Ch.2: Thinking Like An Economist

Question 1

____ 1. By scientific method we mean

Answer 1

the dispassionate development and testing of theories about how the world works.

Question 2

____ 2. The use of theory and observation is more difficult in economics than in sciences such as physics due to the
difficulty in

Answer 2

actually performing an experiment in an economic system.

Question 3

____3.Because it is difficult for economists to use experiments to generate data, they generally must

Answer 3

use whatever data the world gives them.

Question 4

____ 4. When testing theories, economists

Answer 4

must make do with whatever data the world gives them.

Question 5

___ 5. For economists, substitutes for laboratory experiments are often

Answer 5

natural experiments offered by history.

Question 6

____ 6. When studying the effects of public policy changes, economists

Answer 6

may make different assumptions for the long run and the short run.

Question 7

7. The foundation stones from which economic models are built are

Answer 7

c. assumptions.

Question 8

____ 8. Factors of production are

Answer 8

inputs into the production process.

Question 9

9. The two loops in the circular-flow diagram represent the flow of

Answer 9

inputs and outputs and the flow of dollars.

Question 10

____ 10. According to a simple circular-flow diagram, households and firms interact in

Answer 10

two types of markets.

Question 11

____ 11. In the simple circular-flow diagram, markets consist of

Answer 11

the market for goods and services and the market for factors of production.

Question 12

____ 12. Refer to Figure 2-2. Firms are sellers in

Answer 12

the goods and services market.

Question 13

____ 13. Refer to Figure 2-3. The economy can produce at which point or points?

Answer 13

B, D, E

Question 14

____ 14. Refer to Figure 2-3. The economy CANNOT produce at which point or points?

Answer 14

b. C

Question 15

___ 15. Refer to Figure 2-7. Which of the following would most likely have caused the production possibilities frontier to shift outward from A to B?

Answer 15

an increase in the overall level of technology in the economy

Question 16

____ 16. The field of economics is traditionally divided into two broad subfields,

Answer 16

d. microeconomics and macroeconomics.

Question 17

____ 17. A microeconomist might study each of the following EXCEPT

Answer 17

d. the effect on the economy when unemployment rates change.

Question 18

____ 18. A macroeconomist would study each of the following EXCEPT the

Answer 18

impact of minimum-wage laws on employment in the fast food industry.

Question 19

____ 19. Which of the following is an example of a positive statement?

Answer 19

Prices rise when the government prints too much money.

Question 20

____ 20. Economists from the Treasury Department provide

Answer 20

d. advice on tax policy to the President.

Question 21

____ 21. When economists are speaking as policy advisors, they are more likely to use

Answer 21

a. normative statements.

Question 22

____ 22. Economists in which department help enforce antitrust laws?

Answer 22

b. Department of Justice

Question 23

____ 23. Tax policy is designed by the

Answer 23

Department of Treasury.

Question 24

____ 24. A duty of the Department of Labor is to

Answer 24

analyze data on workers.

Question 25

____ 25. In the early 19th century, the Russian government sent doctors to southern Russian villages to provide
assistance during a cholera epidemic. The villagers noticed that wherever doctors appeared, people died.
Therefore, many doctors were chased away from villages, and some were even killed. This reaction to the
correlation between doctors and deaths is most likely a problem of

Answer 25

b. reverse causality.

Question 26

____ 26. John Maynard Keynes referred to economics as an easy subject,

Answer 26

at which very few excel.

Question 27

____ 27. George Bernard Shaw, among others, has criticized economists because

Answer 27

they seem to give conflicting advice to policymakers.

Question 28

____ 28. The 3 propositions about which most economists agree most often are (in order from first to third)

Answer 28

rent control, tariffs and quotas, and floating exchange rates.

Question 29

____ 29. Tariffs and quotas are

Answer 29

• policies that restrict trade.
• opposed by almost all economists.
  Both a and c are correct.

Question 30

____ 30. A coordinate system is used to

Answer 30

allow economists to show two variables on a single graph.

Question 31

____ 31. Refer to Figure 2-9. The graph shown is known as a

Answer 31

c. scatterplot.

Question 32

____ 32. Refer to Figure 2-9. What would you say about the relationship between coffee and hours without sleep?

Answer 32

The more coffee a person drinks per day, the longer he can go without sleep.

Question 33

____ 33. Refer to Figure 2-9. The curves shown are

Answer 33

b. demand curves.

Question 34

____ 34. Refer to Figure 2-10. The movement from point A to point B is a

Answer 34

movement along the curve.

Question 35

____ 35. The slope of a fairly flat upward-sloping line will be a

Answer 35

small positive number.

Question 36

____ 36. Which of the following statements about slope is NOT correct?

Answer 36

b. Slope can be computed by delta x/delta y.

Question 37

____ 37. Which of the following is NOT a problem associated with graphing in economics?

Answer 37

the ability to show a relationship between 2 variables

Question 38

____ 38. When a relevant variable that is not named on either axis changes,

Answer 38

the curve will shift.

Question 39

____ 39. When a variable on an axis of a graph changes, the curve

Answer 39

will not shift.

Question 40

____ 40. The single most important purpose of your textbook is to teach you

Answer 40

the economist’s way of thinking.