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Thinking Like an Economist

Multiple Choice – Section 00: Introduction

1. Whichofthefollowingisnotcorrect?a. Economistsusesomefamiliarwordsinspecializedways.b. Economicshasitsownlanguageanditsownwayofthinking,butfewotherfieldsofstudydo.c. Suppl

y,demand,elasticity,comparativeadvantage,consumersurplus,anddeadweightlossarealltermsthatarepartoftheeconomist’slanguage.

d. Thevalueoftheeconomist’slanguageliesinitsabilitytoprovideyouwithanewandusefulwayofthinkingaboutthe worldinwhichyoulive.

ANSWER: bPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.5-LO:2-0NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Comprehension

2. Economistsusesomefamiliartermsinspecializedwaysa. tomakethesubjectsoundmorecomplexthanitis.b. becauseeveryrespectablefieldofstudyhasitsownlanguage.c. toprovideanewandusefulwayofthinkingabouttheworld.d. becauseitwastoodifficulttocomeupwithnewterms.

ANSWER: cPOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.5-LO:2-0NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Comprehension

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204 Thinking Like an Economist

3. Thelanguageofeconomicsisa. needlesslyarcane.b. valuablebecauseitprovidesanewandusefulwayoflearningabouttheworld.c. easytolearnwithinaday.d. unnecessarytolearnforathoroughunderstandingofeconomics.

ANSWER: bPOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.5-LO:2-0NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Comprehension

Multiple Choice – Section 01: The Economist as Scientist

1. Economists,likemathematicians,physicists,andbiologists,a. makeuseofthescientificmethod.b. trytoaddresstheirsubjectwithascientist’sobjectivity.c. devisetheories,collectdata,andthenanalyzethesedatainanattempttoverifyorrefutetheirtheories.d. Alloftheabovearecorrect.

ANSWER: dPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Comprehension


From https://testbankgo.eu/p/Test-Bank-for-Principles-of-Microeconomics-7th-Edition-by-Gregory-Mankiw

2. Theessenceofscienceisa. thelaboratoryexperiment.b. thescientificmethod.c. thestudyofnature,butnotthestudyofsociety.d. Alloftheabovearecorrect.

ANSWER: bPOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:

DISC:GeneralPrinciples

KEYWORDS: BLOOM'S:Knowledge

3. Thescientificmethodisa. theuseofmoderntechnologytounderstandthewaytheworldworks.b. theuseofcontrolledlaboratoryexperimentstounderstandthewaytheworldworks.c. thedispassionatedevelopmentandtestingoftheoriesabouthowtheworldworks.d. thesearchforevidencetosupportpreconceivedtheoriesabouthowtheworldworks.

ANSWER: cPOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:





4. Thescientificmethodisapplicabletostudyinga. naturalsciences,butnotsocialsciences.b. socialsciences,butnotnaturalsciences.c. bothnaturalsciencesandsocialsciences.d. Noneoftheaboveiscorrect.

ANSWER: cPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:


KEYWORDS: BLOOM'S:Comprehension

5. Whosaid,"Thewholeofscienceisnothingmorethantherefinementofeverydaythinking"?a. IsaacNewtonb. AlbertEinsteinc. AdamSmithd. BenjaminFranklin






6. AlbertEinsteinoncemadethefollowingobservationaboutscience:a. "Thewholeofscienceisnothingmorethantherefinementofeverydaythinking."b. "Thewholeofscienceisnothingmorethananinterestingintellectualexercise."c. "Inordertounderstandscience,onemustrelysolelyonabstraction."d. "Inordertounderstandscience,onemusttranscendeverydaythinking."

ANSWER: aPOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:



7. SirIsaacNewton'sdevelopmentofthetheoryofgravityafterobservinganapplefallfromatreeisanexampleofa. acontrolledexperimentthatleadtotheformulationofascientifictheory.b. beingintherightplaceattherighttime.c. anideawhosetimehadcome.d. theinterplaybetweenobservationandtheoryinscience.

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8. Whichofthefollowingstepsdoesaneconomisttakewhenstudyingtheeconomy?a. devisetheoriesb. collectdatac. analyzedatad. Alloftheabovearecorrect.

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9. Whichofthefollowingisanexampleofusingthescientificmethodwithanaturalexperiment?a. measuringhowlongittakesamarbletofallfromatenstorybuildingb. comparingplantgrowthwithandwithoutasoiladditivec. trackingthepriceofoilwhenawarintheMiddleEastinterruptstheflowofcrudeoild. observingthereactionwhentwochemicalsaremixedtogether



KEYWORDS: BLOOM'S:ApplicationNOTES: s



10. Thegoalofaneconomistwhoformulatesnewtheoriesistoa. provi

deaninterestingframeworkofanalysis,whetherornottheframeworkturnsouttobeofmuchuseinunderstandinghowtheworldworks.

b. provokestimulatingdebateinscientificjournals.c. contributetoanunderstandingofhowtheworldworks.d. demonstratethateconomists,likeotherscientists,canformulatetestabletheories.

ANSWER: cPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Comprehension

11. Supposeaneconomistdevelopsatheorythathigherfoodpricesarisefromhighergasprices.Accordingtothescientificmethod,whichofthefollowingistheeconomist’snextstep?a. Collectandanalyzedata.b. Gotoalaboratoryandgeneratedatatotestthetheory.c. Publishthetheorywithouttestingit.d. Consultwithothereconomiststoseetheyagreewiththetheory.



KEYWORDS: BLOOM'S:Application



12. Whichofthefollowingstatementsappliestoeconomics,aswellastoothersciencessuchasphysics?a. Experimentsareconsideredvalidonlywhentheyareconductedinalaboratory.b. Goodtheoriesdonotneedtobetested.c. Real-worldobservationsoftenleadtotheories.d. Economics,aswellasothersciences,isconcernedprimarilywithabstractconcepts.




13. Withrespecttohoweconomistsstudytheeconomy,whichofthefollowingstatementsismostaccurate?a. Economistsstudythepast,buttheydonottrytopredictthefuture.b. Economistsuse“rulesofthumb”topredictthefuture.c. Economistsdevisetheories,collectdata,andanalyzethedatatotestthetheories.d. Economistsusecontrolledexperimentsinmuchthesamewaythatbiologistsandphysicistsdo.




14. Economistsfaceanobstaclethatmanyotherscientistsdonotface.Whatisthatobstacle?a. Itisoftendifficulttoformulatetheoriesineconomics.b. Itisoftenimpracticaltoperformexperimentsineconomics.c. Economicscannotbeaddressedobjectively;itmustbeaddressedsubjectively.d. Thescientificmethodcannotbeappliedtothestudyofeconomics.

ANSWER: bPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:GeneralPrinciplesKEYWORDS: BLOOM'S:ComprehensionNOTES: s

15. Inconductingtheirresearch,economistsfaceanobstaclethatnotallscientistsface;specifically,ineconomics,itisoftenimpracticaltoa. makeuseoftheoryandobservation.b. relyuponthescientificmethod.c. conductlaboratoryexperiments.d. findarticlesorbooksthatwerewrittenbefore1900.



KEYWORDS: BLOOM'S:ComprehensionNOTES: s



16. Theuseoftheoryandobservationismoredifficultineconomicsthaninsciencessuchasphysicsduetothedifficultyina. performinganexperimentinaneconomicsystem.b. applyingmathematicalmethodstoeconomicanalysis.c. analyzingavailabledata.d. formulatingtheoriesabouteconomicevents.

ANSWER: aPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:



17. Whichofthefollowingstatementsis(are)correct?a. Relativetosomeotherscientists,economistsfinditmoredifficulttoconductexperiments.b. Theoryandobservationareimportantineconomicsaswellasinothersciences.c. Toobtaindata,economistsoftenrelyuponthenaturalexperimentsofferedbyhistory.d. Alloftheabovearecorrect.

ANSWER: dPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:





18. Becauseitisdifficultforeconomiststouseexperimentstogeneratedata,theygenerallymusta. dowithoutdata.b. substituteassumptionsfordatawhendataareunavailable.c. relyuponhypotheticaldatathatwerepreviouslyconcoctedbyothereconomists.d. usewhateverdatatheworldgivesthem.


19. Whichofthefollowingstatementsiscorrect?a. Economistsalmostalwaysfinditeasytoconductexperimentsinordertotesttheirtheories.b. Economi

csisnotatruesciencebecauseeconomistsarenotusuallyallowedtoconductexperimentstotesttheirtheories.

c. Economicsisasocialscienceratherthanatruesciencebecauseitcannotemploythescientificmethod.d. Economis

tsareusuallynotabletoconductexperiments,sotheymustrelyonnaturalexperimentsofferedbyhistory.




20. Insteadofconductinglaboratoryexperimentstogeneratedatatotesttheirtheories,economistsoftena. askwinnersoftheNobelPrizeinEconomicstoevaluatetheirtheories.b. arguethatdataisimpossibletocollectineconomics.c. gatherdatafromhistoricalepisodesofeconomicchange.d. assumethatdatawouldsupporttheirtheories.


21. Themostcommondatafortestingeconomictheoriescomefroma. carefullycontrolledandconductedlaboratoryexperiments.b. computermodelsofeconomies.c. historicalepisodesofeconomicchange.d. centrallyplannedeconomies.




22. Inconductingtheirresearch,economistsoftensubstitutehistoricaleventsandhistoricalepisodesfora. theoriesandobservations.b. laboratoryexperiments.c. models.d. assumptions.


23. Foreconomists,substitutesforlaboratoryexperimentsoftencomeintheformofa. naturalexperimentsofferedbyhistory.b. untestedtheories.c. “rulesofthumb”andothersuchconveniences.d. relianceuponthewisdomofeldersintheeconomicsprofession.

ANSWER: aPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Comprehension



24. Economistsregardeventsfromthepastasa. irrelevant,sincehistoryisunlikelytorepeatitself.b. oflimitedinterest,sincethoseeventsseldomprovideanyusefuleconomicdata.c. interestingbutnotparticularlyvaluable,sincethoseeventscannotbeusedtoevaluatepresent-

dayeconomictheories.d. interesti

ngandvaluable,sincethoseeventsarecapableofhelpingustounderstandthepast,thepresent,andthefuture.


25. Foreconomists,historicalepisodesa. arenotworthyofstudybecausetheyofferfewinsightsintocurrenteconomiceventsandproblems.b. arenotworthyofstudybecauselaboratoryexperimentsprovidemorereliabledata.c. areworthyofstudybecauseeconomistsrelyentirelyonobservation,ratherthanontheory.d. areworthyofstudybecausetheyserveasvaluablesubstitutesforlaboratoryexperiments.




26. Historicalepisodesarea. valuabletoeconomistsbecausetheyalloweconomiststoseehowthescienceofeconomicshasevolved.b. valuabletoeconomistsbecausetheyalloweconomiststoevaluateeconomictheories.c. notofconcerntoeconomistsbecauseeconomicsisaboutpredictingthefuture,notdwellingonthepast.d. n

otofconcerntoeconomistsbecausetheexactcircumstancesofhistoricalepisodesareunlikelytobeobservedagain.


27. Onethingeconomistsdotohelpthemunderstandhowtherealworldworksisa. makeassumptions.b. ignorethepast.c. trytocaptureeveryaspectoftherealworldinthemodelstheyconstruct.d. Alloftheabovearecorrect.




28. Whichofthe followingisnotanexampleofanaturalexperimentaneconomistmightusetoevaluateatheory?a. TransitridershipincreasedinAtlantafollowinganincreaseingasprices.b. Federaltaxrevenueincreasedfollowingadecreaseinthetaxrate.c. Studen

tsinaprinciplesofmicroeconomicscourseareaskedtoplayagamewithclassmatestodeterminewhatdecisionstheymakeundercertaincircumstances.

d. Followingtheimpositionofausteritymeasures,thegrowthrateoftheeconomyinGreeceslowed.

ANSWER: cPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Application

29. Economistsmakeassumptionstoa. mimicthemethodologiesemployedbyotherscientists.b. minimizethenumberofexperimentsthatyieldnousefuldata.c. minimizethelikelihoodthatsomeaspectoftheproblemathandisbeingoverlooked.d. focustheirthinkingontheessenceoftheproblemathand.

ANSWER: dPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:ComprehensionNOTES: s



30. Economistsmakeuseofassumptions,someofwhichareunrealistic,forthepurposeofa. teachingeconomicstopeoplewhohaveneverbeforestudiedeconomics.b. advancingtheirpoliticalagendas.c. developingmodelswhenthescientificmethodcannotbeused.d. focusingtheirthinking.


31. Foraneconomist,theideaofmakingassumptionsisregardedgenerallyasaa. badidea,sincedoingsoleadstotheomissionofimportantideasandvariablesfromeconomicmodels.b. badidea,sincedoingsoinvariablyleadstodata-collectionproblems.c. goodidea,sincedoingsohelpstosimplifythecomplexworldandmakeiteasiertounderstand.d. go

odidea,sinceeconomicanalysiswithoutassumptionsleadstocomplicatedresultsthatthegeneralpublicfindshardtounderstand.




32. Economistsmakeassumptionstoa. provideissuesforpoliticaldiscussion.b. makeacomplexworldeasiertounderstand.c. makeiteasiertoteacheconomicconceptsandanalysis.d. createpolicyalternativesthatareincompleteorsubjecttocriticism.

ANSWER: bPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Knowledge

33. Acircular-flowmodelandproductionpossibilitiesfrontieraresimilarinthata. neitherallowseconomicanalysistooccur.b. neithercanberepresentedvisuallyonagraph.c. bothmakeuseofassumptions.d. bothmakeuseofcomplexequationstoarriveatsolutions.

ANSWER: cPOINTS: 1DIFFICULTY: Difficulty:ChallengingLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Comprehension



34. Aneconomictheoryaboutinternationaltradethatisbasedontheassumptionthatthereareonlytwocountriestradingtwogoodsa. isuseless,sincetherealworldhasmanycountriestradingmanygoods.b. canbeusefulonlyinsituationsinvolvingtwocountriesandtwogoods.c. canbeusefulintheclassroom,butisuselessintherealworld.d. c

anbeusefulinhelpingeconomistsunderstandthecomplexworldofinternationaltradeinvolvingmanycountriesandmanygoods.


35. Theartinscientificthinking--whetherinchemistry,economics,orbiology--isa. thedesignandimplementationoflaboratoryexperiments.b. knowingwhentostopcollectingdataandwhentostartanalyzingthedata.c. decidingwhichassumptionstomake.d. beingabletomathematicallymodelnaturalphenomena.






36. Theartinscientificthinkingisa. findingtherightproblemtostudy.b. decidingwhichassumptionstomake.c. theabilitytomakeanabstractsubjecteasytounderstand.d. notsomethinginwhicheconomistshavetobeskilled.




37. Thedecisionofwhichassumptionstomakeisa. aneasydecisionforaneconomist,butadifficultdecisionforaphysicistorachemist.b. notaparticularlyimportantdecisionforaneconomist.c. usuallyregardedasanartinscientificthinking.d. usuallyregardedastheeasiestpartofthescientificmethod.






38. Anexampleofapricethatchangesonlyinfrequentlyisthepriceofa. stocksontheNewYorkStockExchange.b. crudeoil.c. residentialrealestate.d. magazinessoldatnewsstands.

ANSWER: dPOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:



39. Whenstudyingtheeffectsofpublicpolicychanges,economistsa. alwaysrefrainfrommakingassumptions.b. sometimesmakedifferentassumptionsabouttheshortrunandthelongrun.c. consideronlythedirecteffectsofthosepolicychangesandnottheindirecteffects.d. consideronlytheshort-runeffectsofthosepolicychangesandnotthelong-runeffects.




40. Whenstudyingtheeffectsofchangesinpublicpolicy,economistsbelievethata. itisimportanttodistinguishbetweentheshortrunandthelongrun.b. theassumptionsusedinstudyingthoseeffectsshouldbethesamefortheshortrunasforthelongrun.c. theshort-runeffectsofthosechangesarealwaysmorebeneficialtosocietythanarethelong-runeffects.d. thelong-runeffectsofthosechangesarealwaysmorebeneficialtosocietythanaretheshort-runeffects.


41. Amodelcanbeaccuratelydescribedasaa. theoreticalabstractionwithverylittlevalue.b. devicethatisusefulonlytothepeoplewhocreatedit.c. realisticandcarefullyconstructedtheory.d. simplificationofreality.






42. Whichofthefollowingstatementsaboutmodelsiscorrect?a. Themoredetailsamodelincludes,thebetterthemodel.b. Modelsassumeawayirrelevantdetails.c. Modelscannotbeusedtoexplainhowtheeconomyfunctions.d. Modelscannotbeusedtomakepredictions.

ANSWER: bPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:



43. Inbuildingeconomicmodels,economistsoftenomita. assumptions.b. theories.c. details.d. equations.






44. Whichofthefollowingstatementsabouteconomicmodelsiscorrect?a. Economicmodelsarebuilttomirrorrealityexactly.b. Economicmodelsareuseful,buttheyshouldnotbeusedforthepurposeofimprovingpublicpolicies.c. Becauseeconomicmodelsomitmanydetails,theyallowustoseewhatistrulyimportant.d. Economicmodelsseldomincorporateequationsordiagrams.




45. Economicmodelsa. cannotbeusefuliftheyarebasedonfalseassumptions.b. wereoncethoughttobeuseful,butthatisnolongertrue.c. mustincorporateallaspectsoftheeconomyiftheyaretobeuseful.d. canbeuseful,eveniftheyarenotparticularlyrealistic.






46. Whichofthefollowingisnotcorrectaboutmosteconomicmodels?a. Theyarecomposedofequationsanddiagrams.b. Theycontributeverylittletoeconomists’understandingoftherealworld.c. Theyomitmanyfeaturesofthereal-worldeconomy.d. Inconstructingmodels,economistsmakeassumptions.




47. Economicmodelsa. a

reconstructedtomirrorrealityascloselyaspossible,andinthisrespecteconomicmodelsarenodifferentfromotherscientificmodels.

b. areconstructedtomirrorrealityascloselyaspossible,andinthisrespecteconomicmodelsareverydifferentfromotherscientificmodels.

c. aresimplificationsofreality,andinthisrespecteconomicmodelsarenodifferentfromotherscientificmodels.

d. aresimplificationsofreality,andinthisrespecteconomicmodelsareverydifferentfromotherscientificmodels.








48. Economicmodelsa. arenotusefulbecausetheyomitmanyreal-worlddetails.b. areusuallycomposedofdiagramsandequations.c. areusefulbecausetheydonotomitanyreal-worlddetails.d. areusuallyplasticrepresentationsoftheeconomy.




49. Justlikemodelsconstructedinotherareasofscience,economicmodelsa. incorporateassumptionsthatcontradictreality.b. incorporatealldetailsoftherealworld.c. complicatereality.d. avoidtheuseofdiagramsandequations.






50. Whichtypesofmodelsarebuiltwithassumptions?a. economicmodels,butnotmodelsinotherdisciplinessuchasphysicsandbiologyb. economicmodelsaswellasmodelsinotherdisciplinessuchasphysicsandbiologyc. modelsthatarebuiltforteachingpurposesbutnotforresearchpurposesd. badmodels




51. Anassumptionaneconomistmightmakewhilestudyinginternationaltradeisa. thereareonlytwocountries.b. countriesonlyproducetwogoods.c. technologydoesnotchange.d. Alloftheabovearepossibleassumptions.

ANSWER: dPOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Application



52. Economistsbuildeconomicmodelsbya. generatingdata.b. conductingcontrolledexperimentsinalab.c. makingassumptions.d. reviewingstatisticalforecasts.




53. Economicmodelsarebuiltwitha. recommendationsconcerningpublicpolicies.b. factsaboutthelegalsystem.c. assumptions.d. statisticalforecasts.






54. Inconstructingmodels,economistsa. leaveoutequations,sinceequationsandmodelstendtocontradictoneanother.b. ignorethelongrun,sincemodelsareusefulonlyforshort-runanalysis.c. sometimesmakeassumptionsthatarecontrarytofeaturesoftherealworld.d. trytoincludeeveryfeatureoftheeconomy.




55. Economicmodelsa. arepeoplewhoactoutthebehavioroffirmsandhouseholdssothateconomistscanstudythisbehavior.b. areusuallydetailedreplicationsofreality.c. incorpora

tesimplifyingassumptionsthatoftencontradictreality,butalsohelpeconomistsbetterunderstandreality.

d. areusefultoresearchersbutnottoteachersbecauseeconomicmodelsomitmanydetailsofthereal-worldeconomy.






56. Whichofthefollowingstatementsiscorrect?a. Feweconomicmodelsincorporateassumptions.b. Differenteconomicmodelsemploydifferentsetsofassumptions.c. Goodeconomicmodelsattempttomimicrealityascloselyaspossible.d. Economicmodels,tobeaccepted,mustbetestedbyconductingexperiments.




57. Whichofthesestatementsabouteconomicmodelsiscorrect?a. Foreconomists,economicmodelsprovideinsightsabouttheworld.b. Economicmodelsarebuiltwithassumptions.c. Economicmodelsareoftencomposedofequationsanddiagrams.d. Alloftheabovearecorrect.






58. Thecircular-flowdiagramisanexampleofa. alaboratoryexperiment.b. aneconomicmodel.c. amathematicalmodel.d. Alloftheabovearecorrect.


DISC:ThinkingLikeanEconomistCircularFlowModel


59. Thecircular-flowdiagramisaa. visualmodeloftheeconomy.b. visualmodeloftherelationshipsamongmoney,prices,andbusinesses.c. modelthatshowstheeffectsofgovernmentontheeconomy.d. mathematicalmodelofhowtheeconomyworks.






60. Acircular-flowdiagramisamodelthata. helpstoexplainhowparticipantsintheeconomyinteractwithoneanother.b. helpstoexplainhowtheeconomyisorganized.c. incorporatesallaspectsoftherealeconomy.d. Both(a)and(b)arecorrect.




61. Thecircular-flowdiagrama. isaneconomicmodel.b. incorporatestwotypesofdecisionmakers:householdsandfirms.c. representstheflowsofinputs,outputs,anddollars.d. Alloftheabovearecorrect.






