Thinking Like an Economist.docx

Thinking Like an Economist Multiple Choice Which of the following is not correct a Economists use some familiar words in specialized ways b Economics has its own language and its own way of thinking but few other fields of study do c Supply demand elasticity comparative advantage consumer surplus and deadweight loss are all terms that are part of the economist s language d The value of the economist s language lies in its ability to provide you with a new and useful way of thinking about the world in which you live ANS B REF - TOP Economics Economists use some familiar terms in specialized ways a to make the subject sound more complex than it is b because every respectable field of study has its own language c to provide a new and useful way of thinking about the world d because it was too difficult to come up with new terms ANS C REF - TOP Economics The Economist as Scientist Economists like mathematicians physicists and biologists a make use of the scientific method b try to address their subject with a scientist s objectivity c devise theories collect data and then analyze these data in an attempt to verify or refute their theories d All of the above are correct ANS D REF - The essence of science is a the laboratory experiment b the scientific method c the study of nature but not the study of society d All of the above are correct ANS B REF - The scientific method is a the use of modern technology to understand the way the world works b the use of controlled laboratory experiments to understand the way the world works c the dispassionate development and testing of theories about how the world works d the search for evidence to support preconceived theories about how the world works ANS C REF - The scientific method is applicable to studying a natural sciences but not social sciences b social sciences but not natural sciences c both natural sciences and social sciences d None of the above is correct ANS C REF - Who said The whole of science is nothing more than the refinement of everyday thinking a Isaac Newton b Albert Einstein c Adam Smith d Benjamin Franklin ANS B REF - Albert Einstein once made the following observation about science a The whole of science is nothing more than the refinement of everyday thinking b The whole of science is nothing more than an interesting intellectual exercise c In order to understand science one must rely solely on abstraction d In order to understand science one must transcend everyday thinking ANS A REF - Sir Isaac Newton's development of the theory of gravity after observing an apple fall from a tree is an example of a a controlled experiment that lead to the formulation of a scientific theory b being in the right place at the right time c an idea whose time had come d the interplay between observation and theory in science ANS D REF - Which of the following is an example of using the scientific method with a natural experiment a Measuring how long it takes a marble to fall from a ten story building b Comparing plant growth with and without a soil additive c Tracking the price of oil when a war in the Middle East interrupts the flow of crude oil d Observing the reaction when two chemicals are mixed together ANS C REF - TOP Natural experiment The goal of an economist who formulates new theories is to a provide an interesting framework of analysis whether or not the framework turns out to be of much use in understanding how the world works b provoke stimulating debate in scientific journals c contribute to an understanding of how the world works d demonstrate that economists like other scientists can formulate testable theories ANS C REF - Which of the following statements applies to economics as well as to other sciences such as physics 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 ANS C REF - With respect to how economists study the economy which of the following statements is most accurate a Economists study the past but they do not try to predict the future b Economists use rules of thumb to predict the future c Economists devise theories collect data and analyze the data to test the theories d Economists use controlled experiments in much the same way that biologists and physicists do ANS C REF - Economists face an obstacle that many other scientists do not face What is that obstacle a It is often difficult to formulate theories in economics b It is often difficult and sometimes impossible to perform experiments in economics c Economics cannot be addressed objectively it must be addressed subjectively d The scientific method cannot be applied to the study of economics ANS B REF - In conducting their research economists face an obstacle that not all scientists face specifically in economics it is often difficult and sometimes impossible to a make use of theory and observation b rely upon the scientific method c conduct laboratory experiments d find articles or books that were written before ANS C REF - The use of theory and observation is more difficult in economics than in sciences such as physics due to the difficulty in a performing an experiment in an economic system b applying mathematical methods to economic analysis c analyzing available data d formulating theories about economic events ANS A REF - Which of the following statements is are correct a Relative to some other scientists economists find it more difficult to conduct experiments b Theory and observation are important in economics as well as in other sciences c To obtain data economists often rely upon the natural experiments offered by history d All of the above are correct ANS D REF - Because it is difficult for economists to use experiments to generate data they generally must a do without data b substitute assumptions for data when data are unavailable c rely upon hypothetical data that were previously concocted by other economists d use whatever data the world gives them ANS D REF - Which of the following statements is correct a Economists almost always find it easy to conduct experiments in order to test their theories b Economics is not a true science because economists are not usually allowed to conduct experiments to test their theories c Economics is a social science rather than a true science because it cannot employ the scientific method d Economists are usually not able to conduct experiments so they must rely on natural experiments offered by history ANS D REF - Instead of conducting laboratory experiments to generate data to test their theories economists often a ask winners of the Nobel Prize in Economics to evaluate their theories b argue that data is impossible to collect in economics c gather data from historical episodes of economic change d assume that data would support their theories ANS C REF - The most common data for testing economic theories come from a carefully controlled and conducted laboratory experiments b computer models of economies c historical episodes of economic change d centrally planned economies ANS C REF - In conducting their research economists often substitute historical events and historical episodes for a theories and observations b laboratory experiments c models d assumptions ANS B REF - For economists substitutes for laboratory experiments often come in the form of a natural experiments offered by history b untested theories c rules of thumb and other such conveniences d reliance upon the wisdom of elders in the economics profession ANS A REF - Economists regard events from the past as a irrelevant since history is unlikely to repeat itself b of limited interest since those events seldom provide any useful economic data c interesting but not particularly valuable since those events cannot be used to evaluate present-day economic theories d interesting and valuable since those events are capable of helping us to understand the past the present and the future ANS D REF - For economists historical episodes a are not worthy of study because they offer few insights into current economic events and problems b are not worthy of study because laboratory experiments provide more reliable data c are worthy of study because economists rely entirely on observation rather than on theory d are worthy of study because they serve as valuable substitutes for laboratory experiments ANS D REF - Historical episodes are a valuable to economists because they allow economists to see how the science of economics has evolved b valuable to economists because they allow economists to evaluate economic theories c not of concern to economists because economics is about predicting the future not dwelling on the past d not of concern to economists because the exact circumstances of historical episodes are unlikely to be observed again ANS B REF - One thing economists do to help them understand how the real world works is a make assumptions b ignore the past c try to capture every aspect of the real world in the models they construct d All of the above are correct ANS A REF - TOP Assumptions Economists make assumptions in order to 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 ANS D REF - TOP Assumptions Economists make use of assumptions some of which are unrealistic for the purpose of 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 ANS D REF - TOP Assumptions For an economist the idea of making assumptions is regarded generally as a 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 ANS C REF - TOP Assumptions Economists make assumptions to a provide issues for political discussion b make a complex world easier to understand c make it easier to teach economic concepts and analysis d create policy alternatives that are incomplete or subject to criticism ANS B REF - TOP Assumptions A circular-flow model and production possibilities frontier are similar in that a neither allows economic analysis to occur b neither can be represented visually on a graph c both make use of assumptions d both make use of complex equations to arrive at solutions ANS C REF - An economic theory about international trade that is based on the assumption that there are only two countries trading two goods a is useless since the real world has many countries trading many goods b can be useful only in situations involving two countries and two goods c can be useful in the classroom but is useless in the real world d can be useful in helping economists understand the complex world of international trade involving many countries and many goods ANS D REF - TOP Assumptions The art in scientific thinking -- whether in chemistry economics or biology -- is a the design and implementation of laboratory experiments b knowing when to stop collecting data and when to start analyzing the data c deciding which assumptions to make d being able to mathematically model natural phenomena ANS C REF - TOP Assumptions The art in scientific thinking is 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 ANS B REF - TOP Assumptions The decision of which assumptions to make is a an easy decision for an economist but a difficult decision for a physicist or a chemist b not a particularly important decision for an economist c usually regarded as an art in scientific thinking d usually regarded as the easiest part of the scientific method ANS C REF - TOP Assumptions An example of a price that changes only infrequently is the price of a stocks on the New York Stock Exchange b crude oil c residential real estate d magazines sold at newsstands ANS D REF - TOP Assumptions Prices When studying the effects of public policy changes economists a always refrain from making assumptions b sometimes make different assumptions about the short run and the long run c consider only the direct effects of those policy changes and not the indirect effects d consider only the short-run effects of those policy changes and not the long-run effects ANS B REF - TOP Public policy Assumptions Short run Long run When studying the effects of changes in public policy economists believe that a it is important to distinguish between the short run and the long run b the assumptions used in studying those effects should be the same for the short run as for the long run c the short-run effects of those changes are always more beneficial to society than are the long-run effects d the long-run effects of those changes are always more beneficial to society than are the short-run effects ANS A REF - TOP Public policy Short run Long run A model can be accurately described as a a theoretical abstraction with very little value b device that is useful only to the people who created it c realistic and carefully constructed theory d simplification of reality ANS D REF - Which of the following statements about models is correct a The more details a model includes the better the model b Models assume away irrelevant details c Models cannot be used to explain how the economy functions d Models cannot be used to make predictions ANS B REF - In building economic models economists often omit