of food and 47 machines. This year it experienced a technological advance in its machine-making industry. As a result, this year the society wants to produce 1050 units of food and 47 machines. Which of the following statements is correct?

Accepted Answer

A)  Because the technological advance occurred in the machine-making industry, it will not be possible to increase food production without reducing machine production below 47.
B)  Because the technological advance occurred in the machine-making industry, increases in output can only occur in the machine industry.
C)  In order to increase food production in these circumstances without reducing machine production, the economy must reduce inefficiencies.
D)  The technological advance reduced the amount of resources needed to produce 47 machines, so these resources could be used to produce more food.E) All of the above
F) A) and B)

Question 3

Almost all economists agree that local and state governments should

Accepted Answer

A)  eliminate subsidies to professional sports franchises.
B)  increase subsidies to professional sports franchises.
C)  copy economic policy from Washington, D.C.
D)  prevent companies from outsourcing work.E) A) and B)
F) C) and D)

Question 4

Assumptions can simplify the complex world and make it easier to understand.

Accepted Answer

A) True 
 B)False

Question 5

The Council of Economic Advisers

Accepted Answer

A)  was created in 1776 and consists of three members and a staff of several dozen economists.
B)  was created in 1776 and consists of thirty members and a staff of a dozen economists.
C)  was created in 1946 and consists of three members and a staff of several dozen economists.
D)  was created in 1946 and consists of thirty members and a staff of a dozen economists.E) A) and B)
F) A) and D)

Question 6

Figure 2-2 
-Refer to Figure 2-2. If Box A of this circular-flow diagram represents firms, then which box represents households?

Accepted Answer

A)  Box B
B)  Box C
C)  Box D
D)  Any one of the other boxes (B, C, or 
D)   could represent households.E) All of the above
F) A) and C)

Question 7

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

Accepted Answer

A)  Universal health care would be good for U.S. citizens.
B)  An increase in the cigarette tax would cause a decrease in the number of smokers.
C)  A decrease in the minimum wage would decrease unemployment.
D)  A law requiring the federal government to balance its budget would increase economic growth.E) B) and D)
F) A) and C)

Question 8

When an economy is operating at a point on its production possibilities frontier, then

Accepted Answer

A)  consumers are content with the mix of goods and services that is being produced.
B)  there is no way to produce more of one good without producing less of the other.
C)  equal amounts of the two goods are being produced.
D)  All of the above are correct.E) A) and D)
F) None of the above

Question 9

Efficiency is illustrated by

Accepted Answer

A)  both the production possibilities frontier and the circular-flow diagram.
B)  neither the production possibilities frontier nor the circular-flow diagram.
C)  the production possibilities frontier only.
D)  the circular-flow diagram only.E) C) and D)
F) None of the above

Question 10

Figure 2-2 
-Refer to Figure 2-2. Boxes C and D of this circular-flow diagram represent

Accepted Answer

A)  households and government.
B)  firms and government.
C)  the markets for goods and services and the markets for financial assets.
D)  the markets for goods and services and the markets for factors of production.E) B) and C)
F) B) and D)

Question 11

Figure 2-9
 
-Refer to Figure 2-9, Panel (a) . The opportunity cost of one computer is highest when the economy produces

Accepted Answer

A)  0 computers.
B)  6 computers.
C)  10 computers.
D)  12 computers.E) A) and D)
F) B) and C)

Question 12

Figure 2-4 
-Refer to Figure 2-4. If this economy devotes all of its resources to the production of notepads, then it will produce

Accepted Answer

A)  0 notepads and 40 lamps.
B)  35 notepads and 20 lamps.
C)  70 notepads and 0 lamps.
D)  70 notepads and 40 lamps.E) B) and D)
F) A) and C)

Question 13

Figure 2-6 
-Refer to Figure 2-6. Inefficient production is represented by which point(s) ?

Accepted Answer

A)  A, B
B)  C, D, F, G
C)  C, F, G
D)  DE) None of the above
F) A) and B)

Question 14

Positive statements are

Accepted Answer

A)  prescriptive.
B)  claims about how the world should be.
C)  claims about how the world is.
D)  made by economists speaking as policy advisers.E) A) and C)
F) B) and C)

Question 15

Economists who are primarily responsible for advising Congress on economic matters work in which agency?

Accepted Answer

A)  the Federal Reserve
B)  the Congressional Budget Office
C)  the Department of the Treasury
D)  the Department of CommerceE) A) and C)
F) All of the above

Question 16

Economic models can help us understand reality only when they include all details of the economy.

Accepted Answer

A) True 
 B)False

Question 17

The opportunity cost of something is what you give up to get it.