62. Whichofthefollowingstatementsaboutthecircular-flowdiagramiscorrect?a. Onemustimaginethattheeconomyoperateswithoutmoneyinordertomakesenseofthediagram.b. T

hediagramleavesoutdetailsthatarenotessentialforunderstandingtheeconomictransactionsthatoccurbetweenhouseholdsandfirms.

c. Thegovernmentcannotbeexcludedasadecisionmakerinacircular-flowdiagram.d. Alloftheabovearecorrect.


DISC:ThinkingLikeanEconomistCircularFlowDiagram


63. Inthesimplecircular-flowdiagram,theparticipantsintheeconomyarea. firmsandgovernment.b. householdsandfirms.c. householdsandgovernment.d. households,firms,andgovernment.






64. Whichtwogroupsofdecisionmakersareincludedinthesimplecircular-flowdiagram?a. marketsandgovernmentb. householdsandgovernmentc. firmsandgovernmentd. householdsandfirms




65. Inthecircular-flowdiagram,firmsproducea. goodsandservicesusingfactorsofproduction.b. outputusinginputs.c. factorsofproductionusinggoodsandservices.d. Both(a)and(b)arecorrect.


DISC:ThinkingLikeanEconomistCircularFlowDiagram




66. Factorsofproductionarea. themathematicalcalculationsfirmsmakeindeterminingtheiroptimalproductionlevels.b. socialandpoliticalconditionsthataffectproduction.c. thephysicalrelationshipsbetweeneconomicinputsandoutputs.d. inputsintotheproductionprocess.

ANSWER: dPOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:FactorsofProductionKEYWORDS: BLOOM'S:Knowledge

67. Factorsofproductionarea. usedtoproducegoodsandservices.b. alsocalledoutput.c. abundantinmosteconomies.d. assumedtobeownedbyfirmsinthecircular-flowdiagram.

ANSWER: aPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:FactorsofProductionKEYWORDS: BLOOM'S:Comprehension

68. Inthecircular-flowdiagram,whichofthefollowingisnotafactorofproduction?a. laborb. landc. capitald. money


DIS



C:ThinkingLikeanEconomistCircularFlowModel


69. Inthecircular-flowdiagram,a. firmsownthefactorsofproduction.b. thefactorsofproductionarelabor,land,andcapital.c. thefactorsofproductionarealsocalled“output.”d. Alloftheabovearecorrect.




70. Whichofthesetermsareusedinterchangeably?a. "goodsandservices"and"inputs"b. "goodsandservices"and"factorsofproduction"c. "inputs"and"factorsofproduction"d. "land,labor,andcapital"and"goodsandservices"

ANSWER: cPOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:FactorsofProductionKEYWORDS: BLOOM'S:Knowledge



71. Anothertermforfactorsofproductionisa. inputs.b. output.c. goods.d. services.

ANSWER: aPOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:FactorsofProductionKEYWORDS: BLOOM'S:Knowledge

72. Ineconomics,capitalreferstoa. thefinancesnecessaryforfirmstoproducetheirproducts.b. buildingsandmachinesusedintheproductionprocess.c. themoneyhouseholdsusetopurchasefirms'output.d. stocksandbonds.


DISC:FactorsofProductionCapital




73. Whichofthefollowingisanexampleofacapitalinput?a. acomputerb. ashareofstockc. anhourofaworker’stimed.$50,000


DISC:FactorsofProductionCapital

KEYWORDS: BLOOM'S:ApplicationNOTES: n

74. Amodelthatshowshowdollarsflowthroughmarketsamonghouseholdsandfirmsiscalledthea. productionpossibilitiesfrontier.b. circular-flowdiagram.c. demandandsupplydiagram.d. comparativeadvantagemodel.






75. Inthesimplecircular-flowdiagram,householdsa. aretheonlydecisionmakers.b. ownthefactorsofproduction.c. arebuyersofinputs.d. consumeonlysomeofthegoodsandservicesthatfirmsproduce.




76. Inthesimplecircular-flowdiagram,a. householdsownthefactorsofproduction.b. householdsbuyallthegoodsandservicesthatfirmsproduce.c. land,labor,andcapitalflowfromhouseholdstofirms.d. Alloftheabovearecorrect.






77. Inthesimplecircular-flowdiagram,whobuysthefactorsofproduction?a. householdsonlyb. firmsonlyc. bothhouseholdsandfirmsd. neitherhouseholdsnorfirms



KEYWORDS: BLOOM'S:ComprehensionNOTES: r

78. Thesimplecircular-flowdiagramisamodelthatincludesonlysomekeyplayersintherealeconomy.Whichofthefollowingkeyplayersareomittedfromthesimplecircular-flowmodel?a. householdsb. firmsc. governmentd. marketsforfactorsofproduction



KEYWORDS: BLOOM'S:KnowledgeNOTES: s



79. Inthecircular-flowdiagram,anothernameforgoodsandservicesproducedbyfirmsisa. factorsofproduction.b. output.c. inputs.d. resources.




80. Whichmarketsarerepresentedinthesimplecircular-flowdiagram?a. marketsforgoodsandservicesandmarketsforfinancialassetsb. marketsforfactorsofproductionandmarketsforfinancialassetsc. marketsforgoodsandservicesandmarketsforfactorsofproductiond. marketsforgoodsandservicesandmarketsforimportsandexports






81. Inthemarketsforgoodsandservicesinthecircular-flowdiagram,a. householdsandfirmsarebothbuyers.b. householdsandfirmsarebothsellers.c. householdsarebuyersandfirmsaresellers.d. householdsaresellersandfirmsarebuyers.




82. Inthecircular-flowdiagram,inthemarketsfora. goodsandservices,householdsandfirmsarebothsellers.b. goodsandservices,householdsarebuyersandfirmsaresellers.c. thefactorsofproduction,householdsarebuyersandfirmsaresellers.d. thefactorsofproduction,householdsandfirmsarebothbuyers.






83. Inthecircular-flowdiagram,inthemarketsfora. goodsandservices,householdsandfirmsarebothsellers.b. goodsandservices,householdsaresellersandfirmsarebuyers.c. thefactorsofproduction,householdsaresellersandfirmsarebuyers.d. thefactorsofproduction,householdsandfirmsarebothbuyers.




84. Inthemarketsforgoodsandservicesinthecircular-flowdiagram,a. householdsprovidefirmswithsavingsforinvestment.b. householdsprovidefirmswithlabor,land,andcapital.c. firmsprovidehouseholdswithoutput.d. firmsprovidehouseholdswithprofit.






85. Inthemarketsforthefactorsofproductioninthecircular-flowdiagram,a. householdsaresellersandfirmsarebuyers.b. householdsarebuyersandfirmsaresellers.c. householdsandfirmsarebothbuyers.d. householdsandfirmsarebothsellers.




86. Inthemarketsforfactorsofproductioninthecircular-flowdiagram,a. householdsprovidefirmswithlabor,land,andcapital.b. householdsprovidefirmswithsavingsforinvestment.c. firmsprovidehouseholdswithgoodsandservices.d. firmsprovidehouseholdswithrevenue.






87. Whichofthefollowingtransactionsdoesnottakeplaceinthemarketsforfactorsofproductioninthecircular-flowdiagram?a. alandownerleaseslandtoafarmerb. afarmerhiresateenagertohelpwithharvestc. aconstructioncompanyrentstrucksforitsbusinessd. awomanbuyscornfordinner




88. Whichofthefollowingtransactionstakesplaceinthemarketsforthefactorsofproductioninthecircular-flowdiagram?a. Dylanreceivesasalaryforhisworkasafinancialanalystforaninvestmentfirm.b. KristinbuystwobusinesssuitstoweartoherjobasaChiefInformationOfficer.c. Jimreceivescleanwaterinhishomeinexchangeforpayinghiswaterbill.d. Carolineownsanailsalonandreceivespaymentsfromherclientsforherservices.

ANSWER: aPOINTS: 1DIFFICULTY: Difficulty:ChallengingLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:


KEYWORDS: BLOOM'S:ApplicationNOTES: r



89. Inthecircular-flowdiagram,a. firmsarebuyersinthemarketsforgoodsandservices.b. householdsaresellersinthemarketsforthefactorsofproduction.c. firmsaresellersinthemarketsforfactorsofproductionandinthemarketsforgoodsandservices.d. dollarsthatarespentongoodsandservicesflowdirectlyfromfirmstohouseholds.




90. Thetwoloopsinthecircular-flowdiagramrepresenta. theflowofgoodsandtheflowofservices.b. theflowofdollarsandtheflowoffinancialassets.c. theflowofinputsintoproductionprocessesandtheflowofoutputsfromproductionprocesses.d. theflowsofinputsandoutputsandtheflowofdollars.






91. Theouterloopofthecircular-flowdiagramrepresentstheflowsofdollarsintheeconomy.Whichofthefollowingdoesnotappearontheouterloop?a. wagesb. incomec. capitald. rent




92. Theinnerloopofthecircular-flowdiagramrepresentstheflowsofinputsandoutputs.Whichofthefollowingdoesnotappearontheinnerloop?a. wagesb. landc. capitald. goodsandservicessold








93. Inthecircular-flowdiagram,a. profitflowsfromhouseholdstofirms.b. laborflowsfromhouseholdstofirms.c. servicesflowfromhouseholdstofirms.d. Alloftheabovearecorrect.




94. Inthecircular-flowdiagram,a. taxesflowfromhouseholdstofirms,andtransferpaymentsflowfromfirmstohouseholds.b. incomepaymentsflowfromfirmstohouseholds,andsalesrevenueflowsfromhouseholdstofirms.c. resourcesflowfromfirmstohouseholds,andgoodsandservicesflowfromhouseholdstofirms.d. inputsandoutputsflowinthesamedirectionastheflowofdollars,fromfirmstohouseholds.






95. Inthecircular-flowdiagram,a. factorsofproductionflowfromgovernmenttofirms.b. goodsandservicesflowfromhouseholdstofirms.c. incomepaidtothefactorsofproductionflowsfromfirmstohouseholds.d. spendingongoodsandservicesflowsfromfirmstohouseholds.




96. Inthecircular-flowdiagram,whichofthefollowingitemsdoesnotflowfromhouseholdstofirms?a. revenueb. land,labor,andcapitalc. factorsofproductiond. profit






97. Inthecircular-flowdiagram,whichofthefollowingitemsdoesnotflowfromfirmstohouseholds?a. goodsb. servicesc. capitald. profit




98. Inthecircular-flowdiagram,whichofthefollowingitemsflowsfromhouseholdstofirmsthroughthemarketsforgoodsandservices?a. goodsandservicesb. dollarspaidtoland,labor,andcapitalc. dollarsspentongoodsandservicesd. wages,rent,andprofit






99. Inthecircular-flowdiagram,whichofthefollowingitemsflowsfromfirmstohouseholdsthroughthemarketsforgoodsandservices?

a. goodsandservicesb. dollarspaidtoland,labor,andcapitalc. dollarsspentongoodsandservicesd. wages,rent,andprofit




100. Inthecircular-flowdiagram,whichofthefollowingitemsflowsfromfirmstohouseholdsthroughthemarketsforthefactorsofproduction?

a. goodsandservicesb. land,labor,andcapitalc. dollarsspentongoodsandservicesd. wages,rent,andprofit






101. Inthecircular-flowdiagram,whichofthefollowingitemsflowsfromhouseholdstofirmsthroughthemarketsforthefactorsofproduction?

a. goodsandservicesb. land,labor,andcapitalc. dollarsspentongoodsandservicesd. wages,rent,andprofit




102. Inthecircular-flowdiagram,whichofthefollowingitemsrepresentsapaymentforafactorofproduction?a. interestb. capitalc. spendingbyhouseholdsongoodsd. spendingbyhouseholdsonservices






103. Inthesimplecircularflowdiagram,theflowofmoneyfromthefirmstothemarketsforfactorsofproductioniscalled

a. spending.b. revenue.c. income.d. wages,rent,andprofit.




104. Inthesimplecircularflowdiagram,theflowofmoneyfromthemarketsforgoodsandservicestothefirmsiscalled

a. spending.b. revenue.c. income.d. wages,rent,andprofit.






105. Amongeconomicmodels,thecircular-flowdiagramisunusualinthatita. drasticallysimplifiestherealworld.b. featuresmorethanonetypeofmarket.c. featuresflowsofdollars.d. doesnotinvolvemathematics.




106. Accordingtothecircularflowdiagram,ifSuzyisaworkerwhodeliversflowersforHappyDayFlowerCompany,sheparticipates

a. inthemarketsforfactorsofproductionexchanginglaborforincome.b. inthemarketsforfactorsofproductionexchangingflowersforrevenue.c. inthemarketsforgoodsandservicesexchangingflowersforwages,rent,andprofit.d. inthemarketsforgoodsandservicesexchanginglaborforincome.






107. Accordingtothecircularflowdiagram,ifDennyistheownerofalandscapingbusinessandhejustreceived$50formowingMrs.Pendleton’slawn,

a. the$50representsacostofproductionforDenny’sfirm.b. the$50representswages,rent,andprofittoDenny’sfirm.c. DennyactsasafirmwhointeractedinthemarketsforfactorsofproductionwithMrs.Pendleton.

d. DennyactsasafirmwhointeractedinthemarketsforgoodsandserviceswithMrs.Pendleton.




Figure2-1



108. RefertoFigure2-1.Whicharrowrepresentstheflowofgoodsandservices?a. Ab. Bc. Cd. D




109. RefertoFigure2-1.Whicharrowrepresentstheflowofspendingbyhouseholds?a. Ab. Bc. Cd. D






110. RefertoFigure2-1.Whicharrowrepresentstheflowofland,labor,andcapital?a. Ab. Bc. Cd. D




111. RefertoFigure2-1.Whicharrowrepresentstheflowofincomepayments?a. Ab. Bc. Cd. D






112. RefertoFigure2-1.Raymondbuysarefrigeratorforhisnewhome.Towhichofthearrowsdoesthistransactiondirectlycontribute?

a. Aonlyb. AandBc. Conlyd. CandD




113. RefertoFigure2-1.Harveyreceiveshisfirstpaycheckforworkingasanicecreamvendor.Towhichofthearrowsdoesthistransactiondirectlycontribute?

a. Bonlyb. AandBc. Conlyd. CandD








Figure2-2

114. RefertoFigure2-2.BoxesAandBofthiscircular-flowdiagramrepresenta. firmsandhouseholds.b. householdsandgovernment.c. themarketsforgoodsandservicesandthemarketsforfinancialassets.d. themarketsforgoodsandthemarketsforservices.




115. RefertoFigure2-2.BoxesCandDofthiscircular-flowdiagramrepresenta. householdsandgovernment.b. firmsandgovernment.c. themarketsforgoodsandservicesandthemarketsforfinancialassets.d. themarketsforgoodsandservicesandthemarketsforfactorsofproduction.

ANSWER: dPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:Analytic



TOPICS:



116. RefertoFigure2-2.IfBoxAofthiscircular-flowdiagramrepresentsfirms,thenwhichboxrepresentshouseholds?

a. BoxBb. BoxCc. BoxDd. Anyoneoftheotherboxes(B,C,orD)couldrepresenthouseholds.




117. RefertoFigure2-2.IfhouseholdsaresellersinthemarketsrepresentedbyBoxDofthiscircular-flowdiagram,then

a. BoxDmustrepresentthemarketsforfactorsofproduction.b. BoxCmustrepresentthemarketsforgoodsandservices.c. firmsarebuyersinthemarketsrepresentedbyBoxD.d. Alloftheabovearecorrect.








118. RefertoFigure2-2.IfhouseholdsarebuyersinthemarketsrepresentedbyBoxCofthiscircular-flowdiagram,then

a. BoxCmustrepresentthemarketsforthefactorsofproduction.b. BoxDmustrepresentthemarketsforgoodsandservices.c. firmsaresellersinthemarketsrepresentedbyBoxC.d. Alloftheabovearecorrect.




119. RefertoFigure2-2.Iftheownersofland,labor,andcapitalarerepresentedbyBoxBofthiscircular-flowdiagram,then

a. householdsarerepresentedbyBoxA.b. firmsarerepresentedbyBoxC.c. firmsarerepresentedbyBoxA.d. firmsaresellersinBoxB.






120. RefertoFigure2-2.Iftheouterloopofthiscircular-flowdiagramrepresentsflowsofdollars,thentheinnerloopincludes

a. flowsofgoodsandservicesfromhouseholdstofirms.b. flowsofinputsfromhouseholdstofirms.c. flowsofrentpaymentspaidtoownersofland.d. flowsofwagesandsalariespaidtoworkers.




121. RefertoFigure2-2.Iftheflowofgoodsandservicesispartofwhatisrepresentedbytheinnerloopofthiscircular-flowdiagram,then

a. theflowoffactorsofproductionisalsopartofwhatisrepresentedbytheinnerloop.b. theflowofincomepaidtohouseholdsisalsopartofwhatisrepresentedbytheinnerloop.c. theflowofrevenuetofirmsisalsopartofwhatisrepresentedbytheinnerloop.d. householdsmustbesellersofoutput.






122. RefertoFigure2-2.Devinworksasanattorneyforacorporationandispaidasalaryinexchangeforthelegalservicesheperforms.Juanownsofficebuildingsandrentshisbuildingstocompaniesinexchangeforrentpayments.IfDevin’sincomeisrepresentedbyaflowofdollarsfromBoxDtoBoxBofthiscircular-flowdiagram,thenJuan’sincomeisrepresentedbyaflowofdollars

a. fromBoxAtoBoxC.b. fromBoxCtoBoxA.c. fromBoxBtoBoxD.d. fromBoxDtoBoxB.

ANSWER: dPOINTS: 1DIFFICULTY: Difficulty:ChallengingLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:


KEYWORDS: BLOOM'S:Analysis

123. RefertoFigure2-2.Carlaregularlybuysfruitsandvegetablesatagrocerystore.Robertoregularlypaysalawn-carecompanytomowhislawn.IftheflowoffruitsandvegetablesfromthegrocerystoretoCarlaisrepresentedbyanarrowfromBoxCtoBoxBofthiscircular-flowdiagram,thenthemoneypaidbyRobertotothelawn-carecompanyisrepresentedbyanarrow

a. fromBoxAtoBoxD.b. fromBoxBtoBoxC.c. fromBoxCtoBoxB.d. fromBoxDtoBoxA.

ANSWER: bPOINTS: 1DIFFICULTY: Difficulty:ChallengingLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:







Figure2-3

124. RefertoFigure2-3.Whichshapereferstothemarketsforgoodsandservices?a. ovalAb. ovalBc. rectangle1d. rectangle2






125. RefertoFigure2-3.Whatisflowingfromrectangle1toovalA?a. revenueb. goodsandservicessoldc. factorsofproductiond. labor,land,andcapital




126. RefertoFigure2-3.Whichofthefollowingisanactivityundertakenbytheactorsinrectangle2?a. produceandsellgoodsandservicesb. hireandusefactorsofproductionc. ownandsellfactorsofproductiond. exchangegoodsandservicesbetweenfirmsandhouseholds






127. Theproductionpossibilitiesfrontierisagraphthatshowsthevariouscombinationsofoutputthataneconomycanpossiblyproducegiventheavailablefactorsofproductionand

a. society’spreferences.b. theavailableproductiontechnology.c. afairdistributionoftheoutput.d. theavailabledemandfortheoutput.

ANSWER: bPOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ProductionPossibilitiesModelKEYWORDS: BLOOM'S:Knowledge

128. Theproductionpossibilitiesfrontierisagraphthatshowsthevariouscombinationsofoutputthataneconomy

a. shouldproduce.b. wantstoproduce.c. canproduce.d. demands.

ANSWER: cPOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ProductionPossibilitiesModelKEYWORDS: BLOOM'S:Knowledge



129. Whenconstructingaproductionpossibilitiesfrontier,whichofthefollowingassumptionsisnotmade?a. Theeconomyproducesonlytwogoodsortwotypesofgoods.b. Firmsproducegoodsusingfactorsofproduction.c. Thetechnologyavailabletofirmsisgiven.

d. Thequantitiesofthefactorsofproductionthatareavailableareincreasingovertherelevanttimeperiod.

ANSWER: dPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ProductionPossibilitiesModelKEYWORDS: BLOOM'S:Comprehension

130. Anypointonacountry'sproductionpossibilitiesfrontierrepresentsacombinationoftwogoodsthataneconomy

a. willneverbeabletoproduce.b. canproduceusingallavailableresourcesandtechnology.c. canproduceusingsomeportion,butnotall,ofitsresourcesandtechnology.d. maybeabletoproduceinthefuturewithmoreresourcesand/orsuperiortechnology.

ANSWER: bPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ProductionPossibilitiesModelKEYWORDS: BLOOM'S:Comprehension



131. Whichofthefollowingisnotanassumptionoftheproductionspossibilitiesfrontier?a. Acountryproducesonlytwogoodsortypesofgoods.b. Technologydoesnotchange.c. Theamountofavailableresourcesdoesnotchange.d. Thereisafixedquantityofmoney.


132. Whichofthefollowingisacorrectstatementaboutproductionpossibilitiesfrontiers?a. Aneconomycanproduceonlyontheproductionpossibilitiesfrontier.b. Aneconomycanproduceatanypointinsideoroutsideaproductionpossibilitiesfrontier.

c. Aneconomycanproduceatanypointonorinsidetheproductionpossibilitiesfrontier,butnotoutsidethefrontier.

d. Aneconomycanproduceatanypointinsidetheproductionpossibilitiesfrontier,butnotonoroutsidethefrontier.

ANSWER: cPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ProductionPossibilitiesModelKEYWORDS: BLOOM'S:Comprehension



133. Wherecananeconomynotproduce?a. insideitsproductionpossibilitiesfrontierb. onitsproductionpossibilitiesfrontierc. outsideitsproductionpossibilitiesfrontierd. attheendpointsofitsproductionpossibilitiesfrontier


134. Aneconomicoutcomeissaidtobeefficientiftheeconomyisa. usingallofthescarceresourcesithasavailable.b. conservingonresources,ratherthanusingallavailableresources.c. gettingallitcangetfromthescarceresourcesithasavailable.d. abletoproducemorethanwhatiscurrentlybeingproducedwithoutadditionalresources.


DISC:ProductionPossibilitiesModelProductiveEfficiency




135. Productionisefficientiftheeconomyisproducingatapointa. ontheproductionpossibilitiesfrontier.b. outsidetheproductionpossibilitiesfrontier.c. onorinsidetheproductionpossibilitiesfrontier.d. insidetheproductionpossibilitiesfrontier.