a assumptions b theories c details d equations ANS C REF - Which of the following statements about economic models is correct 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 ANS C REF - Economic models a cannot be useful if they are based on false assumptions b were once thought to be useful but that is no longer true c must incorporate all aspects of the economy if they are to be useful d can be useful even if they are not particularly realistic ANS D REF - Which of the following is not correct about most economic models a They are composed of equations and diagrams b They contribute very little to economists understanding of the real world c They omit many features of the real-world economy d In constructing models economists make assumptions ANS B REF - Economic models 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 ANS C REF - Economic models a are not useful because they omit many real-world details b are usually composed of diagrams and equations c are useful because they do not omit any real-world details d are usually plastic representations of the economy ANS B REF - Just like models constructed in other areas of science economic models a incorporate assumptions that contradict reality b incorporate all details of the real world c complicate reality d avoid the use of diagrams and equations ANS A REF - Which types of models are built with assumptions a economic models but not models in other disciplines such as physics and biology b economic models as well as models in other disciplines such as physics and biology c models that are built for teaching purposes but not for research purposes d bad models ANS B REF - An assumption an economist might make while studying international trade is a there are only two countries b countries only produce two goods c technology does not change d All of the above are possible assumptions ANS D REF - TOP Assumptions Economists build economic models by a generating data b conducting controlled experiments in a lab c making assumptions d reviewing statistical forecasts ANS C REF - Economic models are built with a recommendations concerning public policies b facts about the legal system c assumptions d statistical forecasts ANS C REF - In constructing models economists a leave out equations since equations and models tend to contradict one another b ignore the long run since models are useful only for short-run analysis c sometimes make assumptions that are contrary to features of the real world d try to include every feature of the economy ANS C REF - Economic models a are people who act out the behavior of firms and households so that economists can study this behavior b are usually detailed replications of reality c incorporate simplifying assumptions that often contradict reality but also help economists better understand reality d are useful to researchers but not to teachers because economic models omit many details of the real-world economy ANS C REF - Which of the following statements is correct a Few economic models incorporate assumptions b Different economic models employ different sets of assumptions c Good economic models attempt to mimic reality as closely as possible d Economic models to be accepted must be tested by conducting experiments ANS B REF - Which of these statements about economic models is correct a For economists economic models provide insights about the world b Economic models are built with assumptions c Economic models are often composed of equations and diagrams d All of the above are correct ANS D REF - The circular-flow diagram is an example of a a laboratory experiment b an economic model c a mathematical model d All of the above are correct ANS B REF - TOP Circular-flow diagram The circular-flow diagram is a a visual model of the economy b visual model of the relationships among money prices and businesses c model that shows the effects of government on the economy d mathematical model of how the economy works ANS A REF - TOP Circular-flow diagram A circular-flow diagram is a model that a helps to explain how participants in the economy interact with one another b helps to explain how the economy is organized c incorporates all aspects of the real economy d Both a and b are correct ANS D REF - TOP Circular-flow diagram The circular-flow diagram a is an economic model b incorporates two types of decision makers households and firms c represents the flows of inputs outputs and dollars d All of the above are correct ANS D REF - TOP Circular-flow diagram Which of the following statements about the circular-flow diagram is correct a One must imagine that the economy operates without money in order to make sense of the diagram b The diagram leaves out details that are not essential for understanding the economic transactions that occur between households and firms c The government cannot be excluded as a decision maker in a circular-flow diagram d All of the above are correct ANS B REF - TOP Circular-flow diagram In the simple circular-flow diagram the participants in the economy are a firms and government b households and firms c households and government d households firms and government ANS B REF - TOP Circular-flow diagram Which two groups of decision makers are included in the simple circular-flow diagram a markets and government b households and government c firms and government d households and firms ANS D REF - TOP Circular-flow diagram In the circular-flow diagram firms produce 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 ANS D REF - TOP Circular-flow diagram Factors of production are a the mathematical calculations firms make in determining their optimal production levels b social and political conditions that affect production c the physical relationships between economic inputs and outputs d inputs into the production process ANS D REF - TOP Factors of production Factors of production are 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 ANS A REF - TOP Factors of production In the circular-flow diagram which of the following is not a factor of production a labor b land c capital d money ANS D REF - TOP Circular-flow diagram Factors of production In the circular-flow diagram a firms own the factors of production b the factors of production are labor land and capital c the factors of production are also called output d All of the above are correct ANS B REF - TOP Circular-flow diagram Factors of production Which of these terms are used interchangeably a goods and services and inputs b goods and services and factors of production c inputs and factors of production d land labor and capital and goods and services ANS C REF - TOP Factors of production Another term for factors of production is a inputs b output c goods d services ANS A REF - TOP Factors of production In economics capital refers to a the finances necessary for firms to produce their products b buildings and machines used in the production process c the money households use to purchase firms' output d stocks and bonds ANS B REF - TOP Capital A model that shows how dollars flow through markets among households and firms is called the a production possibilities frontier b circular-flow diagram c demand and supply diagram d comparative advantage model ANS B REF - TOP Circular-flow diagram In the simple circular-flow diagram households a are the only decision makers b own the factors of production c are buyers of inputs d consume only some of the goods and services that firms produce ANS B REF - TOP Circular-flow diagram In the simple circular-flow diagram 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 ANS D REF - TOP Circular-flow diagram In the simple circular-flow diagram who consumes the goods and services that firms produce a households only b firms only c both households and firms d neither households nor firms ANS A REF - TOP Circular-flow diagram The simple circular-flow diagram is a model that includes only some key players in the real economy Which of the following key players are omitted from the simple circular-flow model a Households b Firms c Government d Markets for Factors of Production ANS C REF - TOP Circular-flow diagram In the circular-flow diagram another name for goods and services produced by firms is a factors of production b output c inputs d resources ANS B REF - TOP Circular-flow diagram Which markets are represented in the simple circular-flow diagram a markets for goods and services and markets for financial assets b markets for factors of production and markets for financial assets c markets for goods and services and markets for factors of production d markets for goods and services and markets for imports and exports ANS C REF - TOP Circular-flow diagram In the markets for goods and services in the circular-flow diagram a households and firms are both buyers b households and firms are both sellers c households are buyers and firms are sellers d households are sellers and firms are buyers ANS C REF - TOP Circular-flow diagram In the circular-flow diagram in the markets for 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 ANS B REF - TOP Circular-flow diagram In the circular-flow diagram in the markets for 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 ANS C REF - TOP Circular-flow diagram Factor markets In the markets for goods and services in the circular-flow diagram a households provide firms with savings for investment b households provide firms with labor land and capital c firms provide households with output d firms provide households with profit ANS C REF - TOP Circular-flow diagram In the markets for the factors of production in the circular-flow diagram a households are sellers and firms are buyers b households are buyers and firms are sellers c households and firms are both buyers d households and firms are both sellers ANS A REF - TOP Circular-flow diagram Factor markets In the markets for factors of production in the circular-flow diagram 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 profit ANS A REF - TOP Circular-flow diagram Factor markets Which of the following transactions does not take place in the markets for factors of production in the circular-flow diagram a a landowner leases land to a farmer b a farmer hires a teenager to help with harvest c a construction company rents trucks for its business d a woman buys corn for dinner ANS D REF - TOP Circular-flow diagram Factor markets Which of the following transactions does not take place in the markets for the factors of production in the circular-flow diagram a Jason provides plumbing services for a plumbing company and receives an hourly wage from the company for his services b Jennifer works as a marriage counselor and her clients pay her on a per-hour basis for her services c Brody owns several shopping malls and receives rent payments from the companies that operate those malls d Bree sells advertising for a newspaper and receives a commission from the newspaper company for each advertisement that she sells ANS B REF - TOP Circular-flow diagram Factor markets In the circular-flow diagram a firms are buyers in the markets for goods and services b households are sellers in the markets for the factors of production c firms are sellers in the markets for factors of production and in the markets for goods and services d dollars that are spent on goods and services flow directly from firms to households ANS B REF - TOP Circular-flow diagram The two loops in the circular-flow diagram represent a the flow of goods and the flow of services b the flow of dollars and the flow of financial assets c the flow of inputs into production processes and the flow of outputs from production processes d the flows of inputs and outputs and the flow of dollars ANS D REF - TOP Circular-flow diagram The outer loop of the circular-flow diagram represents the flows of dollars in the economy Which of the following does not appear on the outer loop a Wages b Income c Capital d Rent ANS C REF - TOP Circular-flow diagram The inner loop of the circular-flow diagram represents the flows of inputs and outputs Which of the following does not appear on the inner loop a Wages b Land c Capital d Goods and services sold ANS A REF - TOP Circular-flow diagram In the circular-flow diagram a profit flows from households to firms b labor flows from households to firms c services flow from households to firms d All of the above are correct ANS B REF - TOP Circular-flow diagram In the circular-flow diagram 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 ANS B REF - TOP Circular-flow diagram In the circular-flow diagram a factors of production flow from government to firms b goods and services flow from households to firms c income paid to the factors of production flows from firms to households d spending on goods and services flows from firms to households ANS C REF - TOP Circular-flow diagram In the circular-flow diagram which of the following items does not flow from households to firms a revenue b land labor and