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ch-2Multiple ChoiceIdentify the choice that best completes the statement or answers the question.____1.Economists regard events from the past asa.irrelevant, since history is unlikely to repeat itself.b.of limited interest, since those events seldom provide any useful economic data.c.interesting but not particularly valuable, since those events cannot be used to evaluate present-day economic theories.d.interesting and valuable, since those events are capable of helping us to understand the past, the present, and the future.____2.One thing economists do to help them understand how the real world works is a.make assumptions.b.ignore the past.c.try to capture every aspect of the real world in the models they construct.d.All of the above are correct.____3.Economists make assumptions to a.provide issues for political discussion.b.make a complex world easier to understand.c.make it easier to teach economic concepts and analysis.d.create policy alternatives that are incomplete or subject to criticism.____4.The art in scientific thinking isa.finding the right problem to study.b.deciding which assumptions to make.c.the ability to make an abstract subject easy to understand.d.not something in which economists have to be skilled.____5.A model can be accurately described as aa.theoretical abstraction with very little value.b.device that is useful only to the people who created it.c.realistic and carefully constructed theory.d.simplification of reality.____6.The circular-flow diagrama.is an economic model.b.incorporates two types of decision makers: households and firms.c.represents the flows of inputs, outputs, and dollars.d.All of the above are correct.____7.Which of the following statements about the circular-flow diagram is correct?a.One must imagine that the economy operates without money in order to make sense of the diagram.b.The diagram leaves out details that are not essential for understanding the economic transactions that occur between households and firms.c.The government cannot be excluded as a decision maker in a circular-flow diagram.d.All of the above are correct.____8.In the simple circular-flow diagram, the participants in the economy area.firms and government.b.households and firms.c.households and government.d.households, firms, and government.____9.In the circular-flow diagram, firms producea.goods and services using factors of production.b.output using inputs.c.factors of production using goods and services.d.Both (a) and (b) are correct.____10.Factors of production area.the mathematical calculations firms make in determining their optimal production levels.b.social and political conditions that affect production.c.the physical relationships between economic inputs and outputs.d.inputs into the production process.____11.In the circular-flow diagram, which of the following is not a factor of production?a.laborb.landc.capitald.money____12.In the simple circular-flow diagram,a.households own the factors of production.b.households buy all the goods and services that firms produce.c.land, labor, and capital flow from households to firms.d.All of the above are correct.____13.In the simple circular-flow diagram, who consumes the goods and services that firms produce?a.households onlyb.firms onlyc.both households and firmsd.neither households nor firms____14.In the circular-flow diagram,a.firms are buyers in the markets for goods and services.b.households are sellers in the markets for the factors of production.c.firms are sellers in the markets for factors of production and in the markets for goods and services.d.dollars that are spent on goods and services flow directly from firms to households.____15.The two loops in the circular-flow diagram represent a.the flow of goods and the flow of services.b.the flow of dollars and the flow of financial assets.c.the flow of inputs into production processes and the flow of outputs from production processes.d.the flows of inputs and outputs and the flow of dollars.____16.In the circular-flow diagram,a.profit flows from households to firms.b.labor flows from households to firms.c.services flow from households to firms.d.All of the above are correct.