DISC:ProductionPossibilitiesModelEfficiency


136. Ifaneconomyisproducingefficiently,thena. thereisnowaytoproducemoreofonegoodwithoutproducinglessofanothergood.

b. itispossibletoproducemoreofbothgoodswithoutincreasingthequantitiesofinputsthatarebeingused.c. itispossibletoproducemoreofonegoodwithoutproducinglessofanothergood.d. itisnotpossibletoproducemoreofanygoodatanycost.






137. Aneconomy’sproductionoftwogoodsisefficientifa. allmembersofsocietyconsumeequalportionsofthegoods.b. thegoodsareproducedusingonlysomeofsociety’savailableresources.c. itisimpossibletoproducemoreofonegoodwithoutproducinglessoftheother.d. theopportunitycostofproducingmoreofonegoodiszero.




138. Whenaneconomyisoperatingatapointonitsproductionpossibilitiesfrontier,thena. consumersarecontentwiththemixofgoodsandservicesthatisbeingproduced.b. thereisnowaytoproducemoreofonegoodwithoutproducinglessoftheother.c. equalamountsofthetwogoodsarebeingproduced.d. Alloftheabovearecorrect.






139. Efficiencyisillustratedbya. boththeproductionpossibilitiesfrontierandthecircular-flowdiagram.b. neithertheproductionpossibilitiesfrontiernorthecircular-flowdiagram.c. theproductionpossibilitiesfrontieronly.d. thecircular-flowdiagramonly.




140. Supposeanationiscurrentlyproducingatapointinsideitsproductionpossibilitiesfrontier.Weknowthata. thenationisproducingbeyonditscapacity,soinflationwilloccur.b. thenationisnotusingallavailableresourcesorisusinginferiortechnologyorboth.c. thenationisproducinganefficientcombinationofgoods.d. therewillbealargeopportunitycostifthenationtriestoincreaseproductionofanygood.






141. Whenaneconomyisoperatinginsideitsproductionpossibilitiesfrontier,weknowthata. thereareunusedresourcesorinefficienciesintheeconomy.b. alloftheeconomy’sresourcesarefullyemployed.

c. economicgrowthwouldhavetooccurinorderfortheeconomytomovetoapointonthefrontier.d. inordertoproducemoreofonegood,theeconomywouldhavetogiveupsomeoftheothergood.




142. Itispossibleforaneconomytoincreaseitsproductionofbothgoodsiftheeconomya. mov

esdownwardandtotherightalongitsproductionpossibilitiesfrontierandthefrontierisbowedoutward.b. movesupwardandtotheleftalongitsproductionpossibilitiesfrontierandthefrontierisbowedoutward.c. movesineitherdirectionalongitsproductionpossibilitiesfrontierandthefrontierisastraightline.d. movesfromasituationofinefficientproductiontoasituationofefficientproduction.






143. Unemploymentwouldcauseaneconomytoa. produceinsideitsproductionpossibilitiesfrontier.b. produceonitsproductionpossibilitiesfrontier.c. produceoutsideitsproductionpossibilitiesfrontier.d. experienceaninwardshiftofitsproductionpossibilitiesfrontier.

ANSWER: aPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ProductionPossibilitiesModelKEYWORDS: BLOOM'S:Comprehension

144. Theproductionpossibilitiesfrontierprovidesanillustrationoftheprinciplethata. tradecanmakeeveryonebetteroff.b. governmentscansometimesimprovemarketoutcomes.c. peoplefacetrade-offs.d. peoplerespondtoincentives.


DISC:ProductionPossibilitiesModelTradeoffs


145. Theproductionpossibilitiesfrontierillustratesa. thetrade-offbetweenefficiencyandequality.b. thecombinationofoutputthataneconomyshouldproduce.c. thecombinationofoutputthateachmemberofsocietyshouldconsume.d. Noneoftheaboveiscorrect.

ANSWER: dPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:Analytic



TOPICS: DISC:ProductionPossibilitiesModelKEYWORDS: BLOOM'S:Comprehension

146. Whichofthefollowingtrade-offsdoestheproductionpossibilitiesfrontierillustrate?a. Ifaneconomywantstoincreaseefficiencyinproduction,thenitmustsacrificeequalityinconsumption.b. On

ceaneconomyhasreachedtheefficientpointsonitsproductionpossibilitiesfrontier,theonlywayofgettingmoreofonegoodistogetlessoftheother.

c. Foraneconomytoconsumemoreofonegood,itmuststopconsumingtheothergoodentirely.d. Foraneconomytoproduceandconsumegoods,itmustsacrificeenvironmentalquality.




147. Whichofthefollowingconceptscannotbeillustratedbytheproductionpossibilitiesfrontier?a. efficiencyb. opportunitycostc. equalityd. trade-offs




148. Theopportunitycostofobtainingmoreofonegoodisshownontheproductionpossibilitiesfrontierasthea. amountoftheothergoodthatmustbegivenup.b. marketpriceoftheadditionalamountproduced.c. amountofresourcesthatmustbedevotedtoitsproduction.d. numberofdollarsthatmustbespenttoproduceit.


DISC:ProductionPossibilitiesModelOpportunityCost


149. Thebowedshapeoftheproductionpossibilitiesfrontiercanbeexplainedbythefactthata. allresourcesarescarce.b. economicgrowthisalwaysoccurring.

c. theopportunitycostofonegoodintermsoftheotherdependsonhowmuchofeachgoodtheeconomyisproducing.

d. theonlywaytogetmoreofonegoodistogetlessoftheother.






150. Economistsbelievethatproductionpossibilitiesfrontiersareoftenbowedbecausea. trade-offsinevitablycreateunemployment.b. resourcesarenotcompletelyadaptable.c. opportunitycostsareconstant.d. ofimprovementsintechnology.


151. Onabowedproductionpossibilitiesfrontier,asyoumovedownalongthecurvea. moreofonegoodmustbegivenuptoreceiveoneunitoftheothergood.b. theavailableproductiontechnologydoesnotchange.c. theopportunitycostincreases.d. Alloftheabovearecorrect.




152. Whenaproductionpossibilitiesfrontierisbowedoutward,theopportunitycostofproducinganadditionalunitofagood

a. increasesasmoreofthegoodisproduced.b. decreasesasmoreofthegoodisproduced.c. doesnotchangeasmoreofthegoodisproduced.d. mayincrease,decrease,ornotchangeasmoreofthegoodisproduced.




153. Productionpossibilitiesfrontiersareusuallybowedoutward.Thisisbecausea. t

hemoreresourcesasocietyusestoproduceonegood,thefewerresourcesithasavailabletoproduceanothergood.

b. theopportunitycostofproducingagooddecreasesasmoreandmoreofthatgoodisproduced.c. oftheeffectsoftechnologicalchange.d. resourcesarespecialized;thatis,somearebetteratproducingparticulargoodsratherthanothergoods.


DISC:ProductionPossibilitiesModelTradeoff




154. Economistsbelievethatproductionpossibilitiesfrontiersa. neverhaveabowedshape.b. rarelyhaveabowedshape.c. oftenhaveabowedshape.d. alwayshaveabowedshape.


Table2-1

Thefollowingtablecontainssomeproductionpossibilitiesforaneconomyforagivenmonth.

Hammers Nails3 9006 ?9 300

155. RefertoTable2-1.Iftheproductionpossibilitiesfrontierisbowedoutward,then“?”couldbea. 400.b. 450.c. 600.d. 750.








Table2-2

Thefollowingtablecontainssomeproductionpossibilitiesforaneconomyforagivenyear:

TennisRackets TennisBalls100 8000200 6500300 ?

156. RefertoTable2-2.Iftheproductionpossibilitiesfrontierisbowedoutward,then"?"couldbea.6000.b.5500.c.5000.d.4500.




157. Aproductionpossibilitiesfrontiercanshiftoutwardifa. governmentincreasestheamountofmoneyintheeconomy.b. thereisatechnologicalimprovement.c. resourcesareshiftedfromtheproductionofonegoodtotheproductionoftheothergood.d. theeconomyabandonsinefficientproductionmethodsinfavorofefficientproductionmethods.




158. Aproductionpossibilitiesfrontiershiftsoutwardwhena. theeconomyexperienceseconomicgrowth.b. thedesiresoftheeconomy’scitizenschange.c. atleastoneofthebasicprinciplesofeconomicsisviolated.d. opportunitycostsarelessened.


DISC:ProductionPossibilitiesModelGrowth


159. Inacertaineconomy,jamandbreadareproduced,andtheeconomycurrentlyoperatesonitsproductionpossibilities frontier.Whichofthefollowingeventswouldallowtheeconomytoproducemorejamandmorebread,relativetothequantitiesofthosegoodsthatarebeingproducednow?

a. Unemployedlaborisputtoworkproducingjamandbread.b. Theeconomyputsitsidlecapitaltoworkproducingjamandbread.c. Theeconomyexperienceseconomicgrowth.d. Alloftheabovearecorrect.






160. Inacertaineconomy,toysandgreetingcardsareproduced,andtheeconomycurrentlyoperatesonitsproductionpossibilities frontier.Whichofthefollowingeventswouldallowtheeconomytoproducemoretoysandmoregreetingcards,relativetothequantitiesofthosegoodsthatarebeingproducednow?a. Theeconomyexperienceseconomicgrowth.b. The

reisatechnologicaladvanceinthetoyindustry,butthegreetingcardindustryexperiencesnosuchadvance.

c. Thereisatechnologicaladvanceinthegreetingcardindustry,butthetoyindustryexperiencesnosuchadvance.

d. Alloftheabovearecorrect.




161. ThecountryofGeranceproducestwogoods,carsandwine.Lastyear,itproduced1,000carsand15,000casesofwine.Thisyear,itproduced1,300carsand20,000casesofwine.Givennootherinformation,whichof thefollowingeventscouldnotexplainthischange?

a. Geranceexperiencedareductioninunemployment.b. Geranceexperiencedanimprovementincar-makingtechnology.c. Geranceacquiredmoreresources.d. Anyoftheseeventscouldexplainthechange.








162. Supposeaneconomyproducestwogoods,foodandmachines.Thiseconomyalwaysoperatesonitsproductionpossibilitiesfrontier.Lastyear,itproduced1000unitsoffoodand47machines.Thisyear,itisproducing1050unitsoffoodand52machines.Whichofthefollowingeventscouldnotexplaintheincreaseinoutput?

a. areductioninunemploymentb. anincreaseinavailablelaborc. animprovementintechnologyd. Anyoftheseeventscouldexplaintheincreaseinoutput.




163. Supposeaneconomyproducestwogoods,foodandmachines.Thiseconomyalwaysoperatesonitsproductionpossibilitiesfrontier.Lastyear,itproduced1000unitsoffoodand47machines.Thisyearitexperiencedatechnologicaladvanceinitsmachine-makingindustry.Asaresult,thisyearthesocietywantstoproduce1050unitsoffoodand47machines.Whichofthefollowingstatementsiscorrect?a. Becausethetechnologicaladvanceoccurredinthemachine-

makingindustry,itwillnotbepossibletoincreasefoodproductionwithoutreducingmachineproductionbelow47.

b. Becausethetechnologicaladvanceoccurredinthemachine-makingindustry,increasesinoutputcanonlyoccurinthemachineindustry.

c. Inordertoincreasefoodproductioninthesecircumstanceswithoutreducingmachineproduction,theeconomymustreduceinefficiencies.

d. Thetechnologicaladvancereducedtheamountofresourcesneededtoproduce47machines,sotheseresourcescouldbeusedtoproducemorefood.

ANSWER: dPOINTS: 1DIFFICULTY: Difficulty:ChallengingLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1



NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:





164. Supposeaneconomyonlyproducestwogoods,robotsandicecream.Lastmonth,theeconomyproduced10robotsand200gallonsoficecream.Thismonth,thesameeconomyproduced15robotsand240gallonsoficecream.Whichofthefollowingstatementscouldexplainthischange?

a. Thismonth,theeconomyreducedtheunemploymentofitsresources.b. Thismonth,theeconomyexperiencedanimprovementintechnology.c. Thismonth,theeconomyexperiencedanincreaseinresourcesd. Alloftheabovearecorrect.




165. Acertainproductionpossibilitiesfrontiershowsproductionpossibilitiesfortwogoods,jewelryandclothing.Whichofthefollowingconceptscannotbeillustratedbythismodel?

a. theflowofdollarsbetweensellersofjewelryandclothingandbuyersofjewelryandclothingb. thetradeoffbetweenproductionofjewelryandproductionofclothingc. theopportunitycostofclothingintermsofjewelryd. theeffectofeconomicgrowthonproductionpossibilitiesinvolvingjewelryandclothing

ANSWER: aPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ProductionPossibilitiesModelKEYWORDS: BLOOM'S:Application



166. Theproductionpossibilitiesfrontierisusedtoillustratesomebasiceconomicideas,includinga. scarcity.b. opportunitycost.c. economicgrowth.d. Alloftheabovearecorrect.

ANSWER: dPOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ProductionPossibilitiesModelKEYWORDS: BLOOM'S:Knowledge

Table2-3

ProductionPossibilitiesforFootville

Shoes Socks800 0600 400400 700200 9000 1000

167. RefertoTable2-3.WhatistheopportunitycosttoFootvilleofincreasingtheproductionofshoesfrom400to600?

a. 400socksb. 300socksc. 200socksd. 100socks






NOTES: r

168. RefertoTable2-3.Whichofthefollowingstatementsiscorrect?a. Theopportunitycostofanadditional200shoesisconstantat200socks.b. Theopportunitycostofanadditional200shoesisconstantat300socks.c. Footville’sproductionpossibilitiesfrontierisastraight,downwardslopingline.d. Theopportunitycostofanadditional200shoesincreasesasmoresocksareproduced.




Table2-4

ProductionPossibilitiesforPicnicland

Hotdogs Burgers1800 01350 450900 750450 9750 1125

169. RefertoTable2-4.WhatistheopportunitycosttoPicniclandofincreasingtheproductionofhotdogsfrom450to900?

a. 150burgersb. 225burgersc. 300burgersd. 450burgers

ANSWER: bPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1






170. RefertoTable2-4.WhatistheopportunitycosttoPicniclandofincreasingtheproductionofburgersfrom450to750?

a. 150hotdogsb. 225hotdogsc. 300hotdogsd. 450hotdogs



KEYWORDS: BLOOM'S:ComprehensionNOTES: n

Figure2-4





171. RefertoFigure2-4.Atwhichpointisthiseconomyproducingitsmaximumpossiblequantityofdoors?a. Rb. Sc. Td. U




172. RefertoFigure2-4.Thiseconomyhastheabilitytoproduceatwhichpoint(s)?a. Q,R,T,Ub. R,T,Uc. R,Ud. T

ANSWER: bPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ProductionPossibilitiesModelKEYWORDS: BLOOM'S:ApplicationNOTES: r



173. RefertoFigure2-4.Thiseconomycannotproduceatwhichpoint(s)?a. Qb. Q, Sc. Q,S,Td. S


174. RefertoFigure2-4.Efficientproductionisrepresentedbywhichpoint(s)?a. Q,R,Ub. R,T,Uc. R,Ud. S,T


DISC:ProductionPossibilitiesModelProduction




175. RefertoFigure2-4.Inefficientproductionisrepresentedbywhichpoint(s)?a. Q, Sb. Q,S,Tc. R,Ud. T




176. RefertoFigure2-4.Unemploymentcouldcausethiseconomytoproduceatwhichpoint(s)?a. Q, Sb. Q,S,Tc. R,Ud. T

ANSWER: dPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ProductionPossibilitiesModelKEYWORDS: BLOOM'S:ApplicationNOTES: r



Figure2-5

177. RefertoFigure2-5.Ifthiseconomydevotesallofitsresourcestotheproductionofdryers,thenitwillproduce

a. 0dryersand100washers.b. 60dryersand50washers.c. 80dryersand0washers.d. 80dryersand50washers.


DISC:ProductionPossibilitiesModelSpecialization




178. RefertoFigure2-5.Itispossibleforthiseconomytoproducea. 60dryersand50washers.b. 60dryersand60washers.c. 80dryersand50washers.d. Alloftheabove.

ANSWER: aPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ProductionPossibilitiesModelKEYWORDS: BLOOM'S:ApplicationNOTES: r

179. RefertoFigure2-5.Itisnotpossibleforthiseconomytoproduceatpointa. A.b. B.c. C.d. D.

ANSWER: cPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ProductionPossibilitiesModelKEYWORDS: BLOOM'S:ApplicationNOTES: r



180. RefertoFigure2-5.Thiseconomycannotcurrentlyproduce70washersand70dryersbecausea. itisnotusingallofitsresources.b. itisnotusingthemostefficientproductionprocess.c. itdoesnothavetheresourcesandtechnologytoproducethatlevelofoutput.d. Alloftheabovearecorrect.


181. RefertoFigure2-5.SupposethiseconomyisproducingatpointD.Whichofthefollowingstatementswouldbestexplainthissituation?

a. Theeconomyhasinsufficientresourcestoproduceatamoredesirablepoint.b. Theeconomy’savailabletechnologypreventsitfromproducingatamoredesirablepoint.c. Thereiswidespreadunemploymentintheeconomy.d. Anyoftheabovestatementswouldbealegitimateexplanationforthissituation.




182. RefertoFigure2-5.Efficientproductionisrepresentedbywhichpoint(s)?a. A,Bb. A,B,Dc. A,B,Cd. C




183. RefertoFigure2-5.Inefficientproductionisrepresentedbywhichpoint(s)?a. A,Bb. Cc. C,Dd. D






184. RefertoFigure2-5.TheopportunitycostofthiseconomymovingfrompointAtopointBisa. 20dryers.b. 20washers.c. 20dryersand20washers.d. 60dryers.




185. RefertoFigure2-5.Theopportunitycostofobtaining40 additionaldryersbymovingfrompointDtopointCis

a. 0washers.b. 20washers.c. 40washers.d. Noneoftheabove;theeconomycannotmovefrompointDtopointC.






186. RefertoFigure2-5.Theopportunitycostofobtaining20additionaldryers bymovingfrompointDtopointAis

a. 0washers.b. 20washers.c. 40washers.d. Noneoftheabove;theeconomycannotmovefrompointDtopointA.




Figure2-6



187. RefertoFigure2-6.Ifthiseconomydevotesallofitsresourcestotheproductionofblankets,thenitwillproduce

a. 0blanketsand360pillows.b. 200blanketsand240pillows.c. 320blanketsand120pillows.d. 360blanketsand0pillows.




188. RefertoFigure2-6.Ifthiseconomydevotesone-halfofitsavailableresourcestotheproductionofblanketsandtheotherhalftotheproductionofpillows,itcouldproduce

a. 120pillowsand320blankets.b. 180pillowsand180blankets.c. 240pillowsand200blankets.d. Wewouldhavetoknowthedetailsofthiseconomy’stechnologyinordertodeterminethis.

ANSWER: dPOINTS: 1DIFFICULTY: Difficulty:ChallengingLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ProductionPossibilitiesModelKEYWORDS: BLOOM'S:AnalysisNOTES: r



189. RefertoFigure2-6.AmovementfrompointHtopointKcouldbecausedbya. unemployment.b. adecreaseinsociety'spreferenceforpillows.c. fewerresourcesavailableforproductionofpillows.d. Alloftheabovearecorrect.


190. RefertoFigure2-6.IfthiseconomymovesfrompointFtopointG,thenwhichofthefollowingstatementsiscorrect?a. Thiseconomyhasmovedfromapointofinefficientproductiontoapointofefficientproduction.

b. Thiseconomyhasexperiencedeconomicgrowth.c. Thiseconomyhasexperiencedanincreaseinemployment.d. Noneoftheaboveiscorrect.






191. RefertoFigure2-6.TheopportunitycostofthiseconomymovingfrompointItopointHisa. 120pillows.b. 120blankets.c. 120blanketsand120pillows.d. 200blankets.




192. RefertoFigure2-6.The opportunitycostof thiseconomy movingfrom pointI topointF isa. zero.b. 40blankets.c. 120pillows.d. 360blankets.






193. RefertoFigure2-6.TheopportunitycostofthiseconomymovingfrompointKtopointHisa. zero.b. 50blankets.c. 60pillows.d. 50blanketsand60pillows.




Figure2-7



194. RefertoFigure2-7.Ifthiseconomydevotesallofitsresourcestotheproductionofengines,thenitwillproduce

a. 0enginesand40tvs.b. 10enginesand35tvs.c. 40enginesand0tvs.d. 40enginesand40tvs.




195. RefertoFigure2-7.Thiseconomyhastheabilitytoproduceatwhichpoint(s)?a. N,O,Pb. L,Mc. L,M,N,O,Pd. L, M,Q




196. RefertoFigure2-7.Thiseconomycannotproduceatwhichpoint(s)?a. L,Mb. N,O,P,Qc. N,O,Pd. Q

ANSWER: dPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ProductionPossibilitiesModelKEYWORDS: BLOOM'S:ApplicationNOTES: r

197. RefertoFigure2-7.Efficientproductionisrepresentedbywhichpoint(s)?a. L,Mb. L,M,N,P,Qc. N,O,Pd. Q






198. RefertoFigure2-7.Inefficientproductionisrepresentedbywhichpoint(s)?a. L,Mb. N,O,P,Qc. N,O,Pd. Q




199. RefertoFigure2-7.Unemploymentcouldcausethiseconomytoproduceatwhichpoint(s)?a. L,Mb. N,O,P,Qc. N,O,Pd. Q




200. RefertoFigure2-7.IfthiseconomymovedfrompointPtopointN,thena. itstillwouldnotbeproducingefficiently.b. therewouldbenogainineitherenginesortvs.c. itwouldbeproducingmoreenginesandmoretvsthanatpointP.d. ItisnotpossibleforthiseconomytomovefrompointPtopointNwithoutadditionalresources.


201. RefertoFigure2-7.WhatistheopportunitycostofmovingfrompointLtopointM?a. zerob. 15tvsc. 20enginesand15tvsd. 20engines


DISC:ProductionPossibilitiesModelopportunityCost




202. RefertoFigure2-7.WhatistheopportunitycostofmovingfrompointMtopointL?a. zerob. 15tvsc. 20enginesand15tvsd. 20engines




Figure2-8

203. RefertoFigure2-8.PointKrepresentsanoutcomeinwhicha. productionisinefficient.b. someoftheeconomy’sresourcesareunemployed.c. theeconomyisusingallofitsresourcestoproducehammers.d. theeconomyisusingallofitsnailstoproducehammers.