capital c factors of production d profit ANS D REF - TOP Circular-flow diagram In the circular-flow diagram which of the following items does not flow from firms to households a goods b services c capital d profit ANS C REF - TOP Circular-flow diagram In the circular-flow diagram which of the following items flows from households to firms through the markets for goods and services a goods and services b dollars paid to land labor and capital c dollars spent on goods and services d wages rent and profit ANS C REF - TOP Circular-flow diagram In the circular-flow diagram which of the following items flows from firms to households through the markets for goods and services a goods and services b dollars paid to land labor and capital c dollars spent on goods and services d wages rent and profit ANS A REF - TOP Circular-flow diagram In the circular-flow diagram which of the following items flows from firms to households through the markets for the factors of production a goods and services b land labor and capital c dollars spent on goods and services d wages rent and profit ANS D REF - TOP Circular-flow diagram In the circular-flow diagram which of the following items flows from households to firms through the markets for the factors of production a goods and services b land labor and capital c dollars spent on goods and services d wages rent and profit ANS B REF - TOP Circular-flow diagram In the circular-flow diagram which of the following items represents a payment for a factor of production a interest b capital c spending by households on goods d spending by households on services ANS A REF - TOP Circular-flow diagram Among economic models the circular-flow diagram is unusual in that it a drastically simplifies the real world b features more than one type of market c features flows of dollars d does not involve mathematics ANS D REF - TOP Circular-flow diagram Economic models Figure - Refer to Figure - Which arrow represents the flow of goods and services a A b B c C d D ANS B REF - TOP Circular-flow diagram Refer to Figure - Which arrow represents the flow of spending by households a A b B c C d D ANS A REF - TOP Circular-flow diagram Refer to Figure - Which arrow represents the flow of land labor and capital a A b B c C d D ANS C REF - TOP Circular-flow diagram Refer to Figure - Which arrow represents the flow of income payments a A b B c C d D ANS D REF - TOP Circular-flow diagram Refer to Figure - Ali buys a new pair of shoes at a shoe store To which of the arrows does this transaction directly contribute a A only b A and B c C only d C and D ANS B REF - TOP Circular-flow diagram Refer to Figure - Sonia completes her first week of employment working as a hairdresser at a salon On Friday of that week she receives her first paycheck To which of the arrows does this transaction directly contribute a B only b A and B c C only d C and D ANS D REF - TOP Circular-flow diagram Figure - Refer to Figure - Boxes A and B of this circular-flow diagram represent a firms and households b households and government c the markets for goods and services and the markets for financial assets d the markets for goods and the markets for services ANS A REF - TOP Circular-flow diagram Refer to Figure - Boxes C and D of this circular-flow diagram represent 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 ANS D REF - TOP Circular-flow diagram Refer to Figure - If Box A of this circular-flow diagram represents firms then which box represents households a Box B b Box C c Box D d Any one of the other boxes B C or D could represent households ANS A REF - TOP Circular-flow diagram Refer to Figure - If households are sellers in the markets represented by Box D of this circular-flow diagram then a Box D must represent the markets for factors of production b Box C must represent the markets for goods and services c firms are buyers in the markets represented by Box D d All of the above are correct ANS D REF - TOP Circular-flow diagram Refer to Figure - If households are buyers in the markets represented by Box C of this circular-flow diagram then a Box C must represent the markets for the factors of production b Box D must represent the markets for goods and services c firms are sellers in the markets represented by Box C d All of the above are correct ANS C REF - TOP Circular-flow diagram Refer to Figure - If the owners of land labor and capital are represented by Box B of this circular-flow diagram then a households are represented by Box A b firms are represented by Box C c firms are represented by Box A d firms are sellers in Box B ANS C REF - TOP Circular-flow diagram Refer to Figure - If the outer loop of this circular-flow diagram represents flows of dollars then the inner loop includes a flows of goods and services from households to firms b flows of inputs from households to firms c flows of rent payments paid to owners of land d flows of wages and salaries paid to workers ANS B REF - TOP Circular-flow diagram Refer to Figure - If the flow of goods and services is part of what is represented by the inner loop of this circular-flow diagram then 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 ANS A REF - TOP Circular-flow diagram Refer to Figure - Devin works as an attorney for a corporation and is paid a salary in exchange for the legal services he performs Juan owns office buildings and rents his buildings to companies in exchange for rent payments If Devin s income is represented by a flow of dollars from Box D to Box B of this circular-flow diagram then Juan s income is represented by a flow of dollars a from Box A to Box C b from Box C to Box A c from Box B to Box D d from Box D to Box B ANS D REF - TOP Circular-flow diagram Refer to Figure - Carla regularly buys fruits and vegetables at a grocery store Roberto regularly pays a lawn-care company to mow his lawn If the flow of fruits and vegetables from the grocery store to Carla is represented by an arrow from Box C to Box B of this circular-flow diagram then the money paid by Roberto to the lawn-care company is represented by an arrow a from Box A to Box D b from Box B to Box C c from Box C to Box B d from Box D to Box A ANS B REF - TOP Circular-flow diagram The production possibilities frontier is a graph that shows the various combinations of output that an economy can possibly produce given the available factors of production and a society s preferences b the available production technology c a fair distribution of the output d the available demand for the output ANS B REF - The production possibilities frontier is a graph that shows the various combinations of output that an economy a should produce b wants to produce c can produce d demands ANS C REF - When constructing a production possibilities frontier which of the following assumptions is not made 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 ANS D REF - Any point on a country's production possibilities frontier represents a combination of two goods that an economy a will never be able to produce b can produce using all available resources and technology c can produce using some portion but not all of its resources and technology d may be able to produce in the future with more resources and or superior technology ANS B REF - Which of the following is not an assumption of the productions possibilities frontier a A country produces only two goods or types of goods b Technology does not change c The amount of available resources does not change d There is a fixed quantity of money ANS D REF - Which of the following is a correct statement about production possibilities frontiers 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 ANS C REF - Where can an economy not produce 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 frontier ANS C REF - An economic outcome is said to be efficient if the economy is a using all of the scarce resources it has available b conserving on resources rather than using all available resources c getting all it can get from the scarce resources it has available d able to produce more than what is currently being produced without additional resources ANS C REF - LOC Efficiency and equality TOP Efficiency Production is efficient if the economy is producing at a point a on the production possibilities frontier b outside the production possibilities frontier c on or inside the production possibilities frontier d inside the production possibilities frontier ANS A REF - If an economy is producing efficiently then a there is no way to produce more of one good without producing less of another good b it is possible to produce more of both goods without increasing the quantities of inputs that are being used c it is possible to produce more of one good without producing less of another good d it is not possible to produce more of any good at any cost ANS A REF - LOC Efficiency and equality TOP Efficiency An economy s production of two goods is efficient if a all members of society consume equal portions of the goods b the goods are produced using only some of society s available resources c it is impossible to produce more of one good without producing less of the other d the opportunity cost of producing more of one good is zero ANS C REF - LOC Efficiency and equality TOP Efficiency When an economy is operating at a point on its production possibilities frontier then 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 ANS B REF - Efficiency is illustrated by 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 ANS C REF - TOP Production possibilities frontier Circular-flow diagram Efficiency Suppose a nation is currently producing at a point inside its production possibilities frontier We know that a the nation is producing beyond its capacity so inflation will occur b the nation is not using all available resources or is using inferior technology or both c the nation is producing an efficient combination of goods d there will be a large opportunity cost if the nation tries to increase production of any good ANS B REF - When an economy is operating inside its production possibilities frontier we know that a there are unused resources or inefficiencies in the economy b all of the economy s resources are fully employed c economic growth would have to occur in order for the economy to move to a point on the frontier d in order to produce more of one good the economy would have to give up some of the other good ANS A REF - It is possible for an economy to increase its production of both goods if the economy a moves downward and to the right along its production possibilities frontier and the frontier is bowed outward b moves upward and to the left along its production possibilities frontier and the frontier is bowed outward c moves in either direction along its production possibilities frontier and the frontier is a straight line d moves from a situation of inefficient production to a situation of efficient production ANS D REF - Unemployment would cause an economy to a produce inside its production possibilities frontier b produce on its production possibilities frontier c produce outside its production possibilities frontier d experience an inward shift of its production possibilities frontier ANS A REF - TOP Production possibilities frontier Unemployment The production possibilities frontier provides an illustration of the principle that a trade can make everyone better off b governments can sometimes improve market outcomes c people face trade-offs d people respond to incentives ANS C REF - TOP Production possibilities frontier Tradeoffs The production possibilities frontier illustrates a the trade-off between efficiency and equality b the combination of output that an economy should produce c the combination of output that each member of society should consume d None of the above is correct ANS D REF - Which of the following trade-offs does the production possibilities frontier illustrate a if an economy wants to increase efficiency in production then it must sacrifice equality in consumption b once an economy has reached the efficient points on its production possibilities frontier the only way of getting more of one good is to get less of the other c for an economy to consume more of one good it must stop consuming the other good entirely d for an economy to produce and consume goods it must sacrifice environmental quality ANS B REF - Which of the following concepts cannot be illustrated by the production possibilities frontier a efficiency b opportunity cost c equality d trade-offs ANS C REF - The opportunity cost of obtaining more of one good is shown on the production possibilities frontier as the a amount of the other good that must be given up b market price of the additional amount produced c amount of resources that must be devoted to its production d number of dollars that must be spent to produce it ANS A REF - The bowed shape of the production possibilities frontier can be explained by the fact that a all resources are