Econ Ch 2

According to the circular-flow diagram, ifChristopher is the owner of a landscaping business and he just received $50 for mowing Mrs. Pendleton's lawn, a. Christopher acts as a firm who interacted in the markets for goods and services with Mrs. Pendleton. b. the $50 represents a cost of production for Christopher's firm. c. the $50 represents wages, rent, and profit to Christopher's firm. d. Christopher acts as a firm who interacted in the markets for factors of production with Mrs. Pendleton.

a

Another term for goods and services is a. output. b. inputs. c. factors of production. d. resources.

a

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. managing of the nation's money supply. d. managing the Social Security program.

a

Economists at which of the following government 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

a

Suppose an economist develops a theory that lower electronics prices arise from lower gas prices. According to the scientific method, which of the following is the economist's next step? a. Collect and analyze data b. Go to a laboratory and generate data to test the theory c. Publish the theory without testing it d. Conduct a natural experiment to confirm the theory

a

The point where both x and y are zero is known as the a. origin. b. null. c. zero coordinate. d. center.

a

The use of theory and observation is more difficult in economics than in sciences such as biology 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.

a

Which of the following is an example of a capital input? a. A computer b. A share of stock c. The finances necessary for firms to produce their products d. The money households use to purchase firms' output

a

Which of the following is an example of a normative, as opposed to a positive, statement? a. The social security system is a good system and it deserves to be preserved as it is. b. An increase in the cigarette tax would cause a decrease in the number of smokers. c. If the national saving rate were to increase, so would the rate of economic growth. d. To stimulate the economy during the most recent recession, the federal government increased spending.

a

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. Local and state governments should eliminate subsidies to professional sports franchises. b. Federal, state, and local governments should prevent companies from outsourcing work. c. A large federal budget deficit has an adverse effect on the economy. d. A ceiling on rents reduces the quantity and quality of housing available.

b

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.

b

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 judgments. 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.

b

In the circular-flow diagram, a. transfer payments flow from firms to households. b. income payments flow from firms to households. c. goods and services flow from households to firms. d. inputs and outputs flow in the same direction as the flow of dollars, from households to firms.

b

In the circular-flow diagram, in the markets for a. goods and services, households and firms are both sellers. b. the factors of production, households are sellers and firms are buyers. c. goods and services, households are sellers and firms are buyers. d. the factors of production, households and firms are both sellers.

b

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.

b

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.

b

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.

b

Tao and Miray are economists. Tao thinks that the wealthiest 10 percent of the U.S. population should be taxed a rate higher than the rest of society because they can better afford it. Miray thinks that everyone should be taxed at the same rate because that is the fairest scenario and the wealthy should not be penalized for their success. In this example, Tao and Miray a. disagree about the validity of a positive theory. b. have different normative views about tax policy. c. must both be incorrect because tax policy is never that simple. d. disagree because they have access to contradicting positive statements.

b

When two variables have a positive correlation, a. if the x-variable decreases, the y-variable increases. b. if the x-variable decreases, the y-variable decreases. c. one variable will move while the other remains constant. d. the variables' values are never negative.

b

Which of the following statements about models is correct? a. Economic models are built to mirror reality exactly. b. Because economic models omit many details, they allow us to see what is truly important. c. Economic models are useful, but they should not be used for the purpose of improving public policies. d. Economic models are usually plastic representations of the economy.

b

Which of the following would likely be studied by a microeconomist rather than a macroeconomist? a. The effect of a national healthcare program on the nation's unemployment rate b. The impact of minimum-wage laws on employment in the fast food industry c. A comparison of alternative tax policies and their respective impacts on the rate of the nation's economic growth d. The effect of a war on government spending

b

An economy's production of two goods is efficient if a. the opportunity cost of producing more of one good is zero. b. the economy is producing at a point outside the production possibilities frontier. c. it is impossible to produce more of one good without producing less of the other. d. it is not possible to produce more of any good at any cost.

c

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.

c

Economists who are primarily responsible for advising Congress on economic matters work in which agency? a. The Federal Reserve b. The Department of the Treasury c. The Congressional Budget Office d. The Department of Commerce

c

In the circular-flow diagram, which of the following items flows from firms to households through the markets for goods and services? a. Dollars paid to land, labor, and capital b. Dollars spent on goods and services c. Goods and services d. Wages, rent, and profit

c

In the early 19th century, the Russian government sent doctors to southern Russian villages to provide assistance during a cholera epidemic. The villagers noticed that wherever doctors appeared, people died. Therefore, many doctors were chased away from villages, and some were even killed. This reaction to the correlation between doctors and deaths is most likely a problem of a. omitted variables. b. bias. c. reverse causality. d. government propaganda.

c

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.

c

Instead of conducting laboratory experiments to generate data to test their theories, economists often a. rely upon hypothetical data that were previously concocted by other economists. b. do without data. c. gather data from historical episodes of economic change. d. substitute assumptions for data when data are unavailable.

c

Normative statements are a. descriptive. b. claims about how the world is. c. prescriptive. d. claims about how variables in the economy normally behave.

c

Suppose the interest rate is measured along the vertical axis on a graph. When the interest rate 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.

c

The art in scientific thinking—whether in physics, economics, or engineering—is a. the design and implementation of laboratory experiments. b. the ability to make an abstract subject easy to understand. c. deciding which assumptions to make. d. not something in which scientists have to be skilled.

