Question 1

Which of the following is an example of a capital input?

Accepted Answer

A)  a computer
B)  a share of stock
C)  an hour of a worker's time
D)  $50,000E) None of the above
F) C) and D)

Question 2

When a production possibilities frontier is bowed outward, the opportunity cost of the first good in terms of the second good increases as more of the second good is produced.

Accepted Answer

A) True 
 B)False

Question 3

Some, but not all, government economists are employed within the administrative branch of government. Which of the following government agencies employs economists outside of the administrative branch?

Accepted Answer

A)  the Department of Labor
B)  the Department of the Treasury
C)  the Congressional Budget Office
D)  the Council of Economic AdvisersE) B) and C)
F) A) and C)

Question 4

The Council of Economic Advisers

Accepted Answer

A)  was created in 1946.
B)  advises the president of the United States on economic policy matters.
C)  writes the annual Economic Report of the President.
D)  All of the above are correct.E) B) and D)
F) A) and C)

Question 5

In the circular-flow diagram, firms produce goods and services using the factors of production.

Accepted Answer

A) True 
 B)False

Question 6

When two variables move in opposite directions, the curve relating them is upward sloping, and we say the variables are positively related.

Accepted Answer

A) True 
 B)False

Question 7

The most common data for testing economic theories come from

Accepted Answer

A)  carefully controlled and conducted laboratory experiments.
B)  computer models of economies.
C)  historical episodes of economic change.
D)  centrally planned economies.E) All of the above
F) A) and B)

Question 8

In the markets for factors of production in the circular-flow diagram,

Accepted Answer

A)  households provide firms with labor, land, and capital.
B)  households provide firms with savings for investment.
C)  firms provide households with goods and services.
D)  firms provide households with revenue.E) B) and D)
F) A) and B)

Question 9

Figure 2-22 
-Refer to Figure 2-22. Given that price is measured on the vertical axis, quantity is measured on the horizontal axis, and that the curves are downward-sloping, what type of curves are depicted here?

Accepted Answer

The answer of Figure 2-22 
-Refer to Figure 2-22. Given...

Question 10

Most economists agree that a large federal budget deficit has what type of effect on the economy?

Accepted Answer

The answer of Most economists agree that a large federal...

Question 11

Yi and Avik are both economists. Yi thinks that taxing consumption, rather than income, would result in higher household saving because income that is saved would not be taxed. Avik does not think that household saving would respond much to a change in the tax laws. In this example, Yi and Avik

Accepted Answer

A)  hold different normative views about the tax system.
B)  disagree about the validity of a positive theory.
C)  have a fundamental misunderstanding of the tax system.
D)  More than one of the above is correct.E) B) and C)
F) A) and C)

Question 12

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

Question 13

A production possibilities frontier will be bowed outward if some of the economy's resources are better suited to producing one good than another.

Accepted Answer

A) True 
 B)False

Question 14

Economists devise theories, collect data, and then analyze these data in an attempt to verify or refute their theories.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following statements about economic models is correct?

Accepted Answer

A)  Economic models are built to mirror reality exactly.
B)  Economic models are useful, but they should not be used for the purpose of improving public policies.
C)  Because economic models omit many details, they allow us to see what is truly important.
D)  Economic models seldom incorporate equations or diagrams.E) B) and C)
F) A) and D)

Question 16

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

Question 17

Figure 2-15 
-Refer to Figure 2-15. Consider the production possibilities frontier for an economy that produces only sofas and cars. When society moves from point A to point B,

Accepted Answer

A)  the opportunity cost is the same as when society moves from point B to point C.
B)  it is giving up cars to get sofas.
C)  the opportunity cost is increasing.
D)  it moves from an inefficient point to an efficient point.E) B) and C)
F) C) and D)

Question 18

Figure 2-8 
-Refer to Figure 2-8. To reach point L, the economy would have to

Accepted Answer

A)  acquire more resources or experience a technological advance.
B)  begin using its available resources more efficiently than it is currently using them.
C)  shift resources away from the production of nails and toward the production of hammers.
D)  None of the above are correct; the economy will never be able to reach point L.E) A) and B)
F) C) and D)

Question 19

In the circular-flow diagram, factors of production are the goods and services produced by firms.

Accepted Answer

A) True 
 B)False

Question 20

Figure 2-17​ 
-Refer to Figure 2-17. It is possible for this economy to produce 1000 shoes.

Accepted Answer

A) True 
 B)False

Exam 2: Thinking Like an Economist

The Council of Economic Advisers

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The production possibilities frontier provides an illustration of the principle that

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Yi and Avik are both economists. Yi thinks that taxing consumption, rather than income, would result in higher household saving because income that is saved would not be taxed. Avik does not think that household saving would respond much to a change in the tax laws. In this example, Yi and Avik

Correct AnswerverifiedShow Answer

Figure 2-17​ -Refer to Figure 2-17. It is possible for this economy to produce 1000 shoes.

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A production possibilities frontier will be bowed outward if some of the economy's resources are better suited to producing one good than another.

Correct AnswerverifiedShow Answer

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

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The most common data for testing economic theories come from

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Figure 2-15 -Refer to Figure 2-15. Consider the production possibilities frontier for an economy that produces only sofas and cars. When society moves from point A to point B,

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Figure 2-22 -Refer to Figure 2-22. Given that price is measured on the vertical axis, quantity is measured on the horizontal axis, and that the curves are downward-sloping, what type of curves are depicted here?

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Which of the following is an example of a capital input?

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Which of the following statements about economic models is correct?

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When a production possibilities frontier is bowed outward, the opportunity cost of the first good in terms of the second good increases as more of the second good is produced.

Correct AnswerverifiedShow Answer

Most economists agree that a large federal budget deficit has what type of effect on the economy?

Correct AnswerverifiedShow Answer

In the markets for factors of production in the circular-flow diagram,

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Economists devise theories, collect data, and then analyze these data in an attempt to verify or refute their theories.

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Figure 2-8 -Refer to Figure 2-8. To reach point L, the economy would have to

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In the circular-flow diagram, factors of production are the goods and services produced by firms.

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Some, but not all, government economists are employed within the administrative branch of government. Which of the following government agencies employs economists outside of the administrative branch?

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In the circular-flow diagram, firms produce goods and services using the factors of production.

Correct AnswerverifiedShow Answer

When two variables move in opposite directions, the curve relating them is upward sloping, and we say the variables are positively related.

Correct AnswerverifiedShow Answer

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Figure 2-17 -Refer to Figure 2-17. It is possible for this economy to produce 1000 shoes.

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