scarce b economic growth is always occurring c the opportunity cost of one good in terms of the other depends on how much of each good the economy is producing d the only way to get more of one good is to get less of the other ANS C REF - Economists believe that production possibilities frontiers are often bowed because a trade-offs inevitably create unemployment b resources are not completely adaptable c opportunity costs are constant d of improvements in technology ANS B REF - On a bowed production possibilities frontier as you move down along the curve a more of one good must be given up to receive one unit of the other good b the available production technology does not change c the opportunity cost increases d All of the above are correct ANS D REF - When a production possibilities frontier is bowed outward the opportunity cost of producing an additional unit of a good a increases as more of the good is produced b decreases as more of the good is produced c does not change as more of the good is produced d may increase decrease or not change as more of the good is produced ANS A REF - Production possibilities frontiers are usually bowed outward This is because a the more resources a society uses to produce one good the fewer resources it has available to produce another good b it reflects the fact that 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 ANS D REF - Economists believe that production possibilities frontiers a never have a bowed shape b rarely have a bowed shape c often have a bowed shape d always have a bowed shape ANS C REF - TOP Production possibilities frontier Economists Table - The following table contains some production possibilities for an economy for a given month Tables Chairs Refer to Table - If the production possibilities frontier is bowed outward then could be a b c d ANS D REF - Table - The following table contains some production possibilities for an economy for a given year Cakes Rolls in dozens Refer to Table - If the production possibilities frontier is bowed outward then could be a b c d ANS D REF - A production possibilities frontier can shift outward if a government increases the amount of money in the economy b there is a technological improvement c resources are shifted from the production of one good to the production of the other good d the economy abandons inefficient production methods in favor of efficient production methods ANS B REF - A production possibilities frontier shifts outward when 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 ANS A REF - TOP Production possibilities frontier Economic growth In a certain economy jam and bread are produced and the economy currently operates on its production possibilities frontier Which of the following events would allow the economy to produce more jam and more bread relative to the quantities of those goods that are being produced now a Unemployed labor is put to work producing jam and bread b The economy puts its idle capital to work producing jam and bread c The economy experiences economic growth d All of the above are correct ANS C REF - TOP Production possibilities frontier Economic growth In a certain economy toys and greeting cards are produced and the economy currently operates on its production possibilities frontier Which of the following events would allow the economy to produce more toys and more greeting cards relative to the quantities of those goods that are being produced now a The economy experiences economic growth b There is a technological advance in the toy industry but the greeting card industry experiences no such advance c There is a technological advance in the greeting card industry but the toy industry experiences no such advance d All of the above are correct ANS D REF - TOP Production possibilities frontier Economic growth The country of Aceland produces two goods televisions and computers Last year it produced televisions and computers This year it produced televisions and computers Given no other information which of the following events could not explain this change a Aceland experienced a reduction in unemployment b Aceland experienced an improvement in computer-making technology c Aceland acquired more resources d Any of these events could in fact explain the change ANS D REF - Suppose an economy produces two goods food and machines This economy always operates on its production possibilities frontier Last year it produced units of food and machines This year it is producing units of food and machines Which of the following events could not explain the increase in output a a reduction in unemployment b an increase in available labor c an improvement in technology d Any of these events could explain the increase in output ANS A REF - Suppose an economy produces two goods food and machines This economy always operates on its production possibilities frontier Last year it produced units of food and machines This year it experienced a technological advance in its machine-making industry As a result this year the society wants to produce units of food and machines Which of the following statements is correct 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 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 machines so these resources could be used to produce more food ANS D REF - A certain production possibilities frontier shows production possibilities for two goods jewelry and clothing Which of the following concepts cannot be illustrated by this model a the flow of dollars between sellers of jewelry and clothing and buyers of jewelry and clothing b the tradeoff between production of jewelry and production of clothing c the opportunity cost of clothing in terms of jewelry d the effect of economic growth on production possibilities involving jewelry and clothing ANS A REF - The production possibilities frontier is used to illustrate some basic economic ideas including a scarcity b opportunity cost c economic growth d All of the above are correct ANS D REF - Table - Production Possibilities for Libraryland Books Magazines Refer to Table - What is the opportunity cost to Libraryland of increasing the production of books from to a magazines b magazines c magazines d magazines ANS B REF - TOP Opportunity cost Refer to Table - Which of the following statements is correct a The opportunity cost of an additional books is constant at magazines b The opportunity cost of an additional books is constant at magazines c Libraryland s production possibilities frontier is a straight downward-sloping line d The opportunity cost of an additional books increases as more books are produced ANS D REF - Table - Production Possibilities for Batterland Pancakes Waffles Refer to Table - What is the opportunity cost to Batterland of increasing the production of pancakes from to a waffles b waffles c waffles d waffles ANS A REF - TOP Opportunity cost Figure - Refer to Figure - At which point is this economy producing its maximum possible quantity of pans a J b L c M d N ANS D REF - Refer to Figure - This economy has the ability to produce at which point s a J K M N b K M N c K N d M ANS B REF - Refer to Figure - This economy cannot produce at which point s a J b J L c J L M d L ANS B REF - Refer to Figure - Efficient production is represented by which point s a J K N b K M N c K N d L M ANS C REF - Refer to Figure - Inefficient production is represented by which point s a J L b J L M c K N d M ANS D REF - Refer to Figure - Unemployment could cause this economy to produce at which point s a J L b J L M c K N d M ANS D REF - TOP Production possibilities frontier Unemployment Figure - Refer to Figure - If this economy devotes all of its resources to the production of notepads then it will produce a notepads and lamps b notepads and lamps c notepads and lamps d notepads and lamps ANS C REF - Refer to Figure - It is possible for this economy to produce a notepads and lamps b notepads and lamps c notepads and lamps d All of the above ANS A REF - Refer to Figure - It is not possible for this economy to produce at point a V b W c Y d Z ANS A REF - Refer to Figure - This economy cannot currently produce notepads and lamps because 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 ANS C REF - Refer to Figure - Suppose this economy is producing at point W Which of the following statements would best explain this situation a The economy lacks the resources to produce at a more desirable point b The economy s available technology prevents it from producing at a more desirable point c There is widespread unemployment in the economy d Any of the above statements would be a legitimate explanation for this situation ANS C REF - TOP Production possibilities frontier Unemployment Refer to Figure - Efficient production is represented by which point s a Y Z b W Y Z c V Y Z d V ANS A REF - Refer to Figure - Inefficient production is represented by which point s a Y Z b V c V W d W ANS D REF - Refer to Figure - The opportunity cost of this economy moving from point Z to point Y is a lamps b lamps c notepads d lamps ANS B REF - Refer to Figure - The opportunity cost of obtaining additional lamps by moving from point W to point V is a notepads b notepads c notepads d None of the above the economy cannot move from point W to point V ANS D REF - Refer to Figure - The opportunity cost of obtaining additional lamps by moving from point W to point Z is a notepads b notepads c notepads d None of the above the economy cannot move from point W to point Z ANS A REF - Figure - Refer to Figure - If this economy devotes all of its resources to the production of sweaters then it will produce a sweaters and soccer balls b sweaters and soccer balls c sweaters and soccer balls d sweaters and soccer balls ANS C REF - Refer to Figure - If this economy devotes one-half of its available resources to the production of soccer balls and the other half to the production of sweaters it could produce a sweaters and soccer balls b sweaters and soccer balls c sweaters and soccer balls d We would have to know the details of this economy s technology in order to determine this ANS D REF - Refer to Figure - A movement from point C to point D could be caused by a unemployment b a decrease in society's preference for sweaters c fewer resources available for production of sweaters d All of the above are correct ANS A REF - TOP Production possibilities frontier Unemployment Refer to Figure - If this economy moves from point A to point B then which of the following statements is correct a This economy has moved from a point of inefficient production to a point of efficient production b This economy has experienced economic growth c This economy has experienced an increase in employment d None of the above is correct ANS D REF - Refer to Figure - The opportunity cost of this economy moving from point A to point C is a soccer balls b soccer balls c soccer balls and sweaters d sweaters ANS B REF - Refer to Figure - The opportunity cost of this economy moving from point D to point B is a zero b soccer balls c sweaters d soccer balls and sweaters ANS A REF - Figure - Refer to Figure - If this economy devotes all of its resources to the production of clocks then it will produce a clocks and candles b clocks and candles c clocks and candles d clocks and candles ANS C REF - Refer to Figure - This economy has the ability to produce at which point s a A B b A B D c A B C F G d C F G ANS C REF - Refer to Figure - This economy cannot produce at which point s a A B D b C D F G c C F G d D ANS D REF - Refer to Figure - Efficient production is represented by which point s a A B b A B C F G c C F G d D ANS A REF - Refer to Figure - Inefficient production is represented by which point s a A B b C D F G c C F G d D ANS C REF - Refer to Figure - Unemployment could cause this economy to produce at which point s a A B b C D F G c C F G d D ANS C REF - TOP Production possibilities frontier Unemployment Refer to Figure - If this economy moved from point C to point F then a it still would not be producing efficiently b there would be no gain in either candles or clocks c it would be producing more candles and more clocks than at point C d It is not possible for this economy to move from point C to point F without additional resources ANS A REF - Refer to Figure - What is the opportunity cost of moving from point A to point B a zero b clocks c clocks and candles d candles ANS D REF - Figure - Refer to Figure - Point K represents an outcome in which 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 ANS C REF - Refer to Figure - Which point on the graph best represents the fact that because resources are scarce not every conceivable outcome is feasible a point J b point K c point L d point M ANS C REF - Refer to Figure - Efficient production is represented by which point s a J b J K c J K L d J K M ANS B REF - Refer to Figure - Inefficient production is represented by which point s a K M b L c L M d M ANS D REF - Refer to Figure - In