____17.In the circular-flow diagram, which of the following items does not flow from households to firms?a.revenueb.land, labor, and capitalc.factors of productiond.profit____18.In the circular-flow diagram, which of the following items represents a payment for a factor of production?a.interestb.capitalc.spending by households on goodsd.spending by households on servicesFigure 2-1____19.Refer to Figure 2-1. Which arrow represents the flow of goods and services?a.Ab.Bc.Cd.D____20.Refer to Figure 2-1. Which arrow represents the flow of spending by households?a.Ab.Bc.Cd.D____21.Refer to Figure 2-1. Which arrow represents the flow of land, labor, and capital?a.Ab.Bc.Cd.D____22.Refer to Figure 2-1. Which arrow represents the flow of income payments?a.Ab.Bc.Cd.D____23.Refer to Figure 2-1. Ali buys a new pair of shoes at a shoe store. To which of the arrows does this transaction directly contribute?a.A onlyb.A and Bc.C onlyd.C and D____24.Refer to Figure 2-1. Sonia completes her first week of employment working as a hairdresser at a salon. On Friday of that week, she receives her first paycheck. To which of the arrows does this transaction directly contribute?a.B onlyb.A and Bc.C onlyd.C and DFigure 2-2____25.Refer to Figure 2-2. Boxes A and B of this circular-flow diagram representa.firms and households.b.households and government.c.the markets for goods and services and the markets for financial assets.d.the markets for goods and the markets for services.____26.Refer to Figure 2-2. Boxes C and D of this circular-flow diagram representa.households and government.b.firms and government.c.the markets for goods and services and the markets for financial assets.d.the markets for goods and services and the markets for factors of production.____27.Refer to Figure 2-2. If Box A of this circular-flow diagram represents firms, then which box represents households?a.Box Bb.Box Cc.Box Dd.Any one of the other boxes (B, C, or D) could represent households.____28.Refer to Figure 2-2. If households are sellers in the markets represented by Box D of this circular-flow diagram, thena.Box D must represent the markets for factors of production.b.Box C must represent the markets for goods and services.c.firms are buyers in the markets represented by Box D.d.All of the above are correct.____29.Refer to Figure 2-2. If households are buyers in the markets represented by Box C of this circular-flow diagram, thena.Box C must represent the markets for the factors of production.b.Box D must represent the markets for goods and services.c.firms are sellers in the markets represented by Box C. d.All of the above are correct.____30.Refer to Figure 2-2. If the owners of land, labor, and capital are represented by Box B of this circular-flow diagram, thena.households are represented by Box A.b.firms are represented by Box C.c.firms are represented by Box A.d.firms are sellers in Box B.____31.Refer to Figure 2-2. If the outer loop of this circular-flow diagram represents flows of dollars, then the inner loop includesa.flows of goods and services from households to firms.b.flows of inputs from households to firms.c.flows of rent payments paid to owners of land.d.flows of wages and salaries paid to workers.____32.Refer to Figure 2-2. If the flow of goods and services is part of what is represented by the inner loop of this circular-flow diagram, thena.the flow of factors of production is also part of what is represented by the inner loop.b.the flow of income paid to households is also part of what is represented by the inner loop.c.the flow of revenue to firms is also part of what is represented by the inner loop.d.households must be sellers of output.____33.Refer to Figure 2-2. Devin works as an attorney for a corporation and is paid a salary in exchange for the legal services he performs. Juan owns office buildings and rents his buildings to companies in exchange for rent payments. If Devin’s income is represented by a flow of dollars from Box D to Box B of this circular-flow diagram, then Juan’s income is represented by a flow of dollars a.from Box A to Box C.b.from Box C to Box A.c.from Box B to Box D.d.from Box D to Box B.____34.Refer to Figure 2-2. Carla regularly buys fruits and vegetables at a grocery store. Roberto regularly pays a lawn-care company to mow his lawn. If the flow of fruits and vegetables from the grocery store to Carla is represented by an arrow from Box C to Box B of this circular-flow diagram, then the money paid by Roberto to the lawn-care company is represented by an arrow a.from Box A to Box D.b.from Box B to Box C.c.from Box C to Box B.d.from Box D to Box A.