Accepted Answer

A) True 
 B)False

Question 18

Figure 2-8
 
-Refer to Figure 2-8, Panel (a) . The opportunity cost of moving from point K to point L is

Accepted Answer

A)  0 cups of coffee.
B)  1 donut.
C)  2 donuts.
D)  4 cups of coffee.E) C) and D)
F) A) and C)

Question 19

Economists make assumptions in order to

Accepted Answer

A)  mimic the methodologies employed by other scientists.
B)  minimize the number of experiments that yield no useful data.
C)  minimize the likelihood that some aspect of the problem at hand is being overlooked.
D)  focus their thinking on the essence of the problem at hand.E) None of the above
F) B) and C)

Question 20

When constructing a production possibilities frontier, which of the following assumptions is not made?

Accepted Answer

A)  The economy produces only two goods or two types of goods.
B)  Firms produce goods using factors of production.
C)  The technology available to firms is given.
D)  The quantities of the factors of production that are available are increasing over the relevant time period.E) None of the above
F) A) and D)

Exam 2: Thinking Like an Economist

Economists make assumptions in order to

Correct Answer
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Almost all economists agree that local and state governments should

Correct Answer
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Figure 2-2 -Refer to Figure 2-2. If Box A of this circular-flow diagram represents firms, then which box represents households?

Correct Answer
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Figure 2-6 -Refer to Figure 2-6. Inefficient production is represented by which point(s) ?

Correct Answer
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The Council of Economic Advisers

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

Correct Answer
verified

Economic models can help us understand reality only when they include all details of the economy.

Correct Answer
verified

Figure 2-8 -Refer to Figure 2-8, Panel (a) . The opportunity cost of moving from point K to point L is

Correct Answer
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When constructing a production possibilities frontier, which of the following assumptions is not made?

Correct Answer
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Assumptions can simplify the complex world and make it easier to understand.

Correct Answer
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Figure 2-9 -Refer to Figure 2-9, Panel (a) . The opportunity cost of one computer is highest when the economy produces

Correct Answer
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Positive statements are

Correct Answer
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Efficiency is illustrated by

Correct Answer
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Figure 2-4 -Refer to Figure 2-4. If this economy devotes all of its resources to the production of notepads, then it will produce

Correct Answer
verified

When an economy is operating at a point on its production possibilities frontier, then

Correct Answer
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Figure 2-2 -Refer to Figure 2-2. Boxes C and D of this circular-flow diagram represent

Correct Answer
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Which of the following is an example of a normative, as opposed to positive, statement?

Correct Answer
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Economists who are primarily responsible for advising Congress on economic matters work in which agency?

Correct Answer
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The opportunity cost of something is what you give up to get it.

Correct Answer
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Exam 2: Thinking Like an Economist

Economists make assumptions in order to

Correct AnswerverifiedShow Answer

Almost all economists agree that local and state governments should

Correct AnswerverifiedShow Answer

Figure 2-2 -Refer to Figure 2-2. If Box A of this circular-flow diagram represents firms, then which box represents households?

Correct AnswerverifiedShow Answer

Figure 2-6 -Refer to Figure 2-6. Inefficient production is represented by which point(s) ?

Correct AnswerverifiedShow Answer

The Council of Economic Advisers

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

Correct AnswerverifiedShow Answer

Economic models can help us understand reality only when they include all details of the economy.

Correct AnswerverifiedShow Answer

Figure 2-8 -Refer to Figure 2-8, Panel (a) . The opportunity cost of moving from point K to point L is

Correct AnswerverifiedShow Answer

When constructing a production possibilities frontier, which of the following assumptions is not made?

Correct AnswerverifiedShow Answer

Assumptions can simplify the complex world and make it easier to understand.

Correct AnswerverifiedShow Answer

Figure 2-9 -Refer to Figure 2-9, Panel (a) . The opportunity cost of one computer is highest when the economy produces

Correct AnswerverifiedShow Answer

Positive statements are

Correct AnswerverifiedShow Answer

Efficiency is illustrated by

Correct AnswerverifiedShow Answer

Figure 2-4 -Refer to Figure 2-4. If this economy devotes all of its resources to the production of notepads, then it will produce

Correct AnswerverifiedShow Answer

When an economy is operating at a point on its production possibilities frontier, then

Correct AnswerverifiedShow Answer

Figure 2-2 -Refer to Figure 2-2. Boxes C and D of this circular-flow diagram represent

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

Correct AnswerverifiedShow Answer

Economists who are primarily responsible for advising Congress on economic matters work in which agency?

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The opportunity cost of something is what you give up to get it.

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Correct AnswerverifiedShow Answer

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