Question 1

Which of the following statements applies to economics, as well as to other sciences such as physics?

Accepted Answer

A)   Experiments are considered valid only when they are conducted in a laboratory.
B)   Good theories do not need to be tested.
C)   Real-world observations often lead to theories.
D)   Economics, as well as other sciences, is concerned primarily with abstract concepts.

Question 2

Almost all economists agree that rent control

Accepted Answer

A)   has no effect on the rental income of landlords.
B)   allows the market for housing to work more efficiently.
C)   adversely affects the availability and quality of housing.
D)   is a very inexpensive way to help the most needy members of society.

Question 3

Which of the following is not held constant when looking at an individual's demand curve?

Accepted Answer

A)   income
B)   price
C)   preferences
D)   the availability of alternative goods

Question 4

Figure 2-14
 
-Refer to Figure 2-14. Points A, B, and D represent feasible outcomes for this economy.

Accepted Answer

A) True 
 B)False

Question 5

Economic models

Accepted Answer

A)   are constructed to mirror reality as closely as possible, and in this respect economic models are no different from other scientific models.
B)   are constructed to mirror reality as closely as possible, and in this respect economic models are very different from other scientific models.
C)   are simplifications of reality, and in this respect economic models are no different from other scientific models.
D)   are simplifications of reality, and in this respect economic models are very different from other scientific models.

Question 6

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 B to point Z?

Accepted Answer

A)   a change in the price of coffee
B)   a change in the number of cups of coffee demanded
C)   a change in income
D)   More than one of the above is correct.

Question 7

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.

Question 8

For an economist, the idea of making assumptions is regarded generally as a

Accepted Answer

A)   bad idea, since doing so leads to the omission of important ideas and variables from economic models.
B)   bad idea, since doing so invariably leads to data-collection problems.
C)   good idea, since doing so helps to simplify the complex world and make it easier to understand.
D)   good idea, since economic analysis without assumptions leads to complicated results that the general public finds hard to understand.

Question 9

Figure 2-14
 
-Refer to Figure 2-14. This economy fully employs its resources when it produces 35 dishwashers and zero doghouses.

Accepted Answer

A) True 
 B)False

Question 10

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.

Question 11

Figure 2-8
 
-Refer to Figure 2-8, Panel (a) . The opportunity cost of one cup of coffee is highest when the economy produces

Accepted Answer

A)   0 cups of coffee.
B)   2 cups of coffee.
C)   4 cups of coffee.
D)   6 cups of coffee.

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Figure 2-4
 
-Refer to Figure 2-4. This economy cannot currently produce 30 notepads and 45 lamps because

Accepted Answer

A)   some of its resources are unemployed.
B)   inefficiencies exist in this economy's production process.
C)   given its current technology, it does not have the resources to produce that level of output.
D)   All of the above are correct.

Question 14

Economist Joseph Schumpeter coined the phrase "creative destruction" to describe the process by which

Accepted Answer

A)   the government destroys the failing markets that caused an economic crisis.
B)   innovation and enterpreneurial initiative have great power to drive economic growth.
C)   economists destroy long-held beliefs about how markets function.
D)   free markets need government intervention to create economic growth.

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.

Question 16

Which of the following is a correct statement about production possibilities frontiers?

Accepted Answer

A)   An economy can produce only on the production possibilities frontier.
B)   An economy can produce at any point inside or outside a production possibilities frontier.
C)   An economy can produce at any point on or inside the production possibilities frontier, but not outside the frontier.
D)   An economy can produce at any point inside the production possibilities frontier, but not on or outside the frontier.

Question 17

Economists speaking like policy advisers make

Accepted Answer

A)   positive statements.
B)   descriptive statements.
C)   claims about how the world is.
D)   claims about how the world should be.

Question 18

In building economic models, economists often omit

Accepted Answer

A)   assumptions.
B)   theories.
C)   details.
D)   equations.

Question 19

In the ordered pair (10,30), 10 is the horizontal location of the point and 30 is the vertical location of the point.

Accepted Answer

A) True 
 B)False

Question 20

In the circular-flow diagram, firms produce

Accepted Answer

A)   goods and services using factors of production.
B)   output using inputs.
C)   factors of production using goods and services.
D)   Both (a)  and (b)  are correct.

Exam 2: Thinking Like an Economist

For an economist, the idea of making assumptions is regarded generally as a

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The Council of Economic Advisers

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Which of the following statements applies to economics, as well as to other sciences such as physics?

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Economists speaking like policy advisers make

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Figure 2-4 -Refer to Figure 2-4. This economy cannot currently produce 30 notepads and 45 lamps because

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Figure 2-14 -Refer to Figure 2-14. This economy fully employs its resources when it produces 35 dishwashers and zero doghouses.

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In the circular-flow diagram, firms produce

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Which of the following is a correct statement about production possibilities frontiers?

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Which of the following statements about economic models is correct?

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

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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 B to point Z?

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Figure 2-14 -Refer to Figure 2-14. Points A, B, and D represent feasible outcomes for this economy.

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Figure 2-8 -Refer to Figure 2-8, Panel (a) . The opportunity cost of one cup of coffee is highest when the economy produces

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Economist Joseph Schumpeter coined the phrase "creative destruction" to describe the process by which

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Economic models

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In the circular-flow diagram, in the markets for

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In the ordered pair (10,30), 10 is the horizontal location of the point and 30 is the vertical location of the point.

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Which of the following is not held constant when looking at an individual's demand curve?

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In building economic models, economists often omit

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Almost all economists agree that rent control

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