order to reach point L the economy would have to 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 production of hammers d None of the above are correct the economy will never be able to reach point L ANS A REF - Refer to Figure - For this economy as more and more hammers are produced the opportunity cost of an additional hammers produced in terms of nails a remains constant b increases c decreases d This cannot be determined from the graph ANS B REF - Figure - Panel a Panel b Refer to Figure - Panel a Production at point K is a possible and efficient b possible but inefficient c impossible but efficient d impossible and inefficient ANS B REF - Refer to Figure - Panel a Production is a possible at points J K L and M but efficient only at points J L and M b possible at points J K L and M but efficient only at point K c possible at points J L M and N but efficient only at points J L and M d possible at points J L M and N but efficient only at point N ANS A REF - Refer to Figure - Panel a The movement from point M to point K could be caused by a an advance in production technology b an improvement in efficiency c economic growth d unemployment ANS D REF - TOP Production possibilities frontier Unemployment Refer to Figure - Panel a The opportunity cost of moving from point J to point L is a donuts b donuts and cups of coffee c cups of coffee d cups of coffee ANS C REF - Refer to Figure - Panel a The opportunity cost of moving from point M to point L is a donuts b donuts and cups of coffee c donuts d cups of coffee ANS A REF - Refer to Figure - Panel a The opportunity cost of moving from point K to point L is a cups of coffee b donut c donuts d cups of coffee ANS A REF - Refer to Figure - Panel a The opportunity cost of one cup of coffee is highest when the economy produces a cups of coffee b cups of coffee c cups of coffee d cups of coffee ANS D REF - Refer to Figure - Panel a In order to gain donuts by moving from point L to point M society must sacrifice a efficiency b employment c cups of coffee d More than one of the above is correct ANS C REF - Refer to Figure - Panel a and Panel b A shift of the economy s production possibilities frontier from Panel a to Panel b could be caused by a unemployment b an improvement in donut production technology c an improvement in coffee production technology d an improvement in both donut and coffee production technology ANS B REF - Refer to Figure - Panel a and Panel b Which of the following is not a result of the shift of the economy s production possibilities frontier from Panel a to Panel b a the tradeoff between the production of donuts and coffee changes b the opportunity cost of a cup of coffee is higher at all levels of coffee production c production of donuts and cups of coffee becomes possible d production of donut and cups of coffee becomes efficient ANS D REF - Figure - Panel a Panel b Refer to Figure - Panel a Production at point B is a impossible and inefficient b impossible but efficient c possible but inefficient d possible and efficient ANS C REF - Refer to Figure - Panel a Production is a possible at points A B C and D but efficient only at points A C and D b possible at points A B C and D but efficient only at point B c possible at points A C D and F but efficient only at points A C and D d possible at points A C D and F but efficient only at point F ANS A REF - Refer to Figure - Panel a The movement from point C to point B could be caused by a economic growth b unemployment c an improvement in efficiency d an advance in production technology ANS B REF - TOP Production possibilities frontier Unemployment Refer to Figure - Panel a The opportunity cost of one computer is highest when the economy produces a computers b computers c computers d computers ANS D REF - Refer to Figure - Panel a In order to gain printers by moving from point C to point D society must sacrifice a computers b employment c efficiency d More than one of the above is correct ANS A REF - Refer to Figure - Panel a and Panel b A shift of the economy s production possibilities frontier from Panel a to Panel b could be caused by a unemployment b an improvement in computer production technology c an improvement in printer production technology d an improvement in both computer and printer production technology ANS C REF - Refer to Figure - Panel a and Panel b Which of the following is not a result of the shift of the economy s production possibilities frontier from Panel a to Panel b a the tradeoff between the production of printers and computers changes b production of printers and computers becomes efficient c production of printers and computers becomes possible d the opportunity cost of a computer is higher at all levels of computer production ANS B REF - Figure - Refer to Figure - Which of the following events would explain the shift of the production possibilities frontier from A to B a The economy s citizens developed an enhanced taste for books b The economy experienced a technological advance in the production of books c More capital became available in the economy d More labor became available in the economy ANS B REF - Refer to Figure - The shift of the production possibilities frontier from A to B illustrates a simultaneous technological advances in the book and DVD industries b a reallocation of resources away from the production of DVDs and toward the production of books c economic growth d All of the above are correct ANS C REF - TOP Production possibilities frontier Economic growth Figure - Refer to Figure - Which of the following would most likely have caused the production possibilities frontier to shift outward from A to B a a decrease in unemployment b a technological advance in the consumer goods industries c a general technological advance d an increase in the availability of capital-producing resources ANS C REF - Refer to Figure - The shift of the production possibilities frontier from A to B can best be described as a a downturn in the economy b economic growth c an enhancement of equality d an improvement in the allocation of resources ANS B REF - TOP Production possibilities frontier Economic growth Figure - Refer to Figure - Which of the following combinations of points are both efficient and attainable for this economy a B C b A D H c A B C D H d F G ANS B REF - TOP Production possibilities curve Refer to Figure - Which of the following statements is true about point B for this economy a Point B is currently unattainable b Point B is efficient c At point B more pillows are produced than blankets d There is unemployment at point B ANS D REF - TOP Production possibilities curve Refer to Figure - Which points are not currently attainable but could become achievable for this economy if there is an improvement in technology a D H b B C c F G d A B ANS C REF - TOP Production possibilities curve Refer to Figure - One difference between points A and B is that a Point B is unattainable with current resources but point A is attainable b All resources are fully employed at point A but there is unemployment at point B c More output can be produced at point A but no additional output can be produced at point B d This economy produces more blankets at point B than at point A ANS B REF - TOP Production possibilities curve Table - Cookies in dozens Coffee in pounds Refer to Table - Table - shows one set of production possibilities What is the opportunity cost of increasing the production of cookies from dozen to dozen a pounds of coffee b pounds of coffee c pounds of coffee d pounds of coffee ANS B REF - TOP Opportunity cost Refer to Table - Table - shows one set of production possibilities What is the opportunity cost of an increase in the production of coffee from pounds to pounds a dozen cookies b dozen cookies c dozen cookies d pounds of coffee ANS C REF - TOP Opportunity cost Refer to Table - Table - shows one set of production possibilities Which of the following statements is correct a The opportunity cost of a dozen cookies does not depend on how many pounds of coffee are being produced b The opportunity cost of a dozen cookies increases as more cookies are produced c The opportunity cost of a dozen cookies decreases as more cookies are produced d The opportunity cost of a pound of coffee decreases as more coffee is produced ANS B REF - TOP Opportunity cost Refer to Table - Table - shows one set of production possibilities Based on the values in the table the production possibilities frontier is 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 ANS A REF - TOP Opportunity cost Refer to Table - Table - shows one set of production possibilities Which of the following combinations of cookies and coffee is not currently attainable but would be attainable if there was an improvement in overall production technology a dozen cookies and pounds of coffee b dozen cookies and pounds of coffee c dozen cookies and pounds of coffee d dozen cookies and pounds of coffee ANS C REF - Home is a country that produces two goods pears and cellular phones Last year Home produced bushels of pears and cellular phones This year it produced bushels of pears and cellular phones Given no other information which of the following events could explain this change a Home experienced increased unemployment b Home experienced a decline in pear-producing technology c Home experienced an improvement in cellular phone-making technology d Home experienced a reduction in resources ANS C REF - Indiadesh is a country that produces two goods textiles and computers Last year Indiadesh produced textiles and computers This year it produced textiles and computers Given no further information which of the following events could explain this change a Indiadesh decreased unemployment b Indiadesh experienced an improvement in textile-making technology c Indiadesh experienced an improvement in computer-making technology d Indiadesh experienced a reduction in resources ANS D REF - The field of economics is traditionally divided into two broad subfields a national economics and international economics b consumer economics and producer economics c private sector economics and public sector economics d microeconomics and macroeconomics ANS D REF - Microeconomics is the study of a how money affects the economy b how individual households and firms make decisions c how government affects the economy d how the economy as a whole works ANS B REF - Macroeconomics is the study of a individual decision makers b international trade c economy-wide phenomena d markets for large products ANS C REF - A microeconomist as opposed to a macroeconomist might study a the effect of borrowing by the federal government on the inflation rate b the effect of rising oil prices on employment in the airline industry c changes in the nation s unemployment rate over short periods of time d alternative policies to promote higher living standards throughout the nation ANS B REF - TOP Microeconomics Which of the following areas of study typifies microeconomics as opposed to macroeconomics 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 growth ANS A REF - TOP Microeconomics Which of the following would likely be studied by a microeconomist rather than a macroeconomist a the effect of foreign direct investment on economic growth b the effect of a sales tax on the cigarette industry c the effect of an investment tax credit on the economy s capital stock d the effect of a war on government spending ANS B REF - TOP Microeconomics A macroeconomist as opposed to a microeconomist might study a the effect of agricultural price support programs on the cotton industry b the effect on U S steel producers of an import quota imposed on foreign steel c the effect of an increasing inflation rate on national living standards d the effect of an increase in the price of imported coffee beans on the U S coffee industry ANS C REF - TOP Macroeconomics Which of the following areas of study typifies macroeconomics as opposed to microeconomics a the effects of rent control on the availability of housing in New York City b the economic impact of tornadoes on cities and towns in Oklahoma c how tariffs on shoes affects the shoe industry d the effect on the economy of changes in the nation s unemployment rate ANS D REF - TOP Macroeconomics Which of the following would likely be studied by a macroeconomist rather than a microeconomist a the effect of an increase in the alcohol tax on the market for beer b the effect of foreign competition on the domestic auto industry c the effect of a price war in the airline industry d the effect of an increase in the minimum wage on an economy s overall rate of unemployment ANS D REF - TOP Macroeconomics Which of the following statements best captures the relationship between microeconomics and macroeconomics a For the most part microeconomists are unconcerned with macroeconomics and macroeconomists are unconcerned with microeconomics b Microeconomists study markets for small products whereas