____35.The production possibilities frontier illustratesa.the trade-off between efficiency and equality.b.the combination of output that an economy should produce.c.the combination of output that each member of society should consume.d.None of the above is correct.____36.Which of the following concepts cannot be illustrated by the production possibilities frontier?a.efficiencyb.opportunity costc.equalityd.trade-offs____37.A production possibilities frontier can shift outward ernment increases the amount of money in the economy.b.there is a technological improvement.c.resources are shifted from the production of one good to the production of the other good.d.the economy abandons inefficient production methods in favor of efficient production methods.Table 2-3Production Possibilities for LibrarylandBooksMagazines400 0300200200350100450 0500____38.Refer to Table 2-3. What is the opportunity cost to Libraryland of increasing the production of books from 200 to 300?a.100 magazinesb.150 magazinesc.200 magazinesd.350 magazines____39.Refer to Table 2-3. Which of the following statements is correct?a.The opportunity cost of an additional 100 books is constant at 50 magazines.b.The opportunity cost of an additional 100 books is constant at 100 magazines.c.Libraryland’s production possibilities frontier is a straight, downward-sloping line.d.The opportunity cost of an additional 100 books increases as more books are produced.Figure 2-3____40.Refer to Figure 2-3. At which point is this economy producing its maximum possible quantity of pans?a.Jb.Lc.Md.N____41.Refer to Figure 2-3. This economy has the ability to produce at which point(s)?a.J, K, M, Nb.K, M, Nc.K, Nd.M____42.Refer to Figure 2-3. This economy cannot produce at which point(s)?a.Jb.J, Lc.J, L, Md.L____43.Refer to Figure 2-3. Efficient production is represented by which point(s)?a.J, K, Nb.K, M, Nc.K, Nd.L, M____44.Refer to Figure 2-3. Inefficient production is represented by which point(s)?a.J, Lb.J, L, Mc.K, Nd.M____45.Refer to Figure 2-3. Unemployment could cause this economy to produce at which point(s)?a.J, Lb.J, L, Mc.K, Nd.MFigure 2-5____46.Refer to Figure 2-5. If this economy devotes all of its resources to the production of sweaters, then it will producea.0 sweaters and 200 soccer balls.b.180 sweaters and 125 soccer balls.c.300 sweaters and 0 soccer balls.d.300 sweaters and 200 soccer balls.____47.Refer to Figure 2-5. If this economy devotes one-half of its available resources to the production of soccer balls and the other half to the production of sweaters, it could producea.150 sweaters and 100 soccer balls.b.150 sweaters and 150 soccer balls.c.300 sweaters and 200 soccer balls.d.We would have to know the details of this economy’s technology in order to determine this.____48.Refer to Figure 2-5. A movement from point C to point D could be caused bya.unemployment.b.a decrease in society's preference for sweaters.c.fewer resources available for production of sweaters.d.All of the above are correct.____49.Refer to Figure 2-5. If this economy moves from point A to point B, then which of the following statements is correct?a.This economy has moved from a point of inefficient production to a point of efficient production.b.This economy has experienced economic growth.c.This economy has experienced an increase in employment.d.None of the above is correct.____50.Refer to Figure 2-5. The opportunity cost of this economy moving from point A to point C isa.75 soccer balls.b.125 soccer balls.c.125 soccer balls and 240 sweaters.d.240 sweaters.____51.Refer to Figure 2-5. The opportunity cost of this economy moving from point D to point B isa.zero.b.50 soccer balls.c.60 sweaters.d.50 soccer balls and 60 sweaters.____52.Positive statements are a.prescriptive.b.claims about how the world should be.c.claims about how the world is.d.made by economists speaking as policy advisers.____53.Normative statements are a.descriptive.b.claims about how the world should be.c.claims about how the world is.d.made by economists speaking as scientists.____54.When economists make positive statements, they area.speaking as scientists.b.speaking as policy advisers.c.making claims about how the world should be.d.revealing that they are very conservative in their views of how the world works.____55.When economists make normative statements, they area.speaking as scientists.b.speaking as policy advisers.c.making claims about how the world is.d.revealing that they are very liberal in their views of how the world works.