204. RefertoFigure2-8.Whichpointonthegraphbestrepresentsthefactthat,becauseresourcesarescarce,noteveryconceivableoutcomeisfeasible?

a. pointJb. pointKc. pointLd. pointM

ANSWER: cPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ProductionPossibilitiesModelKEYWORDS: BLOOM'S:Application

205. RefertoFigure2-8.Efficientproductionisrepresentedbywhichpoint(s)?a. Jb. J,Kc. J,K,Ld. J,K,M






206. RefertoFigure2-8.Inefficientproductionisrepresentedbywhichpoint(s)?a. K,Mb. Lc. L,Md. M




207. RefertoFigure2-8.ToreachpointL,theeconomywouldhavetoa. acquiremoreresourcesorexperienceatechnologicaladvance.b. beginusingitsavailableresourcesmoreefficientlythanitiscurrentlyusingthem.c. shiftresourcesawayfromtheproductionofnailsandtowardtheproductionofhammers.d. Noneoftheabovearecorrect;theeconomywillneverbeabletoreachpointL.






208. RefertoFigure2-8.Forthiseconomy,asmoreandmorehammersareproduced,theopportunitycostofanadditionalhammerproduced,intermsofnails,

a. remainsconstant.b. increases.c. decreases.d. Thisanswercannotbedeterminedfromthegraph.




Figure2-9

Panel (a) Panel(b)



209. RefertoFigure2-9,Panel(a).ProductionatpointKisa. possibleandefficient.b. possiblebutinefficient.c. impossiblebutefficient.d. impossibleandinefficient.




210. RefertoFigure2-9,Panel(a).Productionisa. possible atpointsJ,K,L,andM,butefficientonlyat pointsJ,L,andM.b. possibleatpointsJ,K,L,andM,butefficientonlyatpointK.c. possible atpointsJ,L,M,andN,butefficientonlyat pointsJ,L,andM.d. possibleatpointsJ,L,M,andN,butefficientonlyatpointN.






211. RefertoFigure2-9,Panel(a).ThemovementfrompointMtopointKcouldbecausedbya. anadvanceinproductiontechnology.b. animprovementinefficiency.c. economicgrowth.d. unemployment.

ANSWER: dPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ProductionPossibilitiesModelKEYWORDS: BLOOM'S:Application

212. RefertoFigure2-9,Panel(a).The opportunitycostof movingfrom pointJ topoint Lisa. 2donuts.b. 2donutsand2cupsofcoffee.c. 2cupsofcoffee.d. 6cupsofcoffee.

ANSWER: cPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ProductionPossibilitiesModelKEYWORDS: BLOOM'S:Application

213. RefertoFigure2-9,Panel(a).The opportunitycostof movingfrompoint Mtopoint Lisa. 2donuts.b. 2donutsand4cupsofcoffee.c. 4donuts.d. 4cupsofcoffee.




214. RefertoFigure2-9,Panel(a).The opportunitycost ofmovingfrom pointK topointL isa. 0cupsofcoffee.b. 1donut.c. 2donuts.d. 4cupsofcoffee.


215. RefertoFigure2-9,Panel(a).Theopportunitycostofonecupofcoffeeishighestwhentheeconomyproduces

a. 0cupsofcoffee.b. 2cupsofcoffee.c. 4cupsofcoffee.d. 6cupsofcoffee.

ANSWER: dPOINTS: 1DIFFICULTY: Difficulty:ChallengingLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ProductionPossibilitiesModelKEYWORDS: BLOOM'S:Analysis



216. RefertoFigure2-9,Panel(a).Togain2donutsbymovingfrompointLtopointM,societymustsacrificea. efficiency.b. employment.c. 4cupsofcoffee.d. Morethanoneoftheaboveiscorrect.

ANSWER: cPOINTS: 1DIFFICULTY: Difficulty:ChallengingLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:


KEYWORDS: BLOOM'S:AnalysisNOTES: s

217. RefertoFigure2-9,Panel(a)andPanel(b).Ashiftoftheeconomy’sproductionpossibilitiesfrontierfromPanel(a)toPanel(b)couldbecausedby

a. unemployment.b. animprovementindonutproductiontechnology.c. animprovementincoffeeproductiontechnology.d. animprovementinbothdonutandcoffeeproductiontechnology.

ANSWER: bPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ProductionPossibilitiesModelKEYWORDS: BLOOM'S:Application



218. RefertoFigure2-9,Panel(a)andPanel(b).Whichofthefollowingisnotaresultoftheshiftoftheeconomy’sproductionpossibilitiesfrontierfromPanel(a)toPanel(b)?

a. thetradeoffbetweentheproductionofdonutsandcoffeechangesb. theopportunitycostofacupofcoffeeishigheratalllevelsofcoffeeproductionc. productionof4donutsand2cupsofcoffeebecomespossibled. productionof1donutand4cupsofcoffeebecomesefficient

ANSWER: dPOINTS: 1DIFFICULTY: Difficulty:ChallengingLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ProductionPossibilitiesModelKEYWORDS: BLOOM'S:Analysis

Figure2-10

Panel (a) Panel(b)



219. RefertoFigure2-10,Panel(a).ProductionatpointYisa. impossibleandinefficient.b. impossiblebutefficient.c. possiblebutinefficient.d. possibleandefficient.




220. RefertoFigure2-10,Panel(a).Productionisa. possibleatpointsV,W,Y,andZ,butefficientonlyatpointsV,W,andZ.b. possibleatpointsV,W,Y,andZ,butefficientonlyatpointY.c. possibleatpointsU,V,W,andZ,butefficientonlyatpointsV,W,andZ.d. possibleatpointsU,V,W,andZ,butefficientonlyatpointU.






221. RefertoFigure2-10,Panel(a).ThemovementfrompointWtopointYcouldbecausedbya. economicgrowth.b. unemployment.c. animprovementinefficiency.d. anadvanceinproductiontechnology.


222. RefertoFigure2-10,Panel(a).Theopportunitycostofonesofaishighestwhentheeconomyproducesa. 0sofas.b. 12sofas.c. 20sofas.d. 24sofas.



KEYWORDS: BLOOM'S:AnalysisNOTES: r



223. RefertoFigure2-10,Panel(a).Togain2tractorsbymovingfrompointWtopointV,societymustsacrificea. 12sofas.b. employment.c. efficiency.d. Morethanoneoftheaboveiscorrect.




224. RefertoFigure2-10,Panel(a)andPanel(b).Ashiftoftheeconomy’sproductionpossibilitiesfrontierfromPanel(a)toPanel(b)couldbecausedby

a. unemployment.b. animprovementinsofaproductiontechnology.c. animprovementintractorproductiontechnology.d. animprovementinbothsofaandtractorproductiontechnology.




225. RefertoFigure2-10,Panel(a)andPanel(b).Whichofthefollowingisnotaresultoftheshiftoftheeconomy’sproductionpossibilitiesfrontierfromPanel(a)toPanel(b)?

a. Thetradeoffbetweentheproductionoftractorsandsofaschanges.b. Productionof2tractorsand10sofasbecomesefficient.c. Productionof6tractorsand14sofasbecomespossible.d. Theopportunitycostofasofaishigheratalllevelsofsofaproduction.

ANSWER: bPOINTS: 1DIFFICULTY: Difficulty:ChallengingLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:



Figure2-11



226. RefertoFigure2-11.WhichofthefollowingeventswouldexplaintheshiftoftheproductionpossibilitiesfrontierfromAtoB?

a. Theeconomy’scitizensdevelopedanenhancedtasteforbooks.b. Theeconomyexperiencedatechnologicaladvanceintheproductionofbooks.c. Morecapitalbecameavailableintheeconomy.d. Morelaborbecameavailableintheeconomy.

ANSWER: bPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ProductionPossibilitiesModelKEYWORDS: BLOOM'S:Application

227. RefertoFigure2-11.TheshiftoftheproductionpossibilitiesfrontierfromAtoBillustratesa. simultaneoustechnologicaladvancesinthebookandDVDindustries.b. areallocationofresourcesawayfromtheproductionofDVDsandtowardtheproductionofbooks.c. economicgrowth.d. Alloftheabovearecorrect.






Figure2-12

228. RefertoFigure2-12.WhichofthefollowingwouldmostlikelyhavecausedtheproductionpossibilitiesfrontiertoshiftoutwardfromAtoB?

a. adecreaseinunemploymentb. atechnologicaladvanceintheconsumergoodsindustriesc. ageneraltechnologicaladvanced. anincreaseintheavailabilityofcapital-producingresources






229. RefertoFigure2-12.TheshiftoftheproductionpossibilitiesfrontierfromAtoBcanbestbedescribedasa. adownturnintheeconomy.b. economicgrowth.c. anenhancementofequality.d. animprovementintheallocationofresources.


DISC:ProductionPossibilitiesModelEconomicGrowth


Figure2-13



230. RefertoFigure2-13.Whichofthefollowingcombinationsofpointsarebothefficientandattainableforthiseconomy?

a. G,Hb. F,I,Lc. F,G,H,I,Ld. J,K




231. RefertoFigure2-13.WhichofthefollowingstatementsistrueaboutpointGforthiseconomy?a. PointGiscurrentlyunattainable.b. PointGisefficient.c. AtpointG,morecakesareproducedthancookies.d. ThereisunemploymentatpointG.

ANSWER: dPOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ProductionPossibilitiesModelKEYWORDS: BLOOM'S:ApplicationNOTES: r



232. RefertoFigure2-13.Whichpointsarenotcurrentlyattainablebutcouldbecomeachievableforthiseconomyifthereisanimprovementintechnology?

a. I,Lb. G,Hc. J,Kd. F,G




233. RefertoFigure2-13.OnedifferencebetweenpointsFandGisthata. PointGisunattainablewithcurrentresources,butpointFisattainable.b. AllresourcesarefullyemployedatpointFbutthereisunemploymentatpointG.c. MoreoutputcanbeproducedatpointFbutnoadditionaloutputcanbeproducedatpointG.d. ThiseconomyproducesmorecookiesatpointGthanatpointF.


Table2-5

Corn(inbushels) Wheat(inbushels)2000 01600 7001200 1300



800 1800400 22000 2500

234. RefertoTable2-5.Table2-5showsonesetofproductionpossibilities.Whatistheopportunitycostofincreasingtheproductionofcornfrom400bushelsto800bushels?

a. 200bushelsofwheatb. 400bushelsofwheatc. 600bushelsofwheatd. 800bushelsofwheat




235. RefertoTable2-5.Table2-5showsonesetofproductionpossibilities.Whatistheopportunitycostofanincreaseintheproductionofwheatfrom700bushelsto1300bushels?

a. 800bushelsofcornb. 600bushelsofcornc. 400bushelsofcornd. 400bushelsofwheat


DIS



C:ProductionPossibilitiesModelOpportunityCost




236. RefertoTable2-5.Table2-5showsonesetofproductionpossibilities.Whichofthefollowingstatementsiscorrect?a. T

heopportunitycostofabushelofcorndoesnotdependonhowmanybushelsofwheatarebeingproduced.

b. Theopportunitycostofabushelofcornincreasesasmorecornisproduced.c. Theopportunitycostofabushelofcorndecreasesasmorecornisproduced.d. Theopportunitycostofabushelofwheatdecreasesasmorewheatisproduced.




237. RefertoTable2-5.Table2-5showsonesetofproductionpossibilities.Basedonthevaluesinthetable,theproductionpossibilitiesfrontieris

a. bowedoutwardindicatingincreasingopportunitycosts.b. bowedoutwardindicatingdecreasingopportunitycosts.c. astraightlineindicatingconstantopportunitycosts.d. bowedinwardindicatingincreasingopportunitycosts.








238. RefertoTable2-5.Table2-5showsonesetofproductionpossibilities.Whichofthefollowingcombinationsofcornandwheatisnotcurrentlyattainablebutwouldbeattainableiftherewasanimprovementinoverallproductiontechnology?

a. 1600bushelsofcornand300bushelsofwheatb. 1400bushelsofcornand800bushelsofwheatc. 1000bushelsofcornand2000bushelsofwheatd. 600bushelsofcornand1800bushelsofwheat




239. Homeisacountrythatproducestwogoods,pearsandcellularphones.Lastyear,Homeproduced450bushelsofpearsand1050cellularphones.Thisyearitproduced450bushelsofpearsand2000cellularphones.Givennootherinformation,whichofthefollowingeventscouldexplainthischange?

a. Homeexperiencedincreasedunemployment.b. Homeexperiencedadeclineinpear-producingtechnology.c. Homeexperiencedanimprovementincellularphone-makingtechnology.d. Homeexperiencedareductioninresources.






240. Indiadeshisacountrythatproducestwogoods,textilesandcomputers.Lastyear,Indiadeshproduced50,000textilesand1300computers.Thisyearitproduced45,000textilesand1100computers.Givennofurtherinformation,whichofthefollowingeventscouldexplainthischange?

a. Indiadeshdecreasedunemployment.b. Indiadeshexperiencedanimprovementintextile-makingtechnology.c. Indiadeshexperiencedanimprovementincomputer-makingtechnology.d. Indiadeshexperiencedareductioninresources.

ANSWER: dPOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ProductionPossibilitiesModelKEYWORDS: BLOOM'S:Application

Figure2-14

Considertheproductionpossibilitiescurveforacountrythatcanproducesweaters,apples(inbushels),oracombinationofthetwo.



241. RefertoFigure2-14.Ifthiseconomydevotesallofitsavailableresourcestoproducingapples,thenitwillproduce

a. 0bushelsofapplesand200sweaters.b. 80bushelsofapplesand160sweatersc. 180bushelsofapplesand200sweaters.d. 180bushelsofapplesand0sweaters.




242. RefertoFigure2-14.Whichcombinationofpointsshowproductionpossibilitiesonlyachievablewithimprovementsintechnologyorincreasesinresources?

a. Q,R,U,andVb. S andXc. TandWd. Noneoftheaboveiscorrect.






243. RefertoFigure2-14.IfthissocietymovesfrompointUtopointV,a. itgivesup40bushelsofapplestoget80sweaters.b. itgivesup140bushelsofapplestoget80sweaters.c. itgivesup80sweaterstoget140bushelsofapples.d. itgivesup80sweaterstoget40bushelsofapples.




244. RefertoFigure2-14.IfthissocietyisproducingatpointT,a. thereisunemployment.b. productionisefficient.c. growthcanonlybeachievedthroughanadvancementintechnology.d. theopportunitycostofproducingonemoresweaterisapproximately40bushelsofapples.




245. RefertoFigure2-14.TheopportunitycostofmovingfrompointUtopointRisa. 60bushelsofapples.b. 80bushelsofapples.c. 80sweaters.d. 160sweaters.




Figure2-15



246. RefertoFigure2-15.Considertheproductionpossibilitiesfrontierforaneconomythatproducesonlysofasandcars.Theopportunitycostofeachcaris

a. theslopeoftheproductionpossibilitiesfrontier.b. 3/2sofas.c. 2/3ofasofa.d. Bothaandbarecorrect.




247. RefertoFigure2-15.Considertheproductionpossibilitiesfrontierforaneconomythatproducesonlysofasandcars.WhensocietymovesfrompointAtopointB,

a. theopportunitycostisthesameaswhensocietymovesfrompointBtopointC.b. itisgivingupcarstogetsofas.c. theopportunitycostisincreasing.d. itmovesfromaninefficientpointtoanefficientpoint.




Multiple Choice – Section 01A: The Economist as Scientist

1. Thefieldofeconomicsistraditionallydividedintotwobroadsubfields,a. nationaleconomicsandinternationaleconomics.b. consumereconomicsandproducereconomics.c. privatesectoreconomicsandpublicsectoreconomics.d. microeconomicsandmacroeconomics.




2. Microeconomicsisthestudyofa. howmoneyaffectstheeconomy.b. howindividualhouseholdsandfirmsmakedecisions.c. howgovernmentaffectstheeconomy.d. howtheeconomyasawholeworks.


DISC:GeneralMicro




3. Macroeconomicsisthestudyofa. individualdecisionmakers.b. internationaltrade.c. economy-widephenomena.d. marketsforlargeproducts.


DISC:GeneralMacro


4. Amicroeconomist—asopposedtoamacroeconomist—mightstudya. theeffectofanationalhealthcareprogramonthenation’sunemploymentrate.b. theeffectofnewregulationsonproductioninthepulpandpaperindustry.c. theeffectofchangesininterestratesongrossdomesticproduct.d. thegrowthrateofproductionintheeconomy.


DISC:GeneralMicro




5. Whichofthefollowingareasofstudytypifiesmicroeconomicsasopposedtomacroeconomics?a. theimpactofminimum-wagelawsonemploymentinthefastfoodindustryb. theeffectofchangesinhouseholdsavingratesonthegrowthrateofnationalincomec. theimpactoffastermoneygrowthontherateofinflationd. a

comparisonofalternativetaxpoliciesandtheirrespectiveimpactsontherateofthenation’seconomicgrowth


DISC:GeneralMicro


6. Whichofthefollowingwouldlikelybestudiedbyamicroeconomistratherthanamacroeconomist?a. theeffectofforeigndirectinvestmentoneconomicgrowthb. theeffectofasalestaxonthecigaretteindustryc. theeffectofaninvestmenttaxcreditontheeconomy’scapitalstockd. theeffectofawarongovernmentspending


DISC:GeneralMicro




7. Amacroeconomist—asopposedtoamicroeconomist—mightstudytheeffectofa. changesinthemoneysupplyontheinflationrate.b. anincreaseinthegastaxonfuelconsumption.c. atechnologicaladvanceonthenaturalgasindustry.d. ahurricaneonpricesintheorangeindustry.


DISC:GeneralMacro


8. Amacroeconomist-asopposedtoamicroeconomist-wouldstudya. theeffectsofrentcontrolonhousinginNewYorkCity.b. theeffectsofforeigncompetitionontheUSautoindustry.c. theeffectsofborrowingbythefederalgovernment.d. theeffectsofraisingthegasolinetaxontransitridership.


DISC:GeneralMacro




9. Whichofthefollowingareasofstudytypifiesmacroeconomicsasopposedtomicroeconomics?a. theeffectsofrentcontrolontheavailabilityofhousinginNewYorkCityb. theeconomicimpactoftornadoesoncitiesandtownsinOklahomac. howtariffsonshoesaffectstheshoeindustryd. theeffectontheeconomyofchangesinthenation’sunemploymentrate


DISC:GeneralMacro


10. Whichofthefollowingwouldlikelybestudiedbyamacroeconomistratherthanamicroeconomist?a. theeffectofanincreaseinthealcoholtaxonthemarketforbeerb. theeffectofforeigncompetitiononthedomesticautoindustryc. theeffectofapricewarintheairlineindustryd. theeffectofanincreaseintheminimumwageonaneconomy’soverallrateofunemployment

ANSWER: dPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:GeneralMacroKEYWORDS: BLOOM'S:Application



11. Whichofthefollowingstatementsbestcapturestherelationshipbetweenmicroeconomicsandmacroeconomics?a. F

orthemostpart,microeconomistsareunconcernedwithmacroeconomics,andmacroeconomistsareunconcernedwithmicroeconomics.

b. Microeconomistsstudymarketsforsmallproducts,whereasmacroeconomistsstudymarketsforlargeproducts.

c. Microeconomicsandmacroeconomicsaredistinctfromoneanother,yettheyarecloselyrelated.d. Microeconomi

csisorientedtowardpolicystudies,whereasmacroeconomicsisorientedtowardtheoreticalstudies.




Multiple Choice – Section 02: The Economist as Policy Adviser

1. Wheneconomistsaretryingtoexplaintheworld,theyarea. scientists.b. policyadvisers.c. intherealmofmicroeconomicsratherthanmacroeconomics.d. intherealmofnormativeeconomicsratherthanpositiveeconomics.






2. Wheneconomistsaretryingtohelpimprovetheworld,theyarea. intherealmofpositiveeconomicsratherthannormativeeconomics.b. intherealmofmacroeconomicsratherthanmicroeconomics.c. scientists.d. policyadvisers.




3. Whichofthefollowingstatementsiscorrectabouttherolesofeconomists?a. Economistsarebestviewedaspolicyadvisers.b. Economistsarebestviewedasscientists.c. I

ntryingtoexplaintheworld,economistsarepolicyadvisers;intryingtoimprovetheworld,theyarescientists.d. I

ntryingtoexplaintheworld,economistsarescientists;intryingtoimprovetheworld,theyarepolicyadvisers.






4. Whenaneconomistisaskedaquestionlike“whyisunemploymenthigherforteenagersthanforolderworkers?”theeconomista. isaskedtoexplainthecauseofaneconomicevent.b. isaskedtorecommendapolicytoimproveeconomicoutcomes.c. isaskedasapolicyadviser.d. doesnothaveenoughinformationtorespond.

ANSWER: aPOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.7-LO:2-2NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Comprehension

5. Foreconomists,statementsabouttheworldareoftwotypes:a. assumptionsandtheories.b. truestatementsandfalsestatements.c. specificstatementsandgeneralstatements.d. positivestatementsandnormativestatements.






6. Normativestatementsarea. prescriptive,whereaspositivestatementsaredescriptive.b. descriptive,whereaspositivestatementsareprescriptive.c. backward-looking,whereaspositivestatementsareforward-looking.d. forward-looking,whereaspositivestatementsarebackward-looking.

ANSWER: aPOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.7-LO:2-2NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:GeneralPrinciplesKEYWORDS: BLOOM'S:Knowledge

7. Positivestatementsarea. prescriptive.b. claimsabouthowtheworldshouldbe.c. claimsabouthowtheworldis.d. madebyeconomistsspeakingaspolicyadvisers.






8. Normativestatementsarea. notusuallymadebyeconomists.b. claimsabouthowtheworldshouldbe.c. claimsabouthowvariablesintheeconomynormallybehave.d. pessimisticinterpretationsoftheeconomy.



KEYWORDS: BLOOM'S:KnowledgeNOTES: r

9. Positivestatementsarenota. descriptive.b. prescriptive.c. claimsabouthowtheworldis.d. madebyeconomistsspeakingasscientists.






10. Normativestatementsarenota. descriptive.b. prescriptive.c. claimsabouthowtheworldshouldbe.d. madebyeconomistsspeakingaspolicyadvisers.