c

The bowed-outward 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.

c

The outer loop of the circular-flow diagram represents the flow of dollars in the economy. Which of the following is not measured in dollars and therefore does not appear on the outer loop? a. Wages b. Income c. Capital d. Rent

c

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.

c

The y-coordinate of an ordered pair specifies the a. diagonal location of the point. b. horizontal location of the point. c. vertical location of the point. d. quadrant location in which the point is located.

c

When recommending specific policies to undertake, economists make a. positive statements. b. claims about how the world is. c. normative statements. d. descriptive statements.

c

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

c

Which of the following is an example of a positive, as opposed to normative, statement? a. If welfare payments increase, the world will be a better place. b. The income tax rate should be increased to offset the budget deficit. c. Prices rise when the government prints too much money. d. Antitrust laws should be used to prevent further concentration in the wireless telephone service market.

c

Which of the following is correct? a. The slope of a line will be one for a vertical line. b. The slope of a fairly flat upward-sloping line will be a large negative number. c. The slope of a line will be a large positive number for a steep upward-sloping line. d. The slope of a steep upward-sloping line will be a small positive number.

c

A circular-flow diagram is a model that a. helps to explain how consumers and the government interact with one another. b. explains how countries trade with each other. c. incorporates all aspects of the real economy. d. helps to explain how the economy is organized.

d

Economists make assumptions to a. minimize the number of experiments that yield no useful data. b. develop models when the scientific method cannot be used. c. provide issues for political discussion. d. simplify the complex world and make it easier to understand.

d

How are economists not like mathematicians, physicists, and biologists? a. Economists do not use models to represent the real world. b. Economists do not make assumptions to answer different questions. c. Economists do not devise theories and collect and analyze data in an attempt to verify or refute their theories. d. Economists typically pay closer attention to natural experiments through history than lab experiments.

d

In the circular-flow diagram, which of the following is not a factor of production? a. Labor b. Land c. Capital d. Output

d

In the ordered pair (1, 16), 16 is the a. the x-coordinate and the vertical location of the point. b. the y-coordinate and the horizontal location of the point. c. the x-coordinate and the horizontal location of the point. d. the y-coordinate and the vertical location of the point.

d

In the simple circular-flow diagram, which of the following is not true? a. Households own the factors of production. b. Firms buy the factors of production. c. Goods and services flow from firms to households. d. Households are the only decision makers.

d

In the simple-circular flow diagram, the flow of money from the firms to the markets for factors of production is called a. spending. b. revenue. c. income. d. wages, rent, and profit.

d

Maylin wants to create a graph containing the prices of concert tickets and the corresponding quantities of concert tickets demanded by customers. She should use a a. pie chart. b. bar graph. c. time-series graph. d. coordinate system.

d

Sometimes economists disagree because their scientific judgments differ. Which of the following instances best reflects this source of disagreement? a. One economist believes everyone should pay the same percentage of their income in taxes; another economist believes that wealthier citizens should pay a higher percentage of their income in taxes. b. One economist believes that manufacturing firms should face greater regulation to preserve the environment; another economist believes the government should not intervene in free markets. c. One economist believes that equality should be valued over efficiency in policy decisions; another economist believes that efficiency should be valued over equality in policy decisions. d. One economist believes the government should tax a household's income; another economist believes the government should tax a household's consumption because it will cause households to save more.

d

Suppose an economy produces two goods, food and machines. This economy always operates on its production possibilities frontier. Last year, it produced 1,000 units of food and 47 machines. This year it experienced a technological advance in its machine-making industry. As a result, this year the society wants to produce 1,050 units of food and 47 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 47. b. Because the technological advance occurred in the machine-making industry, increases in output can only occur in the machine industry. c. In order to increase food production in these circumstances without reducing machine production, the economy must reduce inefficiencies. d. The technological advance reduced the amount of resources needed to produce 47 machines, so these resources could be used to produce more food.

d

The president of the United States receives tax policy advice from economists in the a. Federal Reserve. b. Department of Justice. c. Congressional Budget Office. d. Department of the Treasury.

d

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.

d

When constructing a production possibilities frontier, which of the following assumptions is not made? a. A country produces only two goods or types of goods. b. The amount of available resources does not change. c. Technology does not change. d. The quantities of the factors of production that are available are increasing over the relevant time period.

d

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.

d

Which of the following statements is correct about the roles of economists? a. When economists are trying to explain the world, they are in the realm of macroeconomics rather than microeconomics. b. When economists are trying to explain the world, they are in the realm of normative economics rather than positive economics. c. Economists are best viewed as scientists. d. In trying to improve the world, economists are policy advisers.

d

Which of the following steps does an economist not take when studying the economy? a. Devise theories b. Collect data c. Analyze data d. Conduct a laboratory experiment in order to generate data

d

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. Amari receives a salary for his work as an analyst for an investment firm. d. Nia buys two business suits to wear to her job as a Chief Information Officer.

d

Which of the following would likely be studied by a macroeconomist rather than a microeconomist? a. The effect of raising the gasoline tax on transit ridership b. The effect of rent control on housing in New York City c. The effect of foreign competition on the United States auto industry d. The effect on the economy of changes in the nation's unemployment rate

d