____56.A positive economic statement such as “Pollution taxes decrease the quantity of pollution generated by firms”a.would likely be made by an economist acting as a policy advisor.b.would require values and data in order to be evaluated.c.would require data but not values in order to be evaluated.d.could not be evaluated by economists acting as scientists.____57.A normative economic statement such as “The minimum wage should be abolished”a.would likely be made by an economist acting as a scientist.b.would require values and data in order to be evaluated.c.would require data but not values in order to be evaluated.d.could not be evaluated by economists acting as policy advisers.____58.Which of the following is an example of a normative, as opposed to positive, statement?a.The price of gasoline came down sharply during the second half of 2006.b.If the government were to set a maximum legal price on gasoline, then there would be a shortage of gasoline.c.Income taxes should be reduced.d.The federal government obtains much of its revenue from income taxes.ch-2Answer SectionMULTIPLE CHOICE1.ANS:DPTS:1DIF:2REF:2-1NAT:AnalyticLOC:The study of economics and definitions in economicsTOP:EconomistsMSC:Interpretive2.ANS:APTS:1DIF:2REF:2-1NAT:AnalyticLOC:The study of economics and definitions in economicsTOP:AssumptionsMSC:Interpretive3.ANS:BPTS:1DIF:2REF:2-1NAT:AnalyticLOC:The study of economics and definitions in economicsTOP:AssumptionsMSC:Definitional4.ANS:BPTS:1DIF:1REF:2-1NAT:AnalyticLOC:The study of economics and definitions in economicsTOP:AssumptionsMSC:Definitional5.ANS:DPTS:1DIF:2REF:2-1NAT:AnalyticLOC:Understanding and applying economic modelsTOP:Economic modelsMSC:Interpretive6.ANS:DPTS:1DIF:2REF:2-1NAT:AnalyticLOC:Understanding and applying economic modelsTOP:Circular flow diagramMSC:Interpretive7.ANS:BPTS:1DIF:2REF:2-1NAT:AnalyticLOC:Understanding and applying economic modelsTOP:Circular flow diagramMSC:Interpretive8.ANS:BPTS:1DIF:1REF:2-1NAT:AnalyticLOC:Understanding and applying economic modelsTOP:Circular flow diagramMSC:Definitional9.ANS:DPTS:1DIF:2REF:2-1NAT:AnalyticLOC:Understanding and applying economic modelsTOP:Circular flow diagramMSC:Interpretive10.ANS:DPTS:1DIF:1REF:2-1NAT:AnalyticLOC:The study of economics and definitions in economicsTOP:Factors of productionMSC:Definitional11.ANS:DPTS:1DIF:2REF:2-1NAT:AnalyticLOC:Understanding and applying economic modelsTOP:Circular flow diagram | Factors of productionMSC:Interpretive12.ANS:DPTS:1DIF:2REF:2-1NAT:AnalyticLOC:Understanding and applying economic modelsTOP:Circular flow diagramMSC:Interpretive13.ANS:APTS:1DIF:2REF:2-1NAT:AnalyticLOC:Understanding and applying economic modelsTOP:Circular flow diagramMSC:Interpretive14.ANS:BPTS:1DIF:2REF:2-1NAT:AnalyticLOC:Understanding and applying economic modelsTOP:Circular flow diagramMSC:Interpretive15.ANS:DPTS:1DIF:2REF:2-1NAT:AnalyticLOC:Understanding and applying economic modelsTOP:Circular flow diagramMSC:Interpretive16.ANS:BPTS:1DIF:2REF:2-1NAT:AnalyticLOC:Understanding and applying economic modelsTOP:Circular flow diagramMSC:Interpretive17.ANS:DPTS:1DIF:2REF:2-1NAT:AnalyticLOC:Understanding and applying economic modelsTOP:Circular flow diagramMSC:Interpretive18.ANS:APTS:1DIF:2REF:2-1NAT:AnalyticLOC:Understanding and applying economic modelsTOP:Circular flow diagramMSC:Interpretive19.ANS:BPTS:1DIF:2REF:2-1NAT:AnalyticLOC:Understanding and applying economic modelsTOP:Circular flow diagramMSC:Interpretive20.ANS:APTS:1DIF:2REF:2-1NAT:AnalyticLOC:Understanding and applying economic modelsTOP:Circular flow diagramMSC:Interpretive21.ANS:CPTS:1DIF:2REF:2-1NAT:AnalyticLOC:Understanding and applying economic modelsTOP:Circular flow diagramMSC:Interpretive22.ANS:DPTS:1DIF:2REF:2-1NAT:AnalyticLOC:Understanding and applying economic modelsTOP:Circular flow diagramMSC:Interpretive23.ANS:BPTS:1DIF:2REF:2-1NAT:AnalyticLOC:Understanding and applying economic modelsTOP:Circular flow diagramMSC:Applicative24.ANS:DPTS:1DIF:2REF:2-1NAT:AnalyticLOC:Understanding and applying economic modelsTOP:Circular flow diagramMSC:Applicative25.ANS:APTS:1DIF:2REF:2-1NAT:AnalyticLOC:Understanding and applying economic modelsTOP:Circular flow diagramMSC:Interpretive26.ANS:DPTS:1DIF:2REF:2-1NAT:AnalyticLOC:Understanding and applying economic modelsTOP:Circular flow