macroeconomists study markets for large products c Microeconomics and macroeconomics are distinct from one another yet they are closely related d Microeconomics is oriented toward policy studies whereas macroeconomics is oriented toward theoretical studies ANS C REF - A macroeconomist - as opposed to a microeconomist - would study a the effects of rent control on housing in New York City b the effects of foreign competition on the US auto industry c the effects of borrowing by the federal government d the effects of raising the gasoline tax on transit ridership ANS C REF - TOP Macroeconomics Microeconomics The Economist as Policy Adviser When economists are trying to explain the world they are a scientists b policy advisers c in the realm of microeconomics rather than macroeconomics d in the realm of normative economics rather than positive economics ANS A REF - When economists are trying to help improve the world they are a in the realm of positive economics rather than normative economics b in the realm of macroeconomics rather than microeconomics c scientists d policy advisers ANS D REF - Which of the following statements is correct about the roles of economists a Economists are best viewed as policy advisers b Economists are best viewed as scientists c In trying to explain the world economists are policy advisers in trying to improve the world they are scientists d In trying to explain the world economists are scientists in trying to improve the world they are policy advisers ANS D REF - When an economist is asked a question like why is unemployment higher for teenagers than for older workers the economist a is asked to explain the cause of an economic event b is asked to recommend a policy to improve economic outcomes c is asked as a policy adviser d does not have enough information to respond ANS A REF - For economists statements about the world are of two types a assumptions and theories b true statements and false statements c specific statements and general statements d positive statements and normative statements ANS D REF - TOP Economists Positive statements Normative statements Normative statements are a prescriptive whereas positive statements are descriptive b descriptive whereas positive statements are prescriptive c backward-looking whereas positive statements are forward-looking d forward-looking whereas positive statements are backward-looking ANS A REF - Positive statements are 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 ANS C REF - Normative statements are a descriptive b claims about how the world should be c claims about how the world is d made by economists speaking as scientists ANS B REF - Positive statements are not a descriptive b prescriptive c claims about how the world is d made by economists speaking as scientists ANS B REF - Normative statements are not a descriptive b prescriptive c claims about how the world should be d made by economists speaking as policy advisers ANS A REF - A statement describing how the world is a is a normative statement b is a positive statement c would only be made by an economist speaking as a policy adviser d would only be made by an economist employed by the government ANS B REF - A statement describing how the world should be a is a normative statement b is a positive statement c would only be made by an economist speaking as a scientist d would only be made by an economist employed by the government ANS A REF - One way to characterize the difference between positive statements and normative statements is as follows a Positive statements tend to reflect optimism about the economy and its future whereas normative statements tend to reflect pessimism about the economy and its future b Positive statements offer descriptions of the way things are whereas normative statements offer opinions on how things ought to be c Positive statements involve advice on policy matters whereas normative statements are supported by scientific theory and observation d Economists outside of government tend to make normative statements whereas government-employed economists tend to make positive statements ANS B REF - Economists view positive statements as a affirmative justifying existing economic policy b optimistic putting the best possible interpretation on things c descriptive making a claim about how the world is d prescriptive making a claim about how the world ought to be ANS C REF - TOP Economists Positive statements Economists view normative statements as a prescriptive making a claim about how the world ought to be b descriptive making a claim about how the world is c statements about the normal condition of the world d pessimistic putting the worst possible interpretation on things ANS A REF - TOP Economists Normative statements Economists speaking like scientists make a normative statements b prescriptive statements c claims about how the world is d claims about how the world should be ANS C REF - TOP Economists Positive statements Economists speaking like policy advisers make a positive statements b descriptive statements c claims about how the world is d claims about how the world should be ANS D REF - TOP Economists Normative statements Economists speaking like scientists make a positive statements b prescriptive statements c claims about how the world should be d More than one of the above is correct ANS A REF - TOP Economists Positive statements Economists speaking like policy advisers make a claims about how the world is b descriptive statements c normative statements d More than one of the above is correct ANS C REF - TOP Economists Normative statements When economists make positive statements they are a speaking as scientists b speaking as policy advisers c making claims about how the world should be d revealing that they are very conservative in their views of how the world works ANS A REF - TOP Economists Positive statements When economists make normative statements they are a speaking as scientists b speaking as policy advisers c making claims about how the world is d revealing that they are very liberal in their views of how the world works ANS B REF - TOP Economists Normative statements When economists make a positive statements they are speaking not as policy advisers but as scientists b positive statements they are speaking not as scientists but as forecasters c normative statements they are speaking not as policy advisers but as scientists d normative statements they are speaking not as policy advisers but as model-builders ANS A REF - TOP Economists Positive statements When economists make a positive statements they are speaking not as scientists but as policy advisers b positive statements they are speaking not as scientists but as forecasters c normative statements they are speaking not as scientists but as policy advisers d normative statements they are speaking not as policy advisers but as model-builders ANS C REF - TOP Economists Normative statements You know an economist has crossed the line from policy adviser to scientist when he or she 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 ANS B REF - TOP Economists Positive statements You know an economist has crossed the line from scientist to policy adviser when he or she a claims that the problem at hand is widely misunderstood by non-economists b talks about the evidence c makes normative statements d makes a claim about how the world is ANS C REF - TOP Economists Normative statements A positive economic statement such as Pollution taxes decrease the quantity of pollution generated by firms a would likely be made by an economist acting as a policy advisor b would require values and data in order to be evaluated c would require data but not values in order to be evaluated d could not be evaluated by economists acting as scientists ANS C REF - A normative economic statement such as The minimum wage should be abolished a would likely be made by an economist acting as a scientist b would require values and data in order to be evaluated c would require data but not values in order to be evaluated d could not be evaluated by economists acting as policy advisers ANS B REF - In principle we can a ignore positive statements when choosing among various public policy alternatives b ignore normative statements when choosing among various public policy alternatives c confirm or refute positive statements by examining evidence d confirm or refute normative statements by examining evidence ANS C REF - Which of the following is not correct a Evaluating statements about how the world should be involves values as well as facts b Positive statements can in principle be confirmed or refuted by examining evidence c Normative statements can be judged using data alone d Deciding what is good or bad policy is not just a matter of science ANS C REF - When an economist evaluates a positive statement he or she is primarily a examining evidence b evaluating values as well as facts c acting as a policy adviser d concerned with making a sound decision on how the world ought to be ANS A REF - TOP Economists Positive statements Normative conclusions 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 ANS C REF - Which of the following is an example of a positive as opposed to normative statement a Inflation is more harmful to the economy than unemployment is b If welfare payments increase the world will be a better place c Prices rise when the government prints too much money d When public policies are evaluated the benefits to the economy of improved equality should be considered more important than the costs of reduced efficiency ANS C REF - Which of the following is an example of a positive as opposed to normative statement a Income tax rates should not have been cut as they were a few years ago b The quantity of money has grown too slowly in recent years c When the quantity of money grows rapidly inflation is a predictable consequence d All of the above are positive statements ANS C REF - Which of the following statements is an example of a positive as opposed to normative statement a Americans deserve a cleaner environment b Reducing emissions reduces days missed from school due to asthma c All Americans are entitled to quality health care d Economic policies should focus on improving equality ANS B REF - Allowing all individuals access to Medicare and Medicaid for health insurance is the fair thing to do is an example of a a contradiction in economic theory b positive economic statement c negative economic statement d normative economic statement ANS D REF - Prices rise when the quantity of money rises rapidly is an example of a a negative economic statement b positive economic statement c normative economic statement d statement that contradicts one of the basic principles of economics ANS B REF - Which of the following is not an example of a positive as opposed to normative statement a Higher gasoline prices will reduce gasoline consumption b Equality is more important than efficiency c Trade restrictions lower our standard of living d If a nation wants to avoid inflation it will restrict the growth rate of the quantity of money ANS B REF - Which of the following is an example of a normative as opposed to positive statement 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 ANS A REF - Which of the following is an example of a normative as opposed to positive statement a Gasoline prices ought to be lower than they are now b The federal government should raise taxes on wealthy people c The social security system is a good system and it deserves to be preserved as it is d All of the above are normative statements ANS D REF - Which of the following is an example of a normative as opposed to positive statement a If the price of a product decreases people s willingness to buy that product will increase b Reducing tax rates on the wealthy would benefit the nation c If the national saving rate were to increase so would the rate of economic growth d The elimination of trade restrictions would increase an economy s standard of living ANS B REF - Which of the following is an example of a normative as opposed to positive statement a The price of gasoline came down sharply during the second half of b If the government were to set a maximum legal price on gasoline then there would be a shortage of gasoline c Income taxes should be reduced d The federal government obtains much of its revenue from income taxes ANS C REF - Which of the following is an example of a normative - as opposed to a positive - statement a The discount rate is the interest rate the Federal Reserve charges banks to borrow funds b The US income tax rate increases with the amount of income earned c The government should increase the tax on gasoline d The US unemployment rate increased to percent in ANS C REF - TOP Positive economics Normative economics President Truman once said the wanted to find a one-armed economist because when he asked his economists for advice they always answered On the one