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Exam 2: Thinking Like an Economist

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Question 251

Multiple Choice

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Figure 2-1 -Refer to Figure 2-1. Which arrow represents the flow of spending by households?

A) A
B) B
C) C
D) D

E) A) and B)
F) None of the above

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Question 252

Multiple Choice

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Joe and Fred are economists. Joe thinks that the wealthiest 10% of the US population should be taxed a rate higher than the rest of society because they can better afford it. Fred thinks that everyone should be taxed at the same rate because that is the fairest scenario and the wealthy should not be penalized for their success. In this example, Joe and Fred

A) disagree about the validity of a positive theory.
B) have different normative views about tax policy.
C) must both be incorrect because tax policy is never that simple.
D) None of the above is correct.

E) A) and B)
F) C) and D)

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Question 253

Multiple Choice

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In a certain economy, toys and greeting cards are produced, and the economy currently operates on its production possibilities frontier. Which of the following events would allow the economy to produce more toys and more greeting cards, relative to the quantities of those goods that are being produced now?

Figure 2-15 -Refer to Figure 2-15. Consider the production possibilities frontier for an economy that produces only sofas and cars. The opportunity cost of one car is

Figure 2-3 -Refer to Figure 2-3. What is the name of the model depicted in the figure?

In the circular-flow diagram, households and firms are the decision makers.

Economists view normative statements as

Figure 2-5 -Refer to Figure 2-5. Suppose this economy is producing at point D. Which of the following statements would best explain this situation?

Figure 2-7 -Refer to Figure 2-7. What is the opportunity cost of moving from point M to point L?

Figure 2-23 -Refer to Figure 2-23. Unemployment could cause this economy to produce at point B.

If new government regulations designed to protect wetlands remove very productive farmland from production, then the production possibilities frontier will shift inward.

"Ensuring that Social Security is financially sound for future generations is an important use of taxpayer dollars" is an example of a

Figure 2-8 -Refer to Figure 2-8. For this economy, as more and more hammers are produced, the opportunity cost of an additional hammer produced, in terms of nails,

Figure 2-22 -Refer to Figure 2-22. Is a move from point A to point B considered a shift of the curve or a movement along the curve?

The slope of a line passing through the points 15, 3) and 10, 6) is

Suppose an economy produces two goods, food and machines. This economy always operates on its production possibilities frontier. Last year, it produced 1000 units of food and 47 machines. This year, it is producing 1050 units of food and 52 machines. Which of the following events could not explain the increase in output?

According to economist John Maynard Keynes, a great economist must also be an)

Economists at which administrative department help design tax policy?

Figure 2-6 -Refer to Figure 2-6. The opportunity cost of this economy moving from point K to point H is

In the circular-flow diagram, which of the following items flows from households to firms through the markets for goods and services?