diagramMSC:Interpretive27.ANS:APTS:1DIF:2REF:2-1NAT:AnalyticLOC:Understanding and applying economic modelsTOP:Circular flow diagramMSC:Interpretive28.ANS:DPTS:1DIF:2REF:2-1NAT:AnalyticLOC:Understanding and applying economic modelsTOP:Circular flow diagramMSC:Interpretive29.ANS:CPTS:1DIF:2REF:2-1NAT:AnalyticLOC:Understanding and applying economic modelsTOP:Circular flow diagramMSC:Interpretive30.ANS:CPTS:1DIF:2REF:2-1NAT:AnalyticLOC:Understanding and applying economic modelsTOP:Circular flow diagramMSC:Interpretive31.ANS:BPTS:1DIF:2REF:2-1NAT:AnalyticLOC:Understanding and applying economic modelsTOP:Circular flow diagramMSC:Interpretive32.ANS:APTS:1DIF:2REF:2-1NAT:AnalyticLOC:Understanding and applying economic modelsTOP:Circular flow diagramMSC:Interpretive33.ANS:DPTS:1DIF:3REF:2-1NAT:AnalyticLOC:Understanding and applying economic modelsTOP:Circular flow diagramMSC:Analytical34.ANS:BPTS:1DIF:3REF:2-1NAT:AnalyticLOC:Understanding and applying economic modelsTOP:Circular flow diagramMSC:Analytical35.ANS:DPTS:1DIF:2REF:2-1NAT:AnalyticLOC:Understanding and applying economic modelsTOP:Production possibilities frontierMSC:Interpretive36.ANS:CPTS:1DIF:2REF:2-1NAT:AnalyticLOC:Understanding and applying economic modelsTOP:Production possibilities frontierMSC:Interpretive37.ANS:BPTS:1DIF:2REF:2-1NAT:AnalyticLOC:Understanding and applying economic modelsTOP:Production possibilities frontierMSC:Interpretive38.ANS:BPTS:1DIF:2REF:2-1NAT:AnalyticLOC:Scarcity, tradeoffs, and opportunity costTOP:Opportunity costMSC:Interpretive39.ANS:DPTS:1DIF:2REF:2-1NAT:AnalyticLOC:Understanding and applying economic modelsTOP:Production possibilities frontier | Opportunity costMSC:Applicative40.ANS:DPTS:1DIF:2REF:2-1NAT:AnalyticLOC:Understanding and applying economic modelsTOP:Production possibilities frontierMSC:Applicative41.ANS:BPTS:1DIF:2REF:2-1NAT:AnalyticLOC:Understanding and applying economic modelsTOP:Production possibilities frontierMSC:Applicative42.ANS:BPTS:1DIF:2REF:2-1NAT:AnalyticLOC:Understanding and applying economic modelsTOP:Production possibilities frontierMSC:Applicative43.ANS:CPTS:1DIF:2REF:2-1NAT:AnalyticLOC:Understanding and applying economic modelsTOP:Production possibilities frontier | EfficiencyMSC:Applicative44.ANS:DPTS:1DIF:2REF:2-1NAT:AnalyticLOC:Understanding and applying economic modelsTOP:Production possibilities frontier | EfficiencyMSC:Applicative45.ANS:DPTS:1DIF:2REF:2-1NAT:AnalyticLOC:Understanding and applying economic modelsTOP:Production possibilities frontier | UnemploymentMSC:Applicative46.ANS:CPTS:1DIF:2REF:2-1NAT:AnalyticLOC:Understanding and applying economic modelsTOP:Production possibilities frontierMSC:Applicative47.ANS:DPTS:1DIF:3REF:2-1NAT:AnalyticLOC:Understanding and applying economic modelsTOP:Production possibilities frontierMSC:Analytical48.ANS:APTS:1DIF:2REF:2-1NAT:AnalyticLOC:Understanding and applying economic modelsTOP:Production possibilities frontier | UnemploymentMSC:Applicative49.ANS:DPTS:1DIF:2REF:2-1NAT:AnalyticLOC:Understanding and applying economic modelsTOP:Production possibilities frontierMSC:Applicative50.ANS:BPTS:1DIF:2REF:2-1NAT:AnalyticLOC:Understanding and applying economic modelsTOP:Production possibilities frontier | Opportunity costMSC:Applicative51.ANS:APTS:1DIF:2REF:2-1NAT:AnalyticLOC:Understanding and applying economic modelsTOP:Production possibilities frontier | Opportunity costMSC:Applicative52.ANS:CPTS:1DIF:1REF:2-2NAT:AnalyticLOC:The study of economics and definitions in economicsTOP:Positive statementsMSC:Definitional53.ANS:BPTS:1DIF:1REF:2-2NAT:AnalyticLOC:The study of economics and definitions in economicsTOP:Normative statementsMSC:Definitional54.ANS:APTS:1DIF:2REF:2-2NAT:AnalyticLOC:The study of economics and definitions in economicsTOP:Economists | Positive statementsMSC:Interpretive55.ANS:BPTS:1DIF:2REF:2-2NAT:AnalyticLOC:The study of economics and definitions in economicsTOP:Economists | Normative statementsMSC:Interpretive56.ANS:CPTS:1DIF:2REF:2-2NAT:AnalyticLOC:The study of economics and definitions in economicsTOP:Positive statementsMSC:Interpretive57.ANS:BPTS:1DIF:2REF:2-2NAT:AnalyticLOC:The study of economics and definitions in economicsTOP:Normative statementsMSC:Interpretive58.ANS:CPTS:1DIF:2REF:2-2NAT:AnalyticLOC:The study of economics and definitions in economicsTOP:Normative statementsMSC:Applicative ................
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