hand On the other hand Truman s observation that economists advice is not always straightforward a is rooted in the principle that people face tradeoffs b indicates that economists recognize that there are opportunity costs associated with policy decisions c confirms that economists are not suited to be presidential advisers d More than one of the above is correct ANS D REF - The Council of Economic Advisers a was created in and consists of three members and a staff of several dozen economists b was created in and consists of thirty members and a staff of a dozen economists c was created in and consists of three members and a staff of several dozen economists d was created in and consists of thirty members and a staff of a dozen economists ANS C REF - TOP Council of Economic Advisers The Council of Economic Advisers a was created in 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 ANS D REF - TOP Council of Economic Advisers Duties of the Council of Economic Advisers include a advising the president and writing the annual Economic Report of the President b implementing the president s tax policies c tracking the behavior of the nation s money supply d All of the above are correct ANS A REF - TOP Council of Economic Advisers In addition to advising the president one duty of the Council of Economic Advisors is to a prepare the federal budget b write government regulations c advise Congress on economic matters d write the annual Economic Report of the President ANS D REF - TOP Council of Economic Advisers The Economic Report of the President a discusses recent developments in the economy and presents analysis of current policy issues b is written by the Council of Economic Advisers c is the responsibility of the economists at the Office of Management and Budget d Both a and b are correct ANS D REF - TOP Council of Economic Advisers Economists at which of the following offices help formulate spending plans and regulatory policies a Office of Management and Budget b Department of the Treasury c Congressional Budget Office d The Federal Reserve ANS A REF - Economists at the Department of the Treasury a design U S currency and coins b provide Congress with the annual budget c enforce the U S antitrust laws d provide advice on tax policy to the President ANS D REF - The president of the United States receives tax policy advice from economists in the a Federal Reserve b Department of Justice c Department of the Treasury d Congressional Budget Office ANS C REF - The design of tax policy is one of the responsibilities of economists who work at the a Council of Economic Advisers b Federal Reserve c Department of the Treasury d Congressional Budget Office ANS C REF - A duty of economists at the Department of Labor is to a analyze data on workers b schedule federal holidays c enforce the nation's antitrust laws d All of the above are correct ANS A REF - Analysis of data on workers and those looking for work is conducted by economists at the a Office of Management and Budget b Department of Labor c Congressional Budget Office d Department of the Treasury ANS B REF - Economists at the Department of Justice 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 ANS C REF - The nation's antitrust laws are enforced by economists at the Department of a Labor b Health and Human Services c Justice d Treasury ANS C REF - 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 a the Department of Labor b the Department of the Treasury c the Congressional Budget Office d the Council of Economic Advisers ANS C REF - Economists who are primarily responsible for advising Congress on economic matters work in which agency a the Federal Reserve b the Congressional Budget Office c the Department of the Treasury d the Department of Commerce ANS B REF - Congress relies on economists at the Congressional Budget Office to a enforce the nation's antitrust laws b set the nation s monetary policy c provide evidence that incumbent members of Congress are performing well in their jobs d provide independent evaluations of policy proposals ANS D REF - The President receives economic policy advice from economists at each of the following except a the Council of Economic Advisors b the Department of the Treasury c the Congressional Budget office d the Department of Labor ANS C REF - The Federal Reserve a designs tax policy b enforces the nation's antitrust laws c sets the nation's monetary policy d analyzes data on workers ANS C REF - TOP Federal Reserve Economists hold many positions advising the president and Congress including a being a member of the Council of Economic Advisers b helping to enforce antitrust laws at the Department of Justice c conducting research at the Congressional Budget Office d All of these are possible positions that economists hold ANS D REF - John Maynard Keynes believed the ideas of economists to be a generally incorrect b powerful c academic and without practical application d rantings of madmen ANS B REF - One difference between a hypothetical benevolent king implementing the best policy and the president implementing the best policy in the real world is the president has to be concerned about a any misunderstandings in communicating the policy to the public b whether the policy will affect his standing among different groups in the electorate c what amendments will be suggested by members of Congress d All of the above are correct ANS D REF - TOP Why economists' advice is not always followed Policymaking in a representative democracy a is straightforward and does not involve any disagreement b benefits from the input of economists even if their advice is not always followed c is conducted without the input of economists d is always based exclusively on the results of economic analysis ANS B REF - John Maynard Keynes observed that during rare times of deep financial and economic crisis when the invisible hand has temporarily ceased to function 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 ANS A REF - TOP Economists Economics of President Obama Larry Summers a chief economic adviser to President Obama stated that as a result of using Keynesian policies in and a US government policy moved in a strongly activist direction b the US has shifted from worrying about an economic depression to thinking about what kind of expansion the country will have c the US has shifted from rescuing the economy to economic recovery d All of the above are correct ANS D REF - TOP Economics of President Obama Economist Joseph Schumpeter coined the phrase creative destruction to describe the process by which 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 ANS B REF - TOP Economics of President Obama Economists Why Economists Disagree If all economists were laid end to end they would not reach a conclusion Who made this whimsical observation a Harry Truman b George Bernard Shaw c John Maynard Keynes d Ronald Reagan ANS B REF - President Ronald Reagan once joked that a Trivial Pursuit game designed for economists would a have no questions but hundreds of answers b have questions and answers c have questions but no answers d never produce a winner ANS B REF - Economists sometimes give conflicting advice because a graduate students in economics are encouraged to argue with each other b economists have different values and scientific judgment c economists acting as scientists do not like to agree with economists acting as policy advisers d economics is more of a belief system than a science ANS B REF - The two basic reasons why economists often appear to give conflicting advice to policymakers are differences in a opinions and education b opinions and values c scientific judgments and education d scientific judgments and values ANS D REF - Sometimes economists disagree because their scientific judgments differ Which of the following instances best reflects this source of disagreement a One economist believes income tax cuts are unfair to those with low incomes another economist believes income tax cuts are not unfair to those with low incomes b One economist believes unemployment causes more human suffering than does inflation another economist believes inflation causes more human suffering than does unemployment c One economist believes the policies of the Democratic party offer the best hope for America's future another economist believes the policies of the Republican party offer the best hope for America's future d One economist believes increases in the minimum wage increase unemployment another economist believes increases in the minimum wage do not increase unemployment ANS D REF - Sometimes economists disagree because their values differ Which of the following instances best reflects this source of disagreement a One economist believes the North American Free Trade Agreement NAFTA has led to a loss of American jobs another economist disputes this claim b One economist believes that when income taxes are cut people will increase their spending another economist believes that when income taxes are cut people will increase their saving c One economist advises against increases in sales taxes because she thinks such increases are unfair to low-income people another economist disputes the idea that increases in sales taxes are unfair to low-income people d One economist believes that prior to the Civil War slavery contributed to economic growth in the South another economist believes that slavery held back the South's economic growth ANS C REF - Which of the following is one of the basic reasons why economists often appear to give conflicting advice to policymakers a similar opinions about the validity of economic theories b significant differences in education c differences in personal values d a reliance on normative statement for research theories ANS C REF - Erma and Wayne are both economists Erma thinks that taxing consumption rather than income would result in higher household saving because income that is saved would not be taxed Wayne does not think that household saving would respond much to a change in the tax laws In this example Erma and Wayne a have different normative views about tax policy b disagree about the validity of a positive theory c must both be incorrect because economists always agree on policy issues d None of the above is correct ANS B REF - TOP Differences in scientific judgments Which of the following statements is correct about the extent of disagreement among economists a There is a great deal of agreement among economists on virtually every economic issue b There is a great deal of agreement among economists on many important economic issues c All disagreements among economists are attributable to differences in their values d All disagreements among economists are attributable to the fact that different economists have different degrees of faith in the validity of alternative economic theories ANS B REF - A survey which sought the opinion of professional economists on fourteen propositions about economic policy found that a the respondents were almost equally divided on the propositions b the respondents favored the propositions by a slight margin c the respondents disagreed with the propositions by a slight margin d there was overwhelming endorsement of the propositions among the respondents ANS D REF - A survey of professional economists revealed that more than three-fourths of them agreed with a number of statements including which of the following a Tariffs and import quotas usually reduce general economic welfare b A large federal budget deficit has an adverse effect on the economy c Minimum wage increases unemployment among young and unskilled workers d All of the above are correct ANS D REF - 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 a The United States should not restrict employers from outsourcing work to foreign countries b The United States should withdraw from the North American Free Trade Agreement NAFTA c The United States should eliminate agricultural subsidies d Local and state governments should eliminate subsidies to professional sports franchises ANS B REF - 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 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 ANS D REF - Almost all economists agree that rent control 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 ANS C REF - Policies such as rent control and trade barriers persist in spite of the fact that economists are virtually united in their opposition to such policies probably because a economists have not yet convinced the general public that the policies are undesirable b economists engage in positive analysis not normative analysis c economists have values that are different from the values of most non-economists d economists theories are not easily confirmed or refuted in laboratory analysis ANS A REF - Policies such as rent control and trade barriers persist a because economists are about evenly divided as to the merits of those policies b because almost all