11. Astatementdescribinghowtheworldisa. isanormativestatement.b. isapositivestatement.c. wouldonlybemadebyaneconomistspeakingasapolicyadviser.d. wouldonlybemadebyaneconomistemployedbythegovernment.






12. Astatementdescribinghowtheworldshouldbea. isanormativestatement.b. isapositivestatement.c. wouldonlybemadebyaneconomistspeakingasascientist.d. wouldonlybemadebyaneconomistemployedbythegovernment.




13. Onewaytocharacterizethedifferencebetweenpositivestatementsandnormativestatementsisasfollows:a. Positi

vestatementstendtoreflectoptimismabouttheeconomyanditsfuture,whereasnormativestatementstendtoreflectpessimismabouttheeconomyanditsfuture.

b. Positivestatementsofferdescriptionsofthewaythingsare,whereasnormativestatementsofferopinionsonhowthingsoughttobe.

c. Positivestatementsinvolveadviceonpolicymatters,whereasnormativestatementsaresupportedbyscientifictheoryandobservation.

d. Economistsoutsideofgovernmenttendtomakenormativestatements,whereasgovernment-employedeconomiststendtomakepositivestatements.






14. Economistsviewpositivestatementsasa. affirmative,justifyingexistingeconomicpolicy.b. optimistic,puttingthebestpossibleinterpretationonthings.c. descriptive,makingaclaimabouthowtheworldis.d. prescriptive,makingaclaimabouthowtheworldoughttobe.


15. Economistsviewnormativestatementsasa. prescriptive,makingaclaimabouthowtheworldoughttobe.b. descriptive,makingaclaimabouthowtheworldis.c. statementsaboutthenormalconditionoftheworld.d. pessimistic,puttingtheworstpossibleinterpretationonthings.


16. Economistsspeakinglikescientistsmakea. normativestatements.b. prescriptivestatements.c. claimsabouthowtheworldis.d. claimsabouthowtheworldshouldbe.




17. Economistsspeakinglikepolicyadvisersmakea. positivestatements.b. descriptivestatements.c. claimsabouthowtheworldis.d. claimsabouthowtheworldshouldbe.


18. Economistsspeakinglikescientistsmakea. positivestatements.b. prescriptivestatements.c. claimsabouthowtheworldshouldbe.d. Morethanoneoftheaboveiscorrect.


19. Economistsspeakinglikepolicyadvisersmakea. claimsabouthowtheworldis.b. descriptivestatements.c. normativestatements.d. Morethanoneoftheaboveiscorrect.




20. Wheneconomistsmakepositivestatements,theyarea. speakingasscientists.b. speakingaspolicyadvisers.c. makingclaimsabouthowtheworldshouldbe.d. revealingthattheyareveryconservativeintheirviewsofhowtheworldworks.




21. Wheneconomistsmakenormativestatements,theyarea. speakingasscientists.b. speakingaspolicyadvisers.c. makingclaimsabouthowtheworldis.d. revealingthattheyareveryliberalintheirviewsofhowtheworldworks.






22. Wheneconomistsmakea. positivestatements,theyarespeakingnotaspolicyadvisersbutasscientists.b. positivestatements,theyarespeakingnotasscientistsbutasforecasters.c. normativestatements,theyarespeakingnotaspolicyadvisersbutasscientists.d. normativestatements,theyarespeakingnotaspolicyadvisersbutasmodel-builders.




23. Wheneconomistsmakea. positivestatements,theyarespeakingnotasscientistsbutaspolicyadvisers.b. positivestatements,theyarespeakingnotasscientistsbutasforecasters.c. normativestatements,theyarespeakingnotasscientistsbutaspolicyadvisers.d. normativestatements,theyarespeakingnotaspolicyadvisersbutasmodel-builders.






24. Youknowaneconomisthascrossedthelinefrompolicyadvisertoscientistwhenheorshea. claimsthattheproblemathandiswidelymisunderstoodbynon-economists.b. makespositivestatements.c. talksaboutvalues.d. makesaclaimabouthowtheworldshouldbe.




25. Youknowaneconomisthascrossedthelinefromscientisttopolicyadviserwhenheorshea. claimsthattheproblemathandiswidelymisunderstoodbynon-economists.b. talksabouttheevidence.c. makesnormativestatements.d. makesaclaimabouthowtheworldis.






26. Apositiveeconomicstatementsuchas“Pollutiontaxesdecreasethequantityofpollutiongeneratedbyfirms”a. wouldlikelybemadebyaneconomistactingasapolicyadvisor.b. wouldrequirevaluesanddatatobeevaluated.c. wouldrequiredatabutnotvaluestobeevaluated.d. couldnotbeevaluatedbyeconomistsactingasscientists.




27. Anormativeeconomicstatementsuchas“Theminimumwageshouldbeabolished”a. wouldlikelybemadebyaneconomistactingasascientist.b. wouldrequirevaluesanddatatobeevaluated.c. wouldrequiredatabutnotvaluestobeevaluated.d. couldnotbeevaluatedbyeconomistsactingaspolicyadvisers.






28. Inprinciple,wecana. ignorepositivestatementswhenchoosingamongvariouspublicpolicyalternatives.b. ignorenormativestatementswhenchoosingamongvariouspublicpolicyalternatives.c. confirmorrefutepositivestatementsbyexaminingevidence.d. confirmorrefutenormativestatementsbyexaminingevidence.




29. Whichofthefollowingisnotcorrect?a. Evaluatingstatementsabouthowtheworldshouldbeinvolvesvaluesaswellasfacts.b. Positivestatementscan,inprinciple,beconfirmedorrefutedbyexaminingevidence.c. Normativestatementscanbejudgedusingdataalone.d. Decidingwhatisgoodorbadpolicyisnotjustamatterofscience.






30. Whenaneconomistevaluatesapositivestatement,heorsheisprimarilya. examiningevidence.b. actingasascientist.c. concernedwithverifyinghowtheworldis.d. Alloftheabovearecorrect.




31. Normativeconclusionsa. comefrompositiveanalysisalone.b. arebasedonignoranceofpositiveanalysis.c. involvevaluejudgments.d. reflecttheeconomist’sroleasscientist.






32. Whichofthefollowingisanexampleofapositive,asopposedtonormative,statement?a. Inflationismoreharmfultotheeconomythanunemploymentis.b. Ifwelfarepaymentsincrease,theworldwillbeabetterplace.c. Pricesrisewhenthegovernmentprintstoomuchmoney.d. Wh

enpublicpoliciesareevaluated,thebenefitstotheeconomyofimprovedequalityshouldbeconsideredmoreimportantthanthecostsofreducedefficiency.


33. Whichofthefollowingisanexampleofapositive,asopposedtonormative,statement?a. Whentheminimumwageisincreased,unemploymentisapredictableconsequence.b. Theincometaxrateshouldbeincreasedtooffsetthebudgetdeficit.c. Increasinggovernmentspendingisthebestwaytohelptheeconomymoveoutofarecession.d. Morethanoneoftheabovearepositivestatements.

ANSWER: aPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.7-LO:2-2NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:ApplicationNOTES: r



34. Whichofthefollowingisapositive,asopposedtoanormative,statement?a. TheUSDepartmentofJusticeshouldallowamergerbetweenAT&TandT-

Mobilebecauseitwouldhavelittleeffectonconsumers.b. Antitrustlawsshouldbeusedtopreventfurtherconcentrationinthewirelesstelephoneservicemarket.c. TheUSDepartmentofJusticesuedAT&TtoblockitsmergerwithT-Mobile.d. Thewirelesstelephoneservicemarketistoohighlyconcentrated.

ANSWER: cPOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.7-LO:2-2NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Application

35. Whichofthefollowingstatementsisanexampleofapositive,asopposedtonormative,statement?a. Americansdeserveacleanerenvironment.b. Reducingemissionsreducesdaysmissedfromschoolduetoasthma.c. AllAmericansareentitledtoqualityhealthcare.d. Economicpoliciesshouldfocusonimprovingequality.

ANSWER: bPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.7-LO:2-2NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Analysis



36. “EnsuringthatSocialSecurityisfinanciallysoundforfuturegenerationsisanimportantuseoftaxpayerdollars”isanexampleofaa. normativeeconomicstatement.b. positiveeconomicstatement.c. statementmadebyaneconomistworkingasascientist.d. judgmentbasedonevaluationofevidence,notvalues.


37. “Pricesrisewhenthequantityofmoneyrisesrapidly”isanexampleofaa. negativeeconomicstatement.b. positiveeconomicstatement.c. normativeeconomicstatement.d. statementthatcontradictsoneofthebasicprinciplesofeconomics.

ANSWER: bPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.7-LO:2-2NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Application



38. Which of the following isnotanexampleofapositive,asopposedtonormative,statement?a. Highergasolinepriceswillreducegasolineconsumption.b. Equalityismoreimportantthanefficiency.c. Traderestrictionslowerourstandardofliving.d. Ifanationwantstoavoidinflation,itwillrestrictthegrowthrateofthequantityofmoney.


39. Whichofthefollowingisanexampleofanormative,asopposedtopositive,statement?a. UniversalhealthcarewouldbegoodforU.S.citizens.b. Anincreaseinthecigarettetaxwouldcauseadecreaseinthenumberofsmokers.c. Adecreaseintheminimumwagewoulddecreaseunemployment.d. Alawrequiringthefederalgovernmenttobalanceitsbudgetwouldincreaseeconomicgrowth.

ANSWER: aPOINTS: 1DIFFICULTY: Difficulty:ChallengingLEARNINGOBJECTIVES: ECON.MANK.15.7-LO:2-2NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Application

40. Whichofthefollowingisanexampleofanormative,asopposedtopositive,statement?a. Gasolinepricesoughttobelowerthantheyarenow.b. Thefederalgovernmentshouldraisetaxesonwealthypeople.c. Thesocialsecuritysystemisagoodsystemanditdeservestobepreservedasitis.d. Alloftheabovearenormativestatements.

ANSWER: dPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.7-LO:2-2NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Application



41. Whichofthefollowingisanexampleofanormative,asopposedtopositive,statement?a. Ifthepriceofaproductdecreases,people’swillingnesstobuythatproductwillincrease.b. Reducingtaxratesonthewealthywouldbenefitthenation.c. Ifthenationalsavingrateweretoincrease,sowouldtherateofeconomicgrowth.d. Theeliminationoftraderestrictionswouldincreaseaneconomy’sstandardofliving.


42. Whichofthefollowingisanexampleofanormative,asopposedtopositive,statement?a. Followingthemostrecentrecession,theeconomyisrecoveringataslowerthanusualpace.b. Tostimulatetheeconomyduringthemostrecentrecession,thefederalgovernmentincreasedspending.c. I

nresponsetothemostrecentrecession,thefederalgovernmentextendedthedurationofunemploymentbenefits.

d. Thefederalgovernment’sresponsestothemostrecentrecessionwereinsufficient.

ANSWER: dPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.7-LO:2-2NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:ApplicationNOTES: r



43. Whichofthefollowingisanexampleofanormative-asopposedtoapositive-statement?a. ThediscountrateistheinterestratetheFederalReservechargesbankstoborrowfunds.b. TheUSincometaxrateincreaseswiththeamountofincomeearned.c. Thegovernmentshouldincreasethetaxongasoline.d. TheUSunemploymentrateincreasedto10percentin2009.

ANSWER: cPOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.7-LO:2-2NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Application

44. PresidentTrumanoncesaidhewantedtofindaone-armedeconomistbecausewhenheaskedhiseconomistsforadvice,theyalwaysanswered,“Ontheonehand,...Ontheotherhand,...”Truman’sobservationthateconomists’adviceisnotalwaysstraightforwarda. isrootedintheprinciplethatpeoplefacetradeoffs.b. indicatesthateconomistsrecognizethatthereareopportunitycostsassociatedwithpolicydecisions.c. confirmsthateconomistsarenotsuitedtobepresidentialadvisers.d. Morethanoneoftheaboveiscorrect.




45. WhichofthefollowingisthebestexplanationforwhyPresidentHarryTrumanoncesaidthathewantedtofindaone-armedeconomist?a. PresidentTrumanreceivedinputfromsomanyeconomiststhatheonlywantedoneviewfromeach.b. PresidentTrumanthoughteconomistsshouldanalyzepoliciesbutnotmakeorenforcethem.c. Economistsunderstandthatmostpolicydecisionsinvolvetrade-

offssotheyarelikelytopresentmultipleviewsofpolicies.d. Aone-armedeconomistwouldconductonlypositiveanalysisandnonormativeanalysis.


46. TheCouncilofEconomicAdvisersa. wascreatedin1776andconsistsofthreemembersandastaffofseveraldozeneconomists.b. wascreatedin1776andconsistsofthirtymembersandastaffofadozeneconomists.c. wascreatedin1946andconsistsofthreemembersandastaffofseveraldozeneconomists.d. wascreatedin1946andconsistsofthirtymembersandastaffofadozeneconomists.


DISC:ThinkingLikeanEconomistOverviewofUSEconomy




47. TheCouncilofEconomicAdvisersa. wascreatedin1946.b. advisesthepresidentoftheUnitedStatesoneconomicpolicymatters.c. writestheannualEconomicReportofthePresident.d. Alloftheabovearecorrect.




48. DutiesoftheCouncilofEconomicAdvisersincludea. advisingthepresidentandwritingtheannualEconomicReportofthePresident.b. implementingthepresident’staxpolicies.c. trackingthebehaviorofthenation’smoneysupply.d. Alloftheabovearecorrect.






49. Inadditiontoadvisingthepresident,onedutyoftheCouncilofEconomicAdvisersistoa. preparethefederalbudget.b. writegovernmentregulations.c. adviseCongressoneconomicmatters.d. writetheannualEconomicReportofthePresident.




50. TheEconomicReportofthePresidenta. discussesrecentdevelopmentsintheeconomyandpresentsanalysisofcurrentpolicyissues.b. iswrittenbytheCouncilofEconomicAdvisers.c. istheresponsibilityoftheeconomistsattheOfficeofManagementandBudget.d. Bothaandbarecorrect.






51. Economistsatwhichofthefollowingofficeshelpformulatespendingplansandregulatorypolicies?a. OfficeofManagementandBudgetb. DepartmentoftheTreasuryc. CongressionalBudgetOfficed. TheFederalReserve




52. EconomistsattheDepartmentoftheTreasurya. designU.S.currencyandcoins.b. provideCongresswiththeannualbudget.c. enforcetheU.S.antitrustlaws.d. provideadviceontaxpolicytothePresident.






53. ThepresidentoftheUnitedStatesreceivestaxpolicyadvicefromeconomistsinthea. FederalReserve.b. DepartmentofJustice.c. DepartmentoftheTreasury.d. CongressionalBudgetOffice.




54. Thedesignoftaxpolicyisoneoftheresponsibilitiesofeconomistswhoworkatthea. CouncilofEconomicAdvisers.b. FederalReserve.c. DepartmentoftheTreasury.d. CongressionalBudgetOffice.






55. AdutyofeconomistsattheDepartmentofLaboristoa. analyzedataonworkers.b. schedulefederalholidays.c. enforcethenation'santitrustlaws.d. Alloftheabovearecorrect.




56. Analysisofdataonworkersandthoselookingforworkisconductedbyeconomistsatthea. OfficeofManagementandBudget.b. DepartmentofLabor.c. CongressionalBudgetOffice.d. DepartmentoftheTreasury.






57. EconomistsattheDepartmentofJusticea. trackthebehaviorofthenation’smoneysupply.b. adviseCongressoneconomicmatters.c. helpenforcethenation’santitrustlaws.d. preparethefederalbudget.




58. Thenation'santitrustlawsareenforcedbyeconomistsattheDepartmentofa. Labor.b. HealthandHumanServices.c. Justice.d. Treasury.






59. Some,butnotall,governmenteconomistsareemployedwithintheadministrativebranchofgovernment.Whichofthefollowinggovernmentagenciesemployseconomistsoutsideoftheadministrativebranch?a. theDepartmentofLaborb. theDepartmentoftheTreasuryc. theCongressionalBudgetOfficed. theCouncilofEconomicAdvisers




60. EconomistswhoareprimarilyresponsibleforadvisingCongressoneconomicmattersworkinwhichagency?a. theFederalReserveb. theCongressionalBudgetOfficec. theDepartmentoftheTreasuryd. theDepartmentofCommerce






61. CongressreliesoneconomistsattheCongressionalBudgetOfficetoa. enforcethenation'santitrustlaws.b. setthenation’smonetarypolicy.c. provideevidencethatincumbentmembersofCongressareperformingwellintheirjobs.d. provideindependentevaluationsofpolicyproposals.




62. ThePresidentreceiveseconomicpolicyadvicefromeconomistsateachofthefollowingexcepta. theCouncilofEconomicAdvisors.b. theDepartmentoftheTreasury.c. theCongressionalBudgetoffice.d. theDepartmentofLabor.






63. TheFederalReservea. designstaxpolicy.b. enforcesthenation'santitrustlaws.c. setsthenation'smonetarypolicy.d. analyzesdataonworkers.




64. EconomistsholdmanypositionsadvisingthepresidentandCongressincludinga. beingamemberoftheCouncilofEconomicAdvisers.b. helpingtoenforceantitrustlawsattheDepartmentofJustice.c. conductingresearchattheCongressionalBudgetOffice.d. Allofthesearepossiblepositionsthateconomistshold.






65. JohnMaynardKeynesbelievedtheideasofeconomiststobea. generallyincorrect.b. powerful.c. academicandwithoutpracticalapplication.d. rantingsofmadmen.

ANSWER: bPOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.7-LO:2-2NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Knowledge

66. Onedifferencebetweenahypotheticalbenevolentkingimplementingthebestpolicyandthepresidentimplementingthebestpolicyintherealworldisthepresidenthastobeconcernedabouta. anymisunderstandingsincommunicatingthepolicytothepublic.b. whetherthepolicywillaffecthisstandingamongdifferentgroupsintheelectorate.c. whatamendmentswillbesuggestedbymembersofCongress.d. Alloftheabovearecorrect.


DISC:ThinkingLikeanEconomistEconomicSystems




67. Policymakinginarepresentativedemocracya. isstraightforwardanddoesnotinvolveanydisagreement.b. benefitsfromtheinputofeconomists,eveniftheiradviceisnotalwaysfollowed.c. isconductedwithouttheinputofeconomists.d. isalwaysbasedexclusivelyontheresultsofeconomicanalysis.




68. Supposeaneconomistadvisesacity’smayortobeginchargingdriversafeetodriveonabusyhighwayduringcongestedtimes.Themayordoesnotimplementthepolicybecauseitwouldnotbepopularwithvoters.Which ofthefollowingstatementsbestdescribesthescenario?a. Th

isisacommonoccurrence.Thepolicymakerknowsthebestpolicybutchoosesnottoinstituteitforotherreasons.

b. Thisisacommonoccurrence.Thepolicymakerusuallydisregardsaneconomist’sadvicebecausetheydonotbelieveitisthemostefficientpolicy.

c. Thisisanunlikelyoccurrence.Mostofthetime,policymakersfollowtheadviceofeconomistsandinstitutethemostefficientpolicies.

d. Thiswouldneverhappen.Policymakersalwaysfollowtheadviceofeconomists.








Multiple Choice – Section 03: Why Economists Disagree

1. “Ifalleconomistswerelaidendtoend,theywouldnotreachaconclusion.”Whomadethiswhimsicalobservation?a. HarryTrumanb. GeorgeBernardShawc. JohnMaynardKeynesd. RonaldReagan


2. PresidentRonaldReaganoncejokedthataTrivialPursuitgamedesignedforeconomistswoulda. havenoquestionsbuthundredsofanswers.b. have100questionsand3,000answers.c. have1,000questionsbutnoanswers.d. neverproduceawinner.




3. Economistssometimesgiveconflictingadvicebecausea. graduatestudentsineconomicsareencouragedtoarguewitheachother.b. economistshavedifferentvaluesandscientificjudgment.c. economistsactingasscientistsdonotliketoagreewitheconomistsactingaspolicyadvisers.d. economicsismoreofabeliefsystemthanascience.




4. Thetwobasicreasonswhyeconomistsoftenappeartogiveconflictingadvicetopolicymakersaredifferencesina. opinionsandeducation.b. opinionsandvalues.c. scientificjudgmentsandeducation.d. scientificjudgmentsandvalues.




5. Sometimeseconomistsdisagreebecausetheirscientificjudgmentsdiffer.Whichofthefollowinginstancesbestreflectsthissourceofdisagreement?a. O

neeconomistbelieveseveryoneshouldpaythesamepercentageoftheirincomeintaxes;anothereconomistbelievesthatwealthiercitizensshouldpayahigherpercentageoftheirincomeintaxes.

b. Oneeconomistbelievesthatmanufacturingfirmsshouldfacegreaterregulationtopreservetheenvironment;anothereconomistbelievesthegovernmentshouldnotinterveneinfreemarkets.

c. Oneeconomistbelievesthatequalityshouldbevaluedoverefficiencyinpolicydecisions;anothereconomistbelievesthatefficiencyshouldbevaluedoverequalityinpolicydecisions.

d. Oneeconomistbelievesthegovernmentshouldtaxahousehold’sincome;anothereconomistbelievesthegovernmentshouldtaxahousehold’sconsumption.

ANSWER: dPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.8-LO:2-3NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:ComprehensionNOTES: r

6. Differencesinscientificjudgementbetweeneconomistsaresimilartoallofthefollowingexcepta. astronomersdebatingwhetherthesunorearthwasatthecenterofthesolarsystem.b. meteorologistsdebatingtheexistenceofglobalwarming.c. twopoliticiansarguingaboutthefairnessofthetaxcode.d. explorersdebatingwhetherornottheearthwasflatbeforethetimeofChristopherColumbus.

ANSWER: cPOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.8-LO:2-3NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Knowledge



7. Sometimeseconomistsdisagreebecausetheirvaluesdiffer.Whichofthefollowinginstancesbestreflectsthissourceofdisagreement?a. O

neeconomistbelievestheNorthAmericanFreeTradeAgreement(NAFTA)hasledtoalossofAmericanjobs;anothereconomistdisputesthisclaim.

b. Oneeconomistbelievesthatwhenincometaxesarecut,peoplewillincreasetheirspending;anothereconomistbelievesthatwhenincometaxesarecut,peoplewillincreasetheirsaving.

c. Oneeconomistadvisesagainstincreasesinsalestaxesbecauseshethinkssuchincreasesareunfairtolow-incomepeople;anothereconomistdisputestheideathatincreasesinsalestaxesareunfairtolow-incomepeople.

d. Oneeconomistbelievesthat,priortotheCivilWar,slaverycontributedtoeconomicgrowthintheSouth;anothereconomistbelievesthatslaveryheldbacktheSouth'seconomicgrowth.


