Question 1

Economists at the U.S. Department of the Treasury help design U.S. coins and paper money.

Accepted Answer

A) True 
 B)False

Question 2

Factors of production are

Accepted Answer

A)   used to produce goods and services.
B)   also called output.
C)   abundant in most economies.
D)   assumed to be owned by firms in the circular-flow diagram.E) All of the above
F) A) and D)

Question 3

The 1990 amendment to the Clean Air Act

Accepted Answer

A)   banned all forms of pollution.
B)   implemented tradable allowances for acid rain.
C)   created a research council on asthma.
D)   made global warming a national priority.E) All of the above
F) A) and B)

Question 4

Figure 2-7
 
-Refer to Figure 2-7. Point K represents an outcome in which

Accepted Answer

A)   production is inefficient.
B)   some of the economy's resources are unemployed.
C)   the economy is using all of its resources to produce hammers.
D)   the economy is using all of its nails to produce hammers.E) A) and B)
F) A) and C)

Question 5

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 6

In the simple circular-flow diagram,

Accepted Answer

A)   households own the factors of production.
B)   households buy all the goods and services that firms produce.
C)   land, labor, and capital flow from households to firms.
D)   All of the above are correct.E) C) and D)
F) B) and C)

Question 7

Figure 2-14
 
-Refer to Figure 2-14. It is possible for this economy to produce 75 doghouses.

Accepted Answer

A) True 
 B)False

Question 8

The production possibilities frontier is a graph that shows the various combinations of outputs that the economy can possibly produce given the available factors of production and the available production technology.

Accepted Answer

A) True 
 B)False

Question 9

Normative conclusions

Accepted Answer

A)   come from positive analysis alone.
B)   are based on ignorance of positive analysis.
C)   involve value judgments.
D)   reflect the economist's role as scientist.E) None of the above
F) A) and C)

Question 10

Figure 2-4
 
-Refer to Figure 2-4. Inefficient production is represented by which point(s) ?

Accepted Answer

A)   Y, Z
B)   V
C)   V, W
D)   WE) All of the above
F) None of the above

Question 11

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 B)
F) A) and C)

Question 12

Figure 2-9
 
-Refer to Figure 2-9, Panel (a) . The movement from point C to point B could be caused by

Accepted Answer

A)   economic growth.
B)   unemployment.
C)   an improvement in efficiency.
D)   an advance in production technology.E) B) and C)
F) A) and B)

Question 13

Differences in scientific judgement between economists is similar to all of the following except

Accepted Answer

A)   astronomers debating whether the sun or earth was at the center of the solar system.
B)   meteorologists debating the existence of global warming.
C)   two politicians arguing about the fairness of the tax code.
D)   explorers debating whether or not the earth was flat before the time of Christopher Columbus.E) All of the above
F) None of the above

Question 14

Historical episodes are not valuable to economists.

Accepted Answer

A) True 
 B)False

Question 15

In the circular-flow diagram, payments for labor, land, and capital flow from firms to households through the markets for the factors of production.

Accepted Answer

A) True 
 B)False

Question 16

In the circular-flow diagram,

Accepted Answer

A)   taxes flow from households to firms, and transfer payments flow from firms to households.
B)   income payments flow from firms to households, and sales revenue flows from households to firms.
C)   resources flow from firms to households, and goods and services flow from households to firms.
D)   inputs and outputs flow in the same direction as the flow of dollars, from firms to households.E) A) and D)
F) B) and C)

Question 17

While the scientific method is applicable to studying natural sciences, it is not applicable to studying a nation's economy.

Accepted Answer

A) True 
 B)False

Question 18

Table 2-5
 
-Refer to Table 2-5. Table 2-5 shows one set of production possibilities. Based on the values in the table, the production possibilities frontier is

Accepted Answer

A)   bowed outward indicating increasing opportunity costs.
B)   bowed outward indicating decreasing opportunity costs.
C)   a straight line indicating constant opportunity costs.
D)   bowed inward indicating decreasing opportunity costs.E) B) and C)
F) All of the above

Question 19

The art in scientific thinking is

Accepted Answer

A)   finding the right problem to study.
B)   deciding which assumptions to make.
C)   the ability to make an abstract subject easy to understand.
D)   not something in which economists have to be skilled.E) C) and D)
F) A) and B)

Question 20

Figure 2-11
 
-Refer to Figure 2-11. The shift of the production possibilities frontier from A to B can best be described as

Accepted Answer

A)   a downturn in the economy.
B)   economic growth.
C)   an enhancement of equality.
D)   an improvement in the allocation of resources.E) A) and B)
F) None of the above

Exam 2: Thinking Like an Economist

While the scientific method is applicable to studying natural sciences, it is not applicable to studying a nation's economy.

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Differences in scientific judgement between economists is similar to all of the following except

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Factors of production are

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

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Figure 2-4 -Refer to Figure 2-4. Inefficient production is represented by which point(s) ?

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Figure 2-9 -Refer to Figure 2-9, Panel (a) . The movement from point C to point B could be caused by

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Figure 2-14 -Refer to Figure 2-14. It is possible for this economy to produce 75 doghouses.

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Economists at the U.S. Department of the Treasury help design U.S. coins and paper money.

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In the circular-flow diagram,

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Figure 2-11 -Refer to Figure 2-11. The shift of the production possibilities frontier from A to B can best be described as

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Figure 2-7 -Refer to Figure 2-7. Point K represents an outcome in which

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Normative conclusions

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The 1990 amendment to the Clean Air Act

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The production possibilities frontier is a graph that shows the various combinations of outputs that the economy can possibly produce given the available factors of production and the available production technology.

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In the simple circular-flow diagram,

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Table 2-5 -Refer to Table 2-5. Table 2-5 shows one set of production possibilities. Based on the values in the table, the production possibilities frontier is

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Historical episodes are not valuable to economists.

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Economists at the Department of Justice

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The art in scientific thinking is

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In the circular-flow diagram, payments for labor, land, and capital flow from firms to households through the markets for the factors of production.

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