economists agree that those policies have no discernible economic effects c because almost all economists agree that those policies are desirable d despite the fact that almost all economists agree that those policies are undesirable ANS D REF - Almost all economists agree that tariffs and import quotas a reduces general economic welfare b increases general economic welfare c have no effect on general economic welfare d stimulate a less than fully employed economy ANS A REF - Almost all economists agree that local and state governments should 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 ANS A REF - Differences in scientific judgement between economists is similar to all of the following except 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 ANS C REF - Let's Get Going John Maynard Keynes referred to economics as an easy subject a at which very few excel b but not as easy as philosophy or the pure sciences c which very few can enjoy d which deals primarily with common sense ANS A REF - How did the influential economist John Maynard Keynes explain his remark that though economics is an easy subject compared with the higher branches of philosophy or pure science it is a subject at which few excel a Most people who study economics are not very bright b Good economists must possess a rare combination of gifts c Economics is quite boring hence people tend to lose interest in it before mastering it d Good thinkers become frustrated with economics because it does not make use of the scientific method ANS B REF - According to economist John Maynard Keynes a great economist must also be a n a mathematician b historian c philosopher d All of the above are correct ANS D REF - The amendment to the Clean Air Act 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 ANS B REF - TOP Environmental Economics Economists have helped modify the debate over the environment a by pointing out that nature is invaluable b by focusing discussion on issues of resource allocation c by lobbying Congress for acid rain legislation d by arguing against tradeable permits for pollution ANS B REF - TOP Environmental Economics In the past environmentalists thought of economics as a method of maximizing profits Presently a there is now realization that economics offers a framework for natural resource allocation b economists are helping to formulate the intellectual framework behind approaches to protecting endangered species reducing pollution and preventing climate change c economics informs environmental studies but economists still do not work for environmental advocacy groups d More than one of the above is correct ANS D REF - TOP Environmental Economics Graphing A Brief Review Which of the following is not correct a When developing economic theories graphs offer a way to visually express ideas that might be less clear if described with equations or words b Graphs are one way of expressing the relationships among variables c When studying the relationship between two economic variables graphs allow economists to draw indisputable conclusions about causes and effects d When analyzing economic data graphs provide a powerful way of finding and interpreting patterns ANS C REF - Which of the following is not an example of a graph of a single variable a a pie chart b a bar graph c a time-series graph d a scatterplot ANS D REF - Graphs such as bar graphs and pie charts are limited in that they a can only show variables that are positively related b can only show variables that have a negative correlation c provide information on only one variable d provide information on no more than two variables ANS C REF - Philip wants to create a graph containing the prices of apples and the corresponding quantities of apples demanded by customers He should use a n a pie chart b bar graph c time-series graph d coordinate system ANS D REF - The use of the coordinate system allows a for the display of the flows of dollars goods and services and factors of production in an economic system b for the display of how labor and other resources are organized in the production process c for the display of two variables on a single graph d for the creation of pie charts and bar graphs ANS C REF - In order to display information on two variables an economist must use a a bar graph b a pie chart c the coordinate system d a time-series graph ANS C REF - Which of the following allows you to provide information about the relationship between two variables a coordinate system b pie chart c bar graph d time-series graph ANS A REF - An ordered pair is a the process of checking calculations twice before placing them on a graph b two numbers that can be represented by a single point on a graph c two numbers that are represented by two points on a graph d two points on a graph that are of equal distance from the origin ANS B REF - The x-coordinate is the a first number of an ordered pair and represents the point's horizontal location b second number of an ordered pair and represents the point's horizontal location c first number of an ordered pair and represents the point's vertical location d second number of an ordered pair and represents the point's vertical location ANS A REF - The x-coordinate of an ordered pair specifies the a diagonal location of the point b vertical location of the point c horizontal location of the point d quadrant location in which the point is located ANS C REF - The first number in any ordered pair is a the x-coordinate b the y-coordinate c the vertical location of the point d the slope ANS A REF - The y-coordinate is the a first number of an ordered pair and represents the point's horizontal location b second number of an ordered pair and represents the point's horizontal location c first number of an ordered pair and represents the point's vertical location d second number of an ordered pair and represents the point's vertical location ANS D REF - The y-coordinate of an ordered pair specifies the a diagonal location of the point b vertical location of the point c horizontal location of the point d quadrant location in which the point is located ANS B REF - The second number in any ordered pair is a the x-coordinate b the y-coordinate c the horizontal location of the point d the slope ANS B REF - In the ordered pair is the a vertical location of the point b the slope c the x-coordinate d the y-coordinate ANS C REF - In the ordered pair is the a horizontal location of the point b the slope c the x-coordinate d the y-coordinate ANS D REF - The point where both x and y are zero is known as the a origin b null c zero coordinate d center ANS A REF - The ordered pair that represents the origin on a graph is a b c - - d ANS B REF - When two variables have a positive correlation a they tend to move in opposite directions b they tend to move in the same direction c one variable will move while the other remains constant d the variables values are never negative ANS B REF - When two variables have a positive correlation a when the x-variable increases the y-variable decreases b when the x-variable decreases the y-variable increases c when the x-variable increases the y-variable increases d More than one of the above is correct ANS C REF - When two variables have a negative correlation a they tend to move in opposite directions b they tend to move in the same direction c one variable will move while the other remains constant d the variables values are never positive ANS A REF - When two variables have a negative correlation a when the x-variable decreases the y-variable decreases b when the x-variable decreases the y-variable increases c when the x-variable increases the y-variable increases d More than one of the above is correct ANS B REF - When two variables have a negative correlation and the x-variable decreases a the y-variable increases b the y-variable decreases c the y-variable stays the same d the x-variable can never be positive ANS A REF - Figure - Refer to Figure - The graph shown is known as a a time-series graph b bar graph c scatterplot d pie chart ANS C REF - Refer to Figure - Cups of coffee per day and the hours that someone can go without sleep appear to have a a positive correlation b a negative correlation c a random correlation d no correlation ANS A REF - Refer to Figure - Taking cause and effect into account which of the following interpretations would be most reasonable regarding the relationship between coffee and hours without sleep a The less coffee a person drinks per day the more time he can go without sleep b There is no relationship between how much coffee per day a person drinks and how long he can go without sleep c The more coffee a person drinks per day the more time he can go without sleep d The more coffee a person drinks per day the less time he can go without sleep ANS C REF - When two variables move in opposite directions the curve relating them is a upward sloping and we say the variables are positively related b upward sloping and we say the variables are negatively related c downward sloping and we say the variables are positively related d downward sloping and we say the variables are negatively related ANS D REF - When two variables move in the same direction the curve relating them is a upward sloping and we say the variables are positively related b upward sloping and we say the variables are negatively related c downward sloping and we say the variables are positively related d downward sloping and we say the variables are negatively related ANS A REF - When a relevant variable that is not named on either axis changes a there will be a movement along the curve b the curve will rotate clockwise c the curve will be unaffected since only the variables on the axis affect the curve d the curve will shift ANS D REF - Suppose price is measured along the vertical axis on a graph When price changes there will be a a rotation of the curve b shift of the curve c movement along the curve d change in the slope of the curve ANS C REF - A demand curve shows the relationship a between income and quantity demanded b between price and income c between price and quantity demanded d among income price and quantity demanded ANS C REF - LOC Supply and demand TOP Demand A demand curve shows the relationship between price and a income b quantity demanded c production d income and quantity demanded ANS B REF - LOC Supply and demand TOP Demand A demand curve displaying the relationship between the price of cars and the quantity demanded of cars should have a slope that is a less than b between zero and c between one and infinity d undefined ANS A REF - LOC Supply and demand TOP Demand Which of the following is not held constant when looking at an individual s demand curve a income b price c preferences d the availability of alternative goods ANS B REF - LOC Supply and demand TOP Demand If Erin s income decreases and as a result she chooses to buy fewer milkshakes per month at each price then her demand curve will a shift to the right b shift to the left c not shift instead Erin will move along her demand curve downward and to the right d not shift instead Erin will move along her demand curve upward and to the left ANS B REF - LOC Supply and demand TOP Demand Figure - Refer to Figure - The curves shown are a supply curves b demand curves c preference curves d income-consumption curves ANS B REF - LOC Supply and demand TOP Demand Refer to Figure - The movement from point A to point B is a n a shift of the demand curve b indication of a change in preferences for grapes c movement along the demand curve d indication of an increase in income ANS C REF - Refer to Figure - The movement from point B to point C is a n a shift of the demand curve b movement along the demand curve c indication that the price of grapes has changed d indication that the costs incurred by firms that produce grapes have changed ANS A REF - Refer to Figure - The movement from point B to point C could have been caused by a inflation b a change in income c a change in the price of grapes d a change in the cost of producing grapes ANS B REF - LOC Supply and demand TOP Demand Refer to Figure - The slope of the curve between points A and B is a - b - c d ANS A REF - Slope The slope of a line is equal to a the change in the value of x divided by the change in the value of y b the change in the value of y divided by the change in the value of x c the horizontal distance divided by the vertical distance d the value of y divided by the value of x ANS B REF - Slope The slope of a line is equal to a rise divided by run b run divided by rise c rise minus run d rise plus run ANS A REF - Slope Which of the following is not correct a The slope of a line will be a small positive number for a fairly flat upward-sloping line b The slope of a line will be a large positive number for a steep upward-sloping line c The slope of a line will be a negative number for a downward-sloping line d The slope of a line will be infinite for a horizontal