8. JoeandFredareeconomists.Joethinksthatthewealthiest10%oftheUSpopulationshouldbetaxedaratehigherthantherestofsocietybecausetheycanbetteraffordit.Fredthinksthateveryoneshouldbetaxedatthesameratebecausethatisthefairestscenarioandthewealthyshouldnotbepenalizedfortheirsuccess.Inthisexample,JoeandFreda. disagreeaboutthevalidityofapositivetheory.b. havedifferentnormativeviewsabouttaxpolicy.c. mustbothbeincorrectbecausetaxpolicyisneverthatsimple.d. Noneoftheaboveiscorrect.




9. Whichofthefollowingisoneofthebasicreasonswhyeconomistsoftenappeartogiveconflictingadvicetopolicymakers?a. similaropinionsaboutthevalidityofeconomictheoriesb. significantdifferencesineducationc. differencesinpersonalvaluesd. arelianceonnormativestatementforresearchtheories


10. YiandAvikarebotheconomists.Yithinksthattaxingconsumption,ratherthanincome,wouldresultinhigherhouseholdsavingbecauseincomethatissavedwouldnotbetaxed.Avikdoesnotthinkthathouseholdsavingwouldrespondmuchtoachangeinthetaxlaws.In thisexample, Yiand Avika. holddifferentnormativeviewsaboutthetaxsystem.b. disagreeaboutthevalidityofapositivetheory.c. haveafundamentalmisunderstandingofthetaxsystem.d. Morethanoneoftheaboveiscorrect.

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11. Whichofthefollowingstatementsiscorrectabouttheextentofdisagreementamongeconomists?a. Thereisagreatdealofagreementamongeconomistsonvirtuallyeveryeconomicissue.b. Thereisagreatdealofagreementamongeconomistsonmanyimportanteconomicissues.c. Alldisagreementsamongeconomistsareattributabletodifferencesintheirvalues.d. A

lldisagreementsamongeconomistsareattributabletothefactthatdifferenteconomistshavedifferentdegreesoffaithinthevalidityofalternativeeconomictheories.


12. Asurveywhichsoughttheopinionofprofessionaleconomistsonfourteenpropositionsabouteconomicpolicyfoundthata. therespondentswerealmostequallydividedonthepropositions.b. therespondentsfavoredthepropositionsbyaslightmargin.c. therespondentsdisagreedwiththepropositionsbyaslightmargin.d. therewasoverwhelmingendorsementofthepropositionsamongtherespondents.

ANSWER: dPOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.8-LO:2-3NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Knowledge



13. Asurveyofprofessionaleconomistsrevealedthatmorethanthree-fourthsofthemagreedwithanumberofstatements,includingwhichofthefollowing?a. Tariffsandimportquotasusuallyreducegeneraleconomicwelfare.b. Alargefederalbudgetdeficithasanadverseeffectontheeconomy.c. Minimumwageincreasesunemploymentamongyoungandunskilledworkers.d. Alloftheabovearecorrect.


14. Asurveyofprofessionaleconomistsrevealedthatmorethanthree-fourthsofthemagreedwithfourteeneconomicpropositions.Whichofthefollowingisnotoneofthosepropositions?a. TheUnitedStatesshouldnotrestrictemployersfromoutsourcingworktoforeigncountries.b. TheUnitedStatesshouldwithdrawfromtheNorthAmericanFreeTradeAgreement(NAFTA).c. TheUnitedStatesshouldeliminateagriculturalsubsidies.d. Localandstategovernmentsshouldeliminatesubsidiestoprofessionalsportsfranchises.






15. Asurveyofprofessionaleconomistsrevealedthatmorethanthree-fourthsofthemagreedwithfourteeneconomicpropositions.Whichofthefollowingisnotoneofthosepropositions?a. Aceilingonrentsreducesthequantityandqualityofhousingavailable.b. Fiscalpolicyhasasignificantstimulativeimpactonalessthanfullyemployedeconomy.c. T

hegapbetweenSocialSecurityfundsandexpenditureswillbecomeunsustainablylargewithinthenextfiftyyearsifcurrentpoliciesremainunchanged.

d. TheUnitedStatesshouldimplementuniversalhealthcareforitscitizens.


16. Almostalleconomistsagreethatrentcontrola. hasnoeffectontherentalincomeoflandlords.b. allowsthemarketforhousingtoworkmoreefficiently.c. adverselyaffectstheavailabilityandqualityofhousing.d. isaveryinexpensivewaytohelpthemostneedymembersofsociety.




17. Policiessuchasrentcontrolandtradebarrierspersistinspiteofthefactthateconomistsarevirtuallyunitedintheiroppositiontosuchpolicies,probablybecausea. economistshavenotyetconvincedthegeneralpublicthatthepoliciesareundesirable.b. economistsengageinpositiveanalysis,notnormativeanalysis.c. economistshavevaluesthataredifferentfromthevaluesofmostnon-economists.d. economists’theoriesarenoteasilyconfirmedorrefutedinlaboratoryanalysis.


18. Policiessuchasrentcontrolandtradebarrierspersista. becauseeconomistsareaboutevenlydividedastothemeritsofthosepolicies.b. becausealmostalleconomistsagreethatthosepolicieshavenodiscernibleeconomiceffects.c. becausealmostalleconomistsagreethatthosepoliciesaredesirable.d. despitethefactthatalmostalleconomistsagreethatthosepoliciesareundesirable.


19. Almostalleconomistsagreethattariffsandimportquotasa. reducesgeneraleconomicwelfare.b. increasesgeneraleconomicwelfare.c. havenoeffectongeneraleconomicwelfare.d. stimulatealessthanfullyemployedeconomy.

ANSWER: aPOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.8-LO:2-3NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomist




20. Almostalleconomistsagreethatlocalandstategovernmentsshoulda. eliminatesubsidiestoprofessionalsportsfranchises.b. increasesubsidiestoprofessionalsportsfranchises.c. copyeconomicpolicyfromWashington,D.C.d. preventcompaniesfromoutsourcingwork.

ANSWER: aPOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.8-LO:2-3NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Knowledge

Multiple Choice – Section 04: Let’s Get Going

1. JohnMaynardKeynesreferredtoeconomicsasaneasysubject,a. atwhichveryfewexcel.b. butnotaseasyasphilosophyorthepuresciences.c. whichveryfewcanenjoy.d. whichdealsprimarilywithcommonsense.




2. HowdidtheinfluentialeconomistJohnMaynardKeynesexplainhisremarkthatthougheconomicsisaneasysubjectcomparedwiththehigherbranchesofphilosophyorpurescience,itisasubjectatwhichfewexcel?a. Mostpeoplewhostudyeconomicsarenotverybright.b. Goodeconomistsmustpossessararecombinationofgifts.c. Economicsisquiteboring;hence,peopletendtoloseinterestinitbeforemasteringit.d. Goodthinkersbecomefrustratedwitheconomicsbecauseitdoesnotmakeuseofthescientificmethod.


3. AccordingtoeconomistJohnMaynardKeynes,agreateconomistmustalsobea(n)a. mathematician.b. historian.c. philosopher.d. Alloftheabovearecorrect.




4. JohnMaynardKeynesdescribedeconomicsasaneasysubjectatwhichveryfewexcel.Which of thefollowing isnotoneofthereasonsKeynesgaveforwhysofewpeopleexcelatthestudyofeconomics?a. Aneconomistmustalsobeamathematician,historian,statesman,andphilosopherinsomedegree.b. Aneconomistmustunderstandsymbolsandspeakinwords.c. Aneconomistmustbepurposefulanddisinterestedinasimultaneousmood.d. Aneconomistmustunderstandenvironmentalscience,regulation,andpoliticalscience.


Multiple Choice – Section 05: APPENDIX: Graphing: A Brief Review

1. Whichofthefollowingisnotcorrect?a. Wh

endevelopingeconomictheories,graphsofferawaytovisuallyexpressideasthatmightbelessclearifdescribedwithequationsorwords.

b. Graphsareonewayofexpressingtherelationshipsamongvariables.c. Wh

enstudyingtherelationshipbetweentwoeconomicvariables,graphsalloweconomiststodrawindisputableconclusionsaboutcausesandeffects.

d. Whenanalyzingeconomicdata,graphsprovideapowerfulwayoffindingandinterpretingpatterns.




2. Whichofthefollowingisnotanexampleofagraphofasinglevariable?a. apiechartb. abargraphc. atime-seriesgraphd. ascatterplot


3. Graphssuchasbargraphsandpiechartsarelimitedinthattheya. canonlyshowvariablesthatarepositivelyrelated.b. canonlyshowvariablesthathaveanegativecorrelation.c. provideinformationononlyonevariable.d. provideinformationonnomorethantwovariables.




4. Evawantstocreateagraphcontainingthepricesofconcertticketsandthecorrespondingquantitiesofconcertticketsdemandedbycustomers.Sheshouldusea(n)a. piechart.b. bargraph.c. time-seriesgraphd. coordinatesystem.

ANSWER: dPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.10-LO:2-5NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:ComprehensionNOTES: r

5. Theuseofthecoordinatesystemallowsa. forthedisplayoftheflowsofdollars,goodsandservices,andfactorsofproductioninaneconomicsystem.b. forthedisplayofhowlaborandotherresourcesareorganizedintheproductionprocess.c. forthedisplayoftwovariablesonasinglegraph.d. forthecreationofpiechartsandbargraphs.




6. Todisplayinformationontwovariables,aneconomistmustusea. abargraph.b. apiechart.c. thecoordinatesystem.d. atime-seriesgraph.


7. Whichofthefollowingallowsyoutoprovideinformationabouttherelationshipbetweentwovariables?a. coordinatesystem.b. piechartc. bargraphd. time-seriesgraph


8. Anorderedpairisa. theprocessofcheckingcalculationstwicebeforeplacingthemonagraph.b. twonumbersthatcanberepresentedbyasinglepointonagraph.c. twonumbersthatarerepresentedbytwopointsonagraph.d. twopointsonagraphthatareofequaldistancefromtheorigin.




9. Thex-coordinateisthea. firstnumberofanorderedpairandrepresentsthepoint'shorizontallocation.b. secondnumberofanorderedpairandrepresentsthepoint'shorizontallocation.c. firstnumberofanorderedpairandrepresentsthepoint'sverticallocation.d. secondnumberofanorderedpairandrepresentsthepoint'sverticallocation.


10. Thex-coordinateofanorderedpairspecifiesthea. diagonallocationofthepoint.b. verticallocationofthepoint.c. horizontallocationofthepoint.d. quadrantlocationinwhichthepointislocated.


11. Thefirstnumberinanyorderedpairisa. thex-coordinate.b. they-coordinate.c. theverticallocationofthepoint.d. theslope.




12. They-coordinateisthea. firstnumberofanorderedpairandrepresentsthepoint'shorizontallocation.b. secondnumberofanorderedpairandrepresentsthepoint'shorizontallocation.c. firstnumberofanorderedpairandrepresentsthepoint'sverticallocation.d. secondnumberofanorderedpairandrepresentsthepoint'sverticallocation.


13. They-coordinateofanorderedpairspecifiesthea. diagonallocationofthepoint.b. verticallocationofthepoint.c. horizontallocationofthepoint.d. quadrantlocationinwhichthepointislocated.


14. Thesecondnumberinanyorderedpairisa. thex-coordinate.b. they-coordinate.c. thehorizontallocationofthepoint.d. theslope.




15. Intheorderedpair(20,30),20isthea. thex-coordinate.b. thehorizontallocationofthepoint.c. they-coordinate.d. Bothaandbarecorrect.


16. Intheorderedpair(5,3),3isthea. horizontallocationofthepoint.b. theslope.c. thex-coordinate.d. they-coordinate.




17. Thepointwherebothxandyarezeroisknownasthea. origin.b. null.c. zerocoordinate.d. center.


18. Theorderedpairthatrepresentstheoriginonagraphis

a. (1,1).b. (0,0).c. (-1, -1).d. (∞, ∞).


19. Whentwovariableshaveapositivecorrelation,a. theytendtomoveinoppositedirections.b. theytendtomoveinthesamedirection.c. onevariablewillmovewhiletheotherremainsconstant.d. thevariables’valuesarenevernegative.




20. Whentwovariableshaveapositivecorrelation,a. whenthex-variableincreases,they-variabledecreases.b. whenthex-variabledecreases,they-variableincreases.c. whenthex-variableincreases,they-variableincreases.d. Morethanoneoftheaboveiscorrect.


21. Whentwovariableshaveanegativecorrelation,a. theytendtomoveinoppositedirections.b. theytendtomoveinthesamedirection.c. onevariablewillmovewhiletheotherremainsconstant.d. thevariables’valuesareneverpositive.


22. Whentwovariableshaveanegativecorrelation,a. whenthex-variabledecreases,they-variabledecreases.b. whenthex-variabledecreases,they-variableincreases.c. whenthex-variableincreases,they-variableincreases.d. Morethanoneoftheaboveiscorrect.




23. Whentwovariableshaveanegativecorrelationandthex-variabledecreases,a. they-variableincreases.b. they-variabledecreases.c. they-variablestaysthesame.d. thex-variablecanneverbepositive.


Figure2-16

24. RefertoFigure2-16.Thegraphshownisknownasaa. time-seriesgraph.b. bargraph.c. scatterplot.d. piechart.




25. RefertoFigure2-16.Cupsofcoffeeperdayandthehoursthatsomeonecangowithoutsleepappeartohavea. apositivecorrelation.b. anegativecorrelation.c. arandomcorrelation.d. nocorrelation.

ANSWER: aPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.10-LO:2-5NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Application

26. RefertoFigure2-16.Takingcauseandeffectintoaccount,whichofthefollowinginterpretationswouldbemostreasonableregardingtherelationshipbetweencoffeeandhourswithoutsleep?a. Thelesscoffeeapersondrinksperday,themoretimehecangowithoutsleep.b. The

reisnorelationshipbetweenhowmuchcoffeeperdayapersondrinksandhowlonghecangowithoutsleep.

c. Themorecoffeeapersondrinksperday,themoretimehecangowithoutsleep.d. Themorecoffeeapersondrinksperday,thelesstimehecangowithoutsleep.




27. Whentwovariablesmoveinoppositedirections,thecurverelatingthemisa. upwardsloping,andwesaythevariablesarepositivelyrelated.b. upwardsloping,andwesaythevariablesarenegativelyrelated.c. downwardsloping,andwesaythevariablesarepositivelyrelated.d. downwardsloping,andwesaythevariablesarenegativelyrelated.


28. Whentwovariablesmoveinthesamedirection,thecurverelatingthemisa. upwardsloping,andwesaythevariablesarepositivelyrelated.b. upwardsloping,andwesaythevariablesarenegativelyrelated.c. downwardsloping,andwesaythevariablesarepositivelyrelated.d. downwardsloping,andwesaythevariablesarenegativelyrelated.


29. Whenarelevantvariablethatisnotnamedoneitheraxischanges,a. therewillbeamovementalongthecurve.b. thecurvewillrotateclockwise.c. thecurvewillbeunaffectedsinceonlythevariablesontheaxisaffectthecurve.d. thecurvewillshift.




30. Supposepriceismeasuredalongtheverticalaxisonagraph.Whenpricechanges,therewillbeaa. rotationofthecurve.b. shiftofthecurve.c. movementalongthecurve.d. changeintheslopeofthecurve.


DISC:SupplyandDemandDemand


31. Ademandcurveshowstherelationshipa. betweenincomeandquantitydemanded.b. betweenpriceandincome.c. betweenpriceandquantitydemanded.d. amongincome,price,andquantitydemanded.






32. Ademandcurveshowstherelationshipbetweenpriceanda. income.b. quantitydemanded.c. production.d. incomeandquantitydemanded.




33. Ademandcurvedisplayingtherelationshipbetweenthepriceofcarsandthequantitydemandedofcarsshouldhaveaslopethatisa. lessthan0.b. betweenzeroand1.c. betweenoneandinfinity.d. undefined.






34. Which ofthefollowingisnotheldconstantwhenlookingatanindividual’sdemandcurve?a. incomeb. pricec. preferencesd. theavailabilityofalternativegoods




35. IfMartina’sincomeincreasesand,asaresult,shechoosestobuymorelattéspermonthateachprice,thenherdemandcurvewilla. shifttotheright.b. shifttotheleft.c. notshift;instead,Martinawillmovealongherdemandcurvedownwardandtotheright.d. notshift;instead,Martinawillmovealongherdemandcurveupwardandtotheleft.






Figure2-17

36. RefertoFigure2-17.Thecurvesshownarea. supplycurves.b. demandcurves.c. preferencecurves.d. income-consumptioncurves.




37. RefertoFigure2-17.ThemovementfrompointAtopointBisa(n)a. shiftofthedemandcurve.b. indicationofachangeinpreferencesforgrapes.c. movementalongthedemandcurve.d. indicationofanincreaseinincome.

ANSWER: cPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.10-LO:2-5NATIONALSTANDARDS: UnitedStates-BUSPROG:Analytic



TOPICS:



38. RefertoFigure2-17.ThemovementfrompointBtopointCisa(n)a. shiftofthedemandcurve.b. movementalongthedemandcurve.c. indicationthatthepriceofgrapeshaschanged.d. indicationthatthecostsincurredbyfirmsthatproducegrapeshavechanged.




39. RefertoFigure2-17.ThemovementfrompointBtopointCcouldhavebeencausedbya. inflation.b. achangeinincome.c. achangeinthepriceofgrapes.d. achangeinthecostofproducinggrapes.






40. RefertoFigure2-17.TheslopeofthecurvebetweenpointsAandBisa. -5b. -1/5c. 1/5d. 5




41. Theslopeofalineisequaltoa. thechangeinthevalueofxdividedbythechangeinthevalueofy.b. thechangeinthevalueofydividedbythechangeinthevalueofx.c. thehorizontaldistancedividedbytheverticaldistance.d. thevalueofydividedbythevalueofx.


42. Theslopeofalineisequaltoa. risedividedbyrun.b. rundividedbyrise.c. riseminusrun.d. riseplusrun.

ANSWER: aPOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.10-LO:2-5



NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Knowledge

43. Whichofthefollowingisnotcorrect?a. Theslopeofalinewillbeasmallpositivenumberforafairlyflatupward-slopingline.b. Theslopeofalinewillbealargepositivenumberforasteepupward-slopingline.c. Theslopeofalinewillbeanegativenumberforadownward-slopingline.d. Theslope of aline will beinfinite for a horizontalline.


44. Whichofthefollowingiscorrect?a. Ahorizontallinehasaninfiniteslope,andaverticallinehasazeroslope.b. Ahorizontallinehasaslopeof1,andaverticallinehasaslopeof-1.c. Ahorizontallinehasazeroslope,andaverticallinehasaninfiniteslope.d. Ahorizontallinehasaslopeof-1,andaverticallinehasaslopeof1.


45. Theslopeofafairlyflatupward-slopinglinewillbeaa. smallpositivenumber.b. largepositivenumber.c. smallnegativenumber.d. largenegativenumber.

ANSWER: aPOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.10-LO:2-5



NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Knowledge

46. Theslopeofasteepupward-slopinglinewillbeaa. smallpositivenumber.b. largepositivenumber.c. smallnegativenumber.d. largenegativenumber.


47. Theslopeofalinethatpassesthroughthepoints(20,30)and(40,14)is

a. -5/4.b. -4/5.c. 4/5.d. 5/4.

ANSWER: bPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.10-LO:2-5NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:ApplicationNOTES: r



48. Theslopeofalinethatpassesthroughthepoints(5,8)and(12,12)is

a. -7/4.b. -4/7.c. 4/7.d. 7/4.

ANSWER: cPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.10-LO:2-5NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:ApplicationNOTES: r

49. Theslopeofalinepassingthroughthepoints(15,3)and(10,6)is

a. -3/5.b. 3/5.c. -5/3.d. 5/3.




50. Arelativelysteepdemandcurveindicatesthata. quantitydemandedwilladjustonlyslightlytoapricechange.b. quantitydemandedwilladjustsignificantlytoapricechange.c. quantitydemandedwillnotadjusttoapricechange.d. thechangeinquantitydemandedwillexactlyequalachangeinprice.




51. Arelativelyflatdemandcurveindicatesthata. quantitydemandedwilladjustonlyslightlytoapricechange.b. quantitydemandedwilladjustsignificantlytoapricechange.c. quantitydemandedwillnotadjusttoapricechange.d. thechangeinquantitydemandedwillexactlyequalachangeinprice.






52. Whenincomeincreasestheslopeofanindividual’sdemandcurve,thedemandcurvea. turnspositive.b. becomesundefined.c. remainsnegative.d. becomesinfinite.




Figure2-18

RelationshipbetweenPriceandRestaurantMeals



53. RefertoFigure2-18.Intheorderedpair(8,24)a. thex-coordinateis8andthey-coordinateis24.b. thex-coordinateis24andthey-coordinateis8.c. thenumberstellthelocationoftheorigin.d. the8representsthepriceandthe24representsthenumberofrestaurantmeals.




54. RefertoFigure2-18.TheslopeofthelinecontainingpointsYandZisa.-0.5.b. -1.c. -2.d. -4.






55. RefertoFigure2-18.TheslopeofthelinecontainingpointsAandBisa.-1/2.b. -2.c. 1/2.d. 2.




56. RefertoFigure2-18.AmovementfrompointAtopointZiscalleda. ashiftindemand.b. amovementalongthedemandcurve.c. a shiftinsupply.d. amovementalongthesupplycurve.






57. RefertoFigure2-18.AmovementfrompointAtopointBiscalleda. ashiftindemand.b. amovementalongthedemandcurve.c. a shiftinsupply.d. amovementalongthesupplycurve.




58. RefertoFigure2-18.WhichofthefollowingcouldresultinamovementfrompointAtopointB?a. achangeinincomeb. achangeinthecostofproducingarestaurantmealc. achangeinthepriceofrestaurantmealsd. achangeinthepriceofmovies






59. RefertoFigure2-18.WhichofthefollowingcouldresultinamovementfrompointBtopointZ?a. achangeinthepriceofarestaurantmealb. achangeinthenumberofrestaurantmealsdemandedc. achangeinincomed. Bothaandbarecorrect.




60. Supposethatsomeonemakestheargumentthatbecauseemptyalcoholcontainersarefoundatmanyaccidents,thecontainerscauseaccidents.Thiswouldbeanexampleofa. soundlogic.b. reversecausality.c. omittedvariables.d. bias.




61. Alfonsohasnoticedthatincreasesinunemploymentinsuranceclaimsareassociatedwithrecessions,andthereforeheadvocateslimitsonunemploymentinsurancesoastopreventrecessions.Maryhasnoticedthatmostdrugaddictsonceattendedschools,andthereforesheadvocatesgettingridofschoolssoastopreventdrugaddiction.a. ThereasoningofbothAlfonsoandMarysuffersfromtheomittedvariableproblem.b. ThereasoningofbothAlfonsoandMarysuffersfromthereversecausalityproblem.c. Alfonso

'sreasoningsuffersfromthereversecausalityproblem,andMary’sreasoningsuffersfromtheomittedvariableproblem.

d. Mary'sreasoningsuffersfromthereversecausalityproblem,andAlfonso'sreasoningsuffersfromtheomittedvariableproblem.


62. Intheearly19thcentury,theRussiangovernmentsentdoctorstosouthernRussianvillagestoprovideassistanceduringacholeraepidemic.Thevillagersnoticedthatwhereverdoctorsappeared,peopledied.Therefore,manydoctorswerechasedawayfromvillages,andsomewereevenkilled.Thisreactiontothecorrelationbetweendoctorsanddeathsismostlikelyaproblemofa. omittedvariables.b. reversecausality.c. governmentpropaganda.d. medicalincompetence.




63. Theargumentthatpurchasesofminivanscauselargefamiliesisanexampleofa. omittedvariables.b. normativestatements.c. reversecausality.d. bias.


Figure2-19

Inthefollowinggraphthex-axisshowsthenumberoftimesacommuterrailtrainstopsatastationperhourandthey-axisshowsthenumberofcommuterrailpassengersperhour.

CommuterRailPassengersbyFrequencyofService

64. RefertoFigure2-19.Whichofthefollowingconclusionsshouldnotbedrawnfromobservingthisgraph?a. Thereisapositivecorrelationbetweenthefrequencyofserviceandthenumberofpassengers.b. Whenthereare5stopsperhour,thereareapproximately200passengers.c. Morestopsperhourisassociatedwithmorepassengersperhour.d. Nootherfactorsbesidesthefrequencyofserviceaffectthenumberofpassengers.




65. RefertoFigure2-19.Apolicymakerobservesthisgraphandconcludesthatincreasingthefrequencyofcommuterrailserviceisacertainwaytogetmorecommuterstochoosethecommuterrailinsteadofdrivingtheirowncars.Youwarnthepolicymakeraboutmakingareversecausalitymistakewithwhichofthefollowingstatements?a. Highergaspricesarecausingmorepeopletochoosethecommuterrailoverdriving.b. Theservicefrequencywasincreasedinresponsetoanincreaseinthenumberofpassengersperhour.c. Thereisapositiverelationshipbetweenfrequencyofstopsandnumberofpassengers.d. Noneoftheaboveiscorrect.


Figure2-20

RelationshipBetweenYearsofEducationandAnnualIncome



66. RefertoFigure2-20.Thegraphaboveisaa. bargraphb. scatterplotc. piechartd. timeseriesanalysis


67. RefertoFigure2-20.Accordingtothegraph,thecorrelationbetweenyearsofeducationandannualincomeisa. positiveb. negativec. inversed. normative

ANSWER: aPOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.10-LO:2-5NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Comprehension



68. RefertoFigure2-20.SenatorSmithobservesthegraphandconcludesthatpeoplewhoearnhigherincomesattendschoolformoreyears.SenatorJonesobservesthegraphandconcludesthatpeoplewhoattendschoolformoreyearsearnhigherincomes.Whoiscorrect?a. SenatorSmithiscorrect.b. SenatorJonesiscorrect.c. Itisdifficulttosaywhichsenatormightbecorrectduetothereversecausalityproblem.d. Itisdifficulttosaywhichsenatormightbecorrectduetoomittedvariablebias.

ANSWER: cPOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.10-LO:2-5NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Comprehension

69. Intheorderedpair(3,6),3isthea. x-coordinate.b. y-coordinate.c. origin.d. slope.

ANSWER: aPOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.10-LO:2-5NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:ApplicationNOTES: r



70. Betweenthetwoorderedpairs(3,6)and(7,18),theslopeisa.1/3b.-1/3.c. 3.d. -3.

ANSWER: cPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.10-LO:2-5NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:ApplicationNOTES: r

Figure2-21

71. RefertoFigure2-21.Accordingtothegraph,snowstormsa. andsnowblowerssoldarepositivelycorrelated.b. andsnowblowerssoldarenegativelycorrelatedc. andsnowblowerssoldareuncorrelated.d. arecausedbymoresnowblowersbeingsold.




72. RefertoFigure2-21.YourfriendJohncreatedthegraphabovetoillustratethatsnowstormsarecausedbymoresnowblowersbeingsold.Youinformhimthathisinterpretationisincorrectduetoa. omittedvariablebias.b. reversecausality.c. slopemismatch.d. shiftingversusmovingalongacurve.


73. RefertoFigure2-21.Whichofthefollowingcouldbeanomittedvariableinthegraph?a. thepriceofsnowblowersb. achangeinconsumers’incomesc. achangeintheseasonsd. Alloftheabovearecorrect.

ANSWER: dPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.10-LO:2-5NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Application



True/False and Short Answer

1. Economiststrytoaddresstheirsubjectwithascientist’sobjectivity.a. Trueb. False

ANSWER: TruePOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Knowledge

2. Economistsdevisetheories,collectdata,andthenanalyzethesedatainanattempttoverifyorrefutetheirtheories.a. Trueb. False


3. Thescientificmethodisthedispassionatedevelopmentandtestingoftheoriesabouthowtheworldworks.a. Trueb. False

ANSWER: TruePOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:GeneralPrinciplesKEYWORDS: BLOOM'S:Knowledge



4. Thescientificmethodcanbeappliedtothestudyofeconomics.a. Trueb. False

ANSWER: TruePOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:



5. Whilethescientificmethodisapplicabletostudyingnaturalsciences,itisnotapplicabletostudyinganation’seconomy.a. Trueb. False

ANSWER: FalsePOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Comprehension

6. Foreconomists,conductingexperimentsisoftendifficultandsometimesimpossible.a. Trueb. False




7. Economistsusuallyhavetomakedowithwhateverdatatheworldhappenstogivethem.a. Trueb. False


8. Itisdifficultforeconomiststomakeobservationsanddeveloptheories,butitiseasyforeconomiststorunexperimentstogeneratedatatotesttheirtheories.a. Trueb. False


9. Sinceeconomistscannotusenaturalexperimentsofferedbyhistory,theymustusecarefullyconstructedlaboratoryexperimentsinstead.a. Trueb. False




10. Historicalepisodesarenotvaluabletoeconomists.a. Trueb. False


11. Historicalepisodesalloweconomiststoillustrateandevaluatecurrenteconomictheories.a. Trueb. False


12. Goodassumptionssimplifyaproblemwithoutsubstantiallyaffectingtheanswer.a. Trueb. False

ANSWER: TruePOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Comprehension



13. Assumptionscansimplifythecomplexworldandmakeiteasiertounderstand.a. Trueb. False


14. Economistsoftenfinditworthwhiletomakeassumptionsthatdonotnecessarilydescribetherealworld.a. Trueb. False


15. Economistsuseonestandardsetofassumptionstoansweralleconomicquestions.a. Trueb. False




16. Economicmodelsaremostoftencomposedofdiagramsandequations.a. Trueb. False


17. Economicmodelsomitmanydetailstoallowustoseewhatistrulyimportant.a. Trueb. False


18. Economicmodelscanhelpusunderstandrealityonlywhentheyincludealldetailsoftheeconomy.a. Trueb. False




19. Aneconomicmodelcanaccuratelyexplainhowtheeconomyisorganizedbecauseitisdesignedtoinclude,totheextentpossible,allfeaturesoftherealworld.a. Trueb. False


20. Allscientificmodels,includingeconomicmodels,simplifyrealityinordertoimproveourunderstandingofit.a. Trueb. False


21. Thecircular-flowdiagramexplains,ingeneralterms,howtheeconomyisorganizedandhowparticipantsintheeconomyinteractwithoneanother.a. Trueb. False




22. Acircular-flowdiagramisavisualmodeloftheeconomy.a. Trueb. False

ANSWER: TruePOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:



23. Thecircularflowmodelisnotusedanymorebecauseitfailstoperfectlyreplicaterealworldsituations.a. Trueb. False

ANSWER: FalsePOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:



24. Inthecircular-flowdiagram,householdsandfirmsarethedecisionmakers.a. Trueb. False








25. Inthecircular-flowdiagram,firmsproducegoodsandservicesusingthefactorsofproduction.a. Trueb. False




26. Inthecircular-flowdiagram,factorsofproductionarethegoodsandservicesproducedbyfirms.a. Trueb. False




27. Inthecircular-flowdiagram,factorsofproductionincludeland,labor,andcapital.a. Trueb. False








28. Inthecircular-flowdiagram,firmsownthefactorsofproductionandusethemtoproducegoodsandservices.a. Trueb. False




29. Inthecircular-flowdiagram,firmsconsumeallthegoodsandservicesthattheyproduce.a. Trueb. False




30. Inthecircular-flowdiagram,thetwotypesofmarketsinwhichhouseholdsandfirmsinteractarethemarketsforgoodsandservicesandthemarketsforfactorsofproduction.a. Trueb. False

ANSWER: TruePOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1








31. Inthemarketsforgoodsandservicesinthecircular-flowdiagram,householdsarebuyersandfirmsaresellers.a. Trueb. False




32. Inthemarketsforthefactorsofproductioninthecircular-flowdiagram,householdsarebuyersandfirmsaresellers.a. Trueb. False

ANSWER: FalsePOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:



33. Inthecircular-flowdiagram,onelooprepresentstheflowofgoods,services,andfactorsofproduction,andtheotherlooprepresentsthecorrespondingflowofdollars.a. Trueb. False

ANSWER: TruePOINTS: 1DIFFICULTY: Difficulty:Moderate



LEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:





34. Inthecircular-flowdiagram,onelooprepresentstheflowofgoodsandservices,andtheotherlooprepresentstheflowoffactorsofproduction.a. Trueb. False




35. Inthecircular-flowdiagram,paymentsforlabor,land,andcapitalflowfromfirmstohouseholdsthroughthemarketsforthefactorsofproduction.a. Trueb. False




36. Theproductionpossibilitiesfrontierisagraphthatshowsthevariouscombinationsofoutputsthattheeconomycanpossiblyproducegiventheavailablefactorsofproductionandtheavailableproductiontechnology.a. Trueb. False



ANSWER: TruePOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ProductionPossibilitiesModelKEYWORDS: BLOOM'S:Knowledge



Figure2-23

37. RefertoFigure2-23.Ifthiseconomyusesallitsresourcesinthedishwasherindustry,itproduces35dishwashersandnodoghouses.a. Trueb. False




38. RefertoFigure2-23.Itispossibleforthiseconomytoproduce75doghouses.a. Trueb. False

ANSWER: FalsePOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ProductionPossibilitiesModel






39. RefertoFigure2-23.Itispossibleforthiseconomytoproduce30doghousesand20dishwashers.a. Trueb. False

ANSWER: TruePOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ProductionPossibilitiesModelKEYWORDS: BLOOM'S:Application

40. RefertoFigure2-23.Itispossibleforthiseconomytoproduce45doghousesand30dishwashers.a. Trueb. False

ANSWER: FalsePOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ProductionPossibilitiesModelKEYWORDS: BLOOM'S:Application

41. RefertoFigure2-23.Whenthiseconomyproduces30doghousesand25dishwashersthereisfullemployment.a. Trueb. False




42. RefertoFigure2-23.Thiseconomyfullyemploysitsresourceswhenitproduces35dishwashersandzerodoghouses.a. Trueb. False


DISC:ProductionPossibilitiesModelAllocativeEfficiency


43. RefertoFigure2-23.Giventhetechnologyavailableformanufacturingdoghousesanddishwashers,thiseconomydoesnothaveenoughofthefactorsofproductiontosupportthelevelofoutputrepresentedbypointC.a. Trueb. False


44. RefertoFigure2-23.PointsA,B,andDrepresentfeasibleoutcomesforthiseconomy.a. Trueb. False






45. RefertoFigure2-23.PointsBandCrepresentinfeasibleoutcomesforthiseconomy.a. Trueb. False


46. RefertoFigure2-23.PointsA,B,andDrepresentefficientoutcomesforthiseconomy.a. Trueb. False




47. RefertoFigure2-23.PointBrepresentsaninefficientoutcomeforthiseconomy.a. Trueb. False








48. RefertoFigure2-23.UnemploymentcouldcausethiseconomytoproduceatpointB.a. Trueb. False


49. RefertoFigure2-23.TheopportunitycostofmovingfrompointAtopointDis10dishwashers.a. Trueb. False




50. RefertoFigure2-23.TheopportunitycostofmovingfrompointBtopointDis15doghouses.a. Trueb. False








51. RefertoFigure2-23.TheopportunitycostofmovingfrompointBtopointAiszero.a. Trueb. False




52. RefertoFigure2-23.Theopportunitycostofanadditionaldoghouseincreasesasmoredoghousesareproduced.a. Trueb. False




53. Withtheresourcesithas,aneconomycanproduceatanypointonoroutsidetheproductionpossibilitiesfrontier,butitcannotproduceatpointsinsidethefrontier.a. Trueb. False

ANSWER: FalsePOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1



NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ProductionPossibilitiesModelKEYWORDS: BLOOM'S:Knowledge



54. Pointsinsidetheproductionpossibilitiesfrontierrepresentfeasiblelevelsofproduction.a. Trueb. False

ANSWER: TruePOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ProductionPossibilitiesModelKEYWORDS: BLOOM'S:Comprehension

55. Pointsinsidetheproductionpossibilitiesfrontierrepresentinefficientlevelsofproduction.a. Trueb. False




56. Pointsontheproductionpossibilitiesfrontierrepresentefficientlevelsofproduction.a. Trueb. False








57. Pointsoutsidetheproductionpossibilitiesfrontierrepresentinfeasiblelevelsofproduction.a. Trueb. False




58. Ifamajoruniongoesonstrike,thenthecountrywouldbeoperatinginsideitsproductionpossibilitiesfrontier.a. Trueb. False


59. Anoutcomeissaidtobeefficientifaneconomyisgettingallitcanfromthescarceresourcesithasavailable.a. Trueb. False








60. Anoutcomeissaidtobeefficientifaneconomyisconservingthelargestpossiblequantityofitsscarceresourceswhilestillmeetingthebasicneedsofsociety.a. Trueb. False




61. Aproductionpointissaidtobeefficientifthereisnowayfortheeconomytoproducemoreofonegoodwithoutproducinglessofanother.a. Trueb. False




62. Ifaneconomycanproducemoreofonegoodwithoutgivingupanyofanothergood,thentheeconomy’scurrentproductionpointisinefficient.a. Trueb. False

ANSWER: TruePOINTS: 1



DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:





63. Unemploymentcausesproductionlevelstobeinefficient.a. Trueb. False




64. Theopportunitycostofsomethingiswhatyougiveuptogetit.a. Trueb. False




65. Theproductionpossibilitiesfrontiershowstheopportunitycostofonegoodasmeasuredintermsoftheothergood.a. Trueb. False

ANSWER: TruePOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:Analytic



TOPICS:





66. Whenaproductionpossibilitiesfrontierisbowedoutward,theopportunitycostofonegoodintermsoftheotherisconstant.a. Trueb. False




67. Whenaproductionpossibilitiesfrontierisbowedoutward,theopportunitycostofonegoodintermsoftheotherdependsonhowmuchofeachgoodisbeingproduced.a. Trueb. False




68. Whenaproductionpossibilitiesfrontierisbowedoutward,theopportunitycostofthefirstgoodintermsofthesecondgoodincreasesasmoreofthesecondgoodisproduced.a. Trueb. False

ANSWER: FalsePOINTS: 1



DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:





69. Whenaproductionpossibilitiesfrontierisbowedoutward,theopportunitycostofthesecondgoodintermsofthefirstgoodincreasesasmoreofthesecondgoodisproduced.a. Trueb. False




70. Aproductionpossibilitiesfrontierhasabowedshapeiftheopportunitycostisconstantatalllevelsofoutput.a. Trueb. False




71. Economistsbelievethatproductionpossibilitiesfrontiersrarelyhaveabowedshape.a. Trueb. False

ANSWER: FalsePOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:Analytic



TOPICS: DISC:ProductionPossibilitiesModelKEYWORDS: BLOOM'S:Knowledge



72. Aproductionpossibilitiesfrontierwillbebowedoutwardifsomeoftheeconomy’sresourcesarebettersuitedtoproducingonegoodthananother.a. Trueb. False

ANSWER: TruePOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ProductionPossibilitiesModelKEYWORDS: BLOOM'S:Comprehension

73. Thetrade-offbetweentheproductionofonegoodandtheproductionofanothergoodcanchangeovertimebecauseoftechnologicaladvances.a. Trueb. False




74. Atechnologicaladvanceintheproductionofthefirstgoodincreasestheopportunitycostofthefirstgoodintermsofthesecondgood.a. Trueb. False

ANSWER: TruePOINTS: 1DIFFICULTY: Difficulty:ChallengingLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:Analytic



TOPICS:





75. Whiletheproductionpossibilitiesfrontierisausefulmodel,itcannotbeusedtoillustrateeconomicgrowth.a. Trueb. False




76. Economicgrowthcausesaproductionpossibilitiesfrontiertoshiftoutward.a. Trueb. False




77. Ifnewgovernmentregulationsdesignedtoprotectwetlandsremoveveryproductivefarmlandfromproduction,thentheproductionpossibilitiesfrontierwillshiftinward.a. Trueb. False

ANSWER: TruePOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:Analytic



TOPICS: DISC:ProductionPossibilitiesModelKEYWORDS: BLOOM'S:Application



78. Productionpossibilitiesfrontierscanbeusedtoillustratescarcity,trade-offs,opportunitycost,efficiency,unemployment,technologicaladvances,andeconomicgrowth.a. Trueb. False

ANSWER: TruePOINTS: 1DIFFICULTY: Difficulty:ChallengingLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ProductionPossibilitiesModelKEYWORDS: BLOOM'S:Analysis

79. Microeconomicsisthestudyofhowhouseholdsandfirmsmakedecisionsandhowtheyinteractinspecificmarkets.a. Trueb. False

ANSWER: TruePOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:GeneralMicroKEYWORDS: BLOOM'S:Knowledge

80. Macroeconomicsisthestudyofeconomy-widephenomena.a. Trueb. False


DISC:GeneralMacro




81. Theeffectsofborrowingbythefederalgovernmentwouldbestudiedbyamicroeconomistratherthanamacroeconomist.a. Trueb. False

ANSWER: FalsePOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:GeneralMacroKEYWORDS: BLOOM'S:Application

82. TheeffectsofforeigncompetitionontheU.S.textileindustrywouldbestudiedbyamicroeconomistratherthanamacroeconomist.a. Trueb. False

ANSWER: TruePOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:GeneralMicroKEYWORDS: BLOOM'S:Application

83. Amacroeconomist,ratherthanamicroeconomist,wouldstudytheeffectsonamarketfromtwofirmsmerging.a. Trueb. False

ANSWER: FalsePOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:GeneralMicroKEYWORDS: BLOOM'S:Application



84. Microeconomicsandmacroeconomicsarecloselyintertwined.a. Trueb. False

ANSWER: TruePOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:GeneralKEYWORDS: BLOOM'S:Knowledge

85. Wheneconomistsaretryingtoexplaintheworld,theyarescientists,andwhentheyaretryingtohelpimprovetheworld,theyarepolicyadvisers.a. Trueb. False


86. Economistsactingasscientistsmakepositivestatements,whileeconomistsactingaspolicyadvisersmakenormativestatements.a. Trueb. False




87. Normativestatementsdescribehowtheworldis,whilepositivestatementsprescribehowtheworldshouldbe.a. Trueb. False




88. Positivestatementsaredescriptive,whilenormativestatementsareprescriptive.a. Trueb. False




89. Positivestatementscanbeevaluatedusingdataalone,butnormativestatementscannot.a. Trueb. False








90. Evaluatingnormativestatementsinvolvesvaluesaswellasfacts.a. Trueb. False




91. "Societywouldbebetteroffifthewelfaresystemwereabolished"isanormativestatement,notapositivestatement.a. Trueb. False




92. "Otherthingsequal,anincreaseinsupplycausesadecreaseinprice"isanormativestatement,notapositivestatement.a. Trueb. False

ANSWER: FalsePOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.7-LO:2-2



NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Application



93. "Minimumwagelawsresultinunemployment”isanormativestatement,while“theminimumwageshouldbehigher”isapositivestatement.a. Trueb. False

ANSWER: FalsePOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.7-LO:2-2NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Application

94. “TheUSshouldnotrestrictemployersfromoutsourcingworktoforeigncountries”isanormativestatement.a. Trueb. False


95. Trade-offsareinvolvedinmostpolicydecisions.a. Trueb. False


DISC:ThinkingLikeanEconomistTradeoffs






96. Since1946,thepresidentoftheUnitedStateshasreceivedguidancefromtheCouncilofEconomicAdvisers.a. Trueb. False




97. TheCouncilofEconomicAdvisersconsistsofthirtymembersandastaffofseveraldozeneconomists.a. Trueb. False

ANSWER: FalsePOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.7-LO:2-2NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:



98. ThedutiesoftheCouncilofEconomicAdvisersaretoadvisethepresidentoftheUnitedStatesandtodetermineU.S.monetarypolicy.a. Trueb. False




TOPICS:





99. TheCouncilofEconomicAdvisers’EconomicReportofthePresidentdiscussesrecentdevelopmentsintheeconomyandpresentsthecouncil’sanalysisofcurrentpolicyissues.a. Trueb. False




100. ThePresidentcountsamonghiseconomicadvisorstheCongressionalBudgetOffice.a. Trueb. False




101. EconomistsattheU.S.DepartmentoftheTreasuryhelpdesignU.S.coinsandpapermoney.a. Trueb. False




TOPICS:





102. EconomistsattheU.S.DepartmentofJusticehelpenforcethenation’santitrustlaws.a. Trueb. False




103. EconomistsworkbothinsideandoutsidetheadministrativebranchoftheU.S.government.a. Trueb. False




104. TheCongressionalBudgetOffice,whichisstaffedbyeconomists,providesCongresswithindependentevaluationsofpolicyproposals.a. Trueb. False




TOPICS:





105. Thereisonlyoneexplanationforwhyeconomistsgiveconflictingadviceonpolicyissues,anditisthattheyhavedifferentvaluesaboutwhatpolicyshouldtrytoaccomplish.a. Trueb. False


106. Economistsmaydisagreeaboutthevalidityofalternativepositivetheoriesabouthowtheworldworks.a. Trueb. False


107. Differentvaluesarenotareasonfordisagreementamongeconomists.a. Trueb. False

ANSWER: FalsePOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.8-LO:2-3NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Knowledge



108. Insurveysofprofessionaleconomists,fourteenpropositionswereendorsedbyanoverwhelmingmajorityofrespondents.a. Trueb. False




109. Becausealmostalleconomistsopposepoliciesthatrestricttradeamongnations,policymakersdonotrestrictimportsofcertaingoods.a. Trueb. False


110. AccordingtoJohnMaynardKeynes,aneconomistmustpossessararecombinationofskillsincludingbeingamathematician,historian,statesman,andphilosopher.a. Trueb. False




TOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Application



111. Ineconomics,graphsservetwopurposes:theyofferawaytovisuallyexpressideas,andtheyprovideawayoffindingandinterpretingpatternswhenanalyzingeconomicdata.a. Trueb. False


112. Examplesofgraphsofasinglevariableincludepiecharts,bargraphs,andtime-seriesgraphs.a. Trueb. False


113. Apiechartisawaytodisplayinformationregardingtwovariables.a. Trueb. False

ANSWER: FalsePOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.10-LO:2-5NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Comprehension



114. Intheorderedpair(10,30),10isthey-coordinateand30isthez-coordinate.a. Trueb. False


115. Intheorderedpair(10,30),10isthehorizontallocationofthepointand30istheverticallocationofthepoint.a. Trueb. False

ANSWER: TruePOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.10-LO:2-5NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Application

116. Twovariablesthathaveapositivecorrelationmoveinthesamedirection.a. Trueb. False




117. Twovariablesthathaveanegativecorrelationmoveinoppositedirections.a. Trueb. False


118. Whentwovariablesmoveinoppositedirections,thecurverelatingthemisupwardsloping,andwesaythevariablesarepositivelyrelated.a. Trueb. False


119. Whentwovariablesmoveinthesamedirection,thecurverelatingthemisdownwardsloping,andwesaythevariablesarenegativelyrelated.a. Trueb. False




120. Whenavariablethatisnamedonanaxisofagraphchanges,thecurveshifts.a. Trueb. False


121. Whenavariablethatisnotnamedoneitheraxisofagraphchanges,wereadthechangeasamovementalongthecurve.a. Trueb. False


122. Theconceptofslopecanbeusedtoanswerquestionsabouthowmuchonevariablerespondstochangesinanothervariable.a. Trueb. False




123. Theslopeofalineisequaltothechangeinthex-variabledividedbythechangeinthey-variable.a. Trueb. False


124. Theslopeofanupward-slopinglineispositive,andtheslopeofadownward-slopinglineisnegative.a. Trueb. False


125. The slopeof ahorizontal lineis infinite,andthe slopeof avertical lineis zero.a. Trueb. False




126. Theslopeofalineistheratiooftheverticaldistancecoveredtothehorizontaldistancecoveredalongtheline.a. Trueb. False


127. Ifalinepassesthroughthepoints(20,5)and(10,10),thentheslopeofthelineis1/2.a. Trueb. False


128. Ifalinepassesthroughthepoints(20,5)and(10,10),thentheslopeofthelineis-2.a. Trueb. False




129. Changesinonevariableonagraphmightbecausedbytheothervariableonthegraphorbyathirdomittedvariable.a. Trueb. False


130. DecidingthatAcausesBwheninfactBcausesAisamistakecalledomittedvariablebias.a. Trueb. False


131. Usingtheoutlinebelow,drawacircular-flowdiagramrepresentingtheinteractionsbetweenhouseholdsandfirmsinasimpleeconomy.Explainbrieflythevariouspartsofthediagram.



ANSWER:

Thisdiagramshouldduplicatetheessentialcharacteristicsofthediagraminthetext,withanexplanationofthemeaningofeachflowandeachmarket.Itisimportantthatthestudentunderstandsthattheinnerlooprepresentstheflowofrealgoodsandservicesandthattheouterlooprepresentsthecorrespondingflowofpayments.

POINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:







132. The prairie dog has always been considered a problem for American cattle ranchers. They dig holes that cattle and horses can step in, and they eat grass necessary for cattle. Recently, ranchers have discovered that there is a demand for prairie dogs as pets. In some areas, prairie dogs can sell for as high as $150 each. Cattlemen are now fencing off prairie dog towns on their land so these towns will not be disturbed by their cattle.

Drawarancher’sproductionpossibilitiesfrontiershowingincreasingopportunitycostofcattleproductionintermsofprairiedogproduction.Usingaseparategraphforeachsituation,showwhatwouldhappentotheinitialproductionpossibilitiesfrontierineachofthefollowingsituations:a. Theoutcomeisefficient,withrancherschoosingtoproduceequalnumbersofcattleandprairiedogs.b. A

saprotestagainstthegovernmentintroducingthegraywolfbackintothewildintheirstate,ranchersdecidetowithhold25percentoftheavailablegrasslandforgrazing.

c. Thepriceofprairiedogsincreasesto$200each,soranchersdecidetoallotadditionallandforprairiedogs.d. T

hegovernmentgrantsnewleasestoranchers,givingthem10,000newacresofgrasslandeachforgrazing.e. A

droughtdestroysmostoftheavailablegrassforgrazingofcattle,butnotforprairiedogssincetheyalsoeatplantroots.

ANSWER:(a) (b)



(c) (d)

(e)

POINTS: 1DIFFICULTY: Difficulty:ChallengingLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ProductionPossibilitiesModelKEYWORDS: BLOOM'S:Analysis



133. Drawaproductionpossibilitiesfrontiershowingincreasingopportunitycostofhammersintermsofhorseshoes.a. Onthegraph,identifytheareaoffeasibleoutcomesandtheareaofinfeasibleoutcomes.b. Onthegraph,labelapointthatisefficientandapointthatisinefficient.c. O

nthegraph,illustratetheeffectofthediscoveryofanewveinofironore,aresourceneededtomakebothhorseshoesandhammers,onthiseconomy.

d. Onasecondgraph,illustratetheeffectofanewcomputerizedassemblylineintheproductionofhammersonthiseconomy.

ANSWER:(a-c) (d)

POINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ProductionPossibilitiesModelKEYWORDS: BLOOM'S:Application



134. Identifyeachofthefollowingtopicsasbeingpartofmicroeconomicsormacroeconomics:a. theimpactofachangeinconsumerincomeonthepurchaseofluxuryautomobilesb. theeffectofachangeinthepriceofCokeonthepurchaseofPepsic. theimpactofawarintheMiddleEastontherateofinflationintheUnitedStatesd. factorsinfluencingtherateofeconomicgrowthe. factorsinfluencingthedemandfortractorsf. theimpactoftaxpolicyonnationalsavingg. theeffectofpollutiontaxesontheU.S.copperindustryh. thedegreeofcompetitioninthecabletelevisionindustryi. theeffectofabalanced-budgetamendmentoneconomicstabilityj. theimpactofderegulationonthesavingsandloanindustry

ANSWER:

a,b,e,g,h,andjaremicroeconomictopics.c,d,f,andiaremacroeconomictopics.

POINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:GeneralKEYWORDS: BLOOM'S:Application



135. Whichofthefollowingstatementsarepositiveandwhicharenormative?a. Theminimumwagecreatesunemploymentamongyoungandunskilledworkers.b. Theminimumwageoughttobeabolished.c. I

fthepriceofaproductinamarketdecreases,then,otherthingsequal,quantitydemandedwillincrease.

d. Alittlebitofinflationisworseforsocietythanalittlebitofunemployment.e. Thereisatradeoffbetweeninflationandunemploymentintheshortrun.f. Ifconsumerincomeincreases,then,otherthingsequal,thedemandforautomobileswillincrease.g. TheU.S.incomedistributionisnotfair.h. U.S.workersdeservemoreliberalunemploymentbenefits.i. Ifinterestratesincrease,theninvestmentwilldecrease.j. Ifwelfarebenefitswerereduced,thenthecountrywouldbebetteroff.

ANSWER:

a,c,e,f,andiarepositivestatements.b,d,g,h,andjarenormativestatements.

POINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.7-LO:2-2NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Application



136. Usethefollowinggraphtoanswerthefollowingquestions.a. HowwouldpointJberepresentedasanorderedpair?b. Whattypeofcurveisthis?c. Doesthiscurveshowapositiveornegativecorrelationbetweenpriceandquantity?d. ComputetheslopeofD1betweenpointsJandL.

e. WhatistheslopeofD1betweenpointsLandN?Whywouldyounothavetocalculatethisanswer?

f. WhatisitcalledifwemovefromD1toD2?

g. HowdoyouknowthattheslopeofD2isthesameastheslopeofD1?

ANSWER: a. (20,24)b. ademandcurvec. anegativecorrelationbetweenpriceandquantityd. -8/20or-2/5e. -2/5;becausetheslopeofastraightlineisconstantf. anincreaseindemand.g. becausethe2linesareparallel

POINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.10-LO:2-5NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:SupplyandDemandDemandKEYWORDS: BLOOM'S:Application



Problems

1. Likebiologistsandphysicists,economistsusethedispassionatedevelopmentandtestingofhowtheworldworksknownasthe

ANSWER: scientificmethod.POINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Knowledge

2. Asasubstituteforlaboratoryexperiments,economistsuseevidenceavailablethroughhistory’s

ANSWER: naturalexperiments.POINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Comprehension

3. SupposeawarintheMiddleEastinterruptstheflowofcrudeoilandoilpricesskyrocketaroundtheworld.Foreconomists,thishistoricalepisodeservesasa

ANSWER: naturalexperiment.POINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Application

4. Justlikeotherscientificmodels,economicmodelssimplifyrealityusing

ANSWER: assumptions.POINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:Analytic



TOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Knowledge

5. Thethreemainfactorsofproduction,orcategoriesofinputs,usedbyfirmstoproducegoodsandservicesare

ANSWER: land,labor,andcapital.POINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:FactorsofProductionKEYWORDS: BLOOM'S:Knowledge

6. Inthecircularflowdiagram,whoownsthefactorsofproductionandconsumesallofthegoodsandservicesproduced?

ANSWER: householdsPOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:



7. Inthecircularflowdiagram,whenBrianprovideslaborthroughthemarketsforfactorsofproductiontoABCCompany,theflowofmoneyhereceivesinexchangeiscalled

ANSWER: income.POINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:







8. Inthemarketsforgoodsandservicesinthecircularflowdiagram,householdsactas

ANSWER: buyers.POINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:



9. Inthecircularflowdiagram,whenDaphnepurchasesanewmobilephone,sheparticipatesinthemarketsfor

ANSWER: goodsandservices.POINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:



Figure2-3





10. RefertoFigure2-3.Whatisthenameofthemodeldepictedinthefigure?

ANSWER: CircularFlowModelPOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:



11. RefertoFigure2-3.Whatdotheovalsrepresentinthefigure?

ANSWER:

MarketforGoodsandServicesMarketforFactorsofProduction

POINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:



12. RefertoFigure2-3.Whatdotherectanglesrepresentinthefigure?

ANSWER: FirmsHouseholds

POINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:







13. RefertoFigure2-3.Whatdotheouterarrowsrepresentinthefigure?

ANSWER: flowofdollarsPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:



14. RefertoFigure2-3.Whatdotheinnerarrowsrepresentinthefigure?

ANSWER: flowofinputsandoutputsPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:



15. RefertoFigure2-3.WhatdoesthearrowgoingfromovalAtorectangle2representinthefigure?

ANSWER: goodsandservicesboughtPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:





16. RefertoFigure2-3.WhatdoesthearrowgoingfromovalBtorectangle2representinthefigure?

ANSWER: incomePOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:



17. RefertoFigure2-3.Whataretwoelementsnotincludedinthisfigurethatcouldbeincludedinamorecomplexmodel?

ANSWER:

governmentinternationaltrade

POINTS: 1DIFFICULTY: Difficulty:ChallengingLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:



18. Whatyoumustgiveuptogetsomethingelseiscalledthe

ANSWER: opportunitycost.POINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:

DISC:ThinkingLikeanEconomistOpportunityCost






Figure2-14

Considertheproductionpossibilitiescurveforacountrythatcanproducesweaters,apples(inbushels),oracombinationofthetwo.

19. RefertoFigure2-14.Thebowedoutwardshapeoftheproductionpossibilitiescurveindicatesthatopportunitycostofapplesintermsofsweatersis

ANSWER: increasing.POINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:



20. RefertoFigure2-14.Whichpoint(s)onthegraphis(are)efficientproductionpossibilities?

ANSWER: Q,R,U,andVPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:Analytic



TOPICS:



21. RefertoFigure2-14.Whichpoint(s)onthegraphshowunemploymentofresources?

ANSWER: TandWPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ProductionPossibilitiesModelKEYWORDS: BLOOM'S:AnalysisNOTES: r

22. RefertoFigure2-14.Whichpoint(s)onthegraphis(are)unattainablegivencurrentresourcesandtechnology?

ANSWER: S andXPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ProductionPossibilitiesModelKEYWORDS: BLOOM'S:AnalysisNOTES: r

23. RefertoFigure2-14.WhatistheopportunitycostofmovingfrompointTtopointR?

ANSWER: zeroPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:





NOTES: n



24. RefertoFigure2-14.WhatistheopportunitycostofmovingfrompointRtopointQ?

ANSWER: 80bushelsofapplesPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:


KEYWORDS: BLOOM'S:AnalysisNOTES: n

Figure2-15

25. RefertoFigure2-15.Considertheproductionpossibilitiesfrontierforaneconomythatproducesonlysofasandcars.AstheeconomymovesfrompointAtopointD,istheopportunitycostofcarsincreasing,constant,ordecreasing?

ANSWER: constantPOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:







26. RefertoFigure2-15.Considertheproductionpossibilitiesfrontierforaneconomythatproducesonlysofasandcars.Theopportunitycostofonesofais

ANSWER: 2/3ofacar.POINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:



27. RefertoFigure2-15.Considertheproductionpossibilitiesfrontierforaneconomythatproducesonlysofasandcars.Theopportunitycostofonecaris

ANSWER: 3/2sofas.POINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:



Table2-6

MobilePhones Pizzas0 10,000200 8,000500 6,000900 4,0001400 2,0002000 0



28. RefertoTable2-6.Considertheproductionpossibilitiestableforaneconomythatproducesonlymobilephonesandpizzas.Whatistheopportunitycostofincreasingproductionofmobilephonesfrom200to500?

ANSWER: 2,000pizzas.POINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:



29. RefertoTable2-6.Considertheproductionpossibilitiestableforaneconomythatproducesonlymobilephonesandpizzas.Whatistheopportunitycostofincreasingproductionofpizzasfrom4,000to6,000?

ANSWER: 400mobilephones.POINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:



30. RefertoTable2-6.Considertheproductionpossibilitiestableforaneconomythatproducesonlymobilephonesandpizzas.Describetheshapeoftheproductionpossibilitiesfrontier.

ANSWER: bowedoutwardPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1



NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ProductionPossibilitiesModelKEYWORDS: BLOOM'S:AnalysisNOTES: n



31. Whowouldbemorelikelytostudytheeffectsofgovernmentspendingontheunemploymentrate,amacroeconomistoramicroeconomist?

ANSWER: macroeconomistPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:GeneralMacroKEYWORDS: BLOOM'S:Comprehension

32. Whowouldbemorelikelytostudytheeffectsofforeigncompetitionontheaccountingindustry,amacroeconomistoramicroeconomist?

ANSWER: microeconomistPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:GeneralMicroKEYWORDS: BLOOM'S:Comprehension

33. WhowouldbemorelikelytostudytheeffectsofrentcontrolonhousinginNewYorkCity,amacroeconomistoramicroeconomist?

ANSWER: microeconomistPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:GeneralMicroKEYWORDS: BLOOM'S:Comprehension



34. WhowouldbemorelikelytostudytheinflationrateintheUnitedStates,amacroeconomistoramicroeconomist?

ANSWER: macroeconomistPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.6-LO:2-1NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:GeneralMacroKEYWORDS: BLOOM'S:Comprehension

35. Wheneconomistsaretryingtoexplaintheworld,theyarescientists.Whentheyaretryingtoimproveit,theyare

ANSWER: policyadvisers.POINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.7-LO:2-2NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Comprehension

36. Whattypeofstatementisadescriptivestatementabouthowtheworldis?

ANSWER: positivestatementPOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.7-LO:2-2NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:GeneralPrinciplesKEYWORDS: BLOOM'S:Knowledge

37. Whattypeofstatementisaprescriptivestatementabouthowtheworldoughttobe?

ANSWER: normativestatementPOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.7-LO:2-2NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:





38. Whichtypeofstatement-positiveornegative-canbeevaluatedbyanalyzingdataalone?

ANSWER: positivePOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.7-LO:2-2NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:GeneralPrinciplesKEYWORDS: BLOOM'S:Comprehension

39. Isthefollowingapositiveornormativestatement?Thefederalminimumwageislowerthanmanystateminimumwages.

ANSWER: positivePOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.7-LO:2-2NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Comprehension

40. Isthefollowingapositiveornormativestatement?TheFederalReserveshouldsetaninflationtargetandemploypoliciestomeetthetarget.

ANSWER: normativePOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.7-LO:2-2NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Comprehension



41. Isthefollowingapositiveornormativestatement?TheUnitedStatesgovernmentshouldmandatethateverycitizenpurchaseshealthinsurance.

ANSWER: normativePOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.7-LO:2-2NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Comprehension

42. Isthefollowingapositiveornormativestatement?TheunemploymentrateinNevadaishigherthantheunemploymentrateinNewYork.

ANSWER: positivePOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.7-LO:2-2NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Comprehension

43. Since1946,thepresidentoftheUnitedStateshasreceivedguidancefromagroupcomprisedofthreemembersandastaffofafewdozeneconomistsknownasthe

ANSWER: CouncilofEconomicAdvisersPOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.7-LO:2-2NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:





44. Economistsatwhichadministrativedepartmenthelpformulatespendingplansandregulatorypolicies?

ANSWER: OfficeofManagementandBudgetPOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.7-LO:2-2NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:



45. Economistsatwhichadministrativedepartmenthelpdesigntaxpolicy?

ANSWER: DepartmentoftheTreasuryPOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.7-LO:2-2NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:



46. Economistsatwhichadministrativedepartmentanalyzedataonworkersandthoselookingforworktohelpformulatelabor-marketpolicies?

ANSWER: DepartmentofLaborPOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.7-LO:2-2NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:





47. Economistsatwhichadministrativedepartmenthelpenforcethenation’santitrustlaws?

ANSWER: DepartmentofJusticePOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.7-LO:2-2NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:



48. Theinstitutionthatsetsthenation’smonetarypolicyiscalledthe

ANSWER: FederalReserve.POINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.7-LO:2-2NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:



49. Wheneconomistsdisagreeaboutwhetherthegovernmentshouldtaxahousehold’sincomeoritsconsumption,theyareexpressingadifferencein

ANSWER: scientificjudgment.POINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.8-LO:2-3NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Comprehension

50. Wheneconomistsdisagreeaboutwhetherapolicyisfair,theyareexpressingadifferencein

ANSWER: values.POINTS: 1



DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.8-LO:2-3NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Comprehension



51. Mosteconomistsagreethatalargefederalbudgetdeficithaswhattypeofeffectontheeconomy?

ANSWER: adversePOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.8-LO:2-3NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:



Figure2-22

52. RefertoFigure2-22.WhatarethecoordinatesofpointC?

ANSWER: (60,3)POINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.10-LO:2-5NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Application



53. RefertoFigure2-22.Whatisthex-coordinateofpointR?

ANSWER: 20POINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.10-LO:2-5NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:ApplicationNOTES: n

54. RefertoFigure2-22.Howarepriceandquantityrelatedinthisgraph?

ANSWER: negativelycorrelatedPOINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.10-LO:2-5NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Application

55. RefertoFigure2-22.WhatistheslopeofthelinewithpointsA,B,andC?

ANSWER: -0.1POINTS: 1DIFFICULTY: Difficulty:ModerateLEARNINGOBJECTIVES: ECON.MANK.15.10-LO:2-5NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:ThinkingLikeanEconomistKEYWORDS: BLOOM'S:Application

56. RefertoFigure2-22.IsamovefrompointAtopointBconsideredashiftofthecurveoramovementalongthecurve?

ANSWER: movementalongthecurvePOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.10-LO:2-5NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS: DISC:SupplyandDemandDemandKEYWORDS: BLOOM'S:Application



57. RefertoFigure2-22.IsamovefrompointAtopointRconsideredashiftofthecurveoramovementalongthecurve?

ANSWER: shiftofthecurvePOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.10-LO:2-5NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:



58. RefertoFigure2-22.Giventhatpriceismeasuredontheverticalaxis,quantityismeasuredonthehorizontalaxis,andthatthecurvesaredownward-sloping,whattypeofcurvesaredepictedhere?

ANSWER: demandcurvesPOINTS: 1DIFFICULTY: Difficulty:EasyLEARNINGOBJECTIVES: ECON.MANK.15.10-LO:2-5NATIONALSTANDARDS: UnitedStates-BUSPROG:AnalyticTOPICS:




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