Who said,

1
Who said, The whole of science is nothing more
than the refinement of everyday thinking?

1. Isaac Newton
2. Albert Einstein
3. Benjamin Franklin
4. Sigmund Freud

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2
Figure 2-8 image Refer to Figure 2-8.. If this
economy puts all of its resources into the
production of bathtubs it could produce
Refer to Figure 2-8. If this economy puts all of
its resources into the production of bathtubs it
could produce

1. 35 barrels and no bathtubs.
2. no barrels and 16 bathtubs.
3. 20 barrels and 12 bathtubs.
4. This economy would not choose to put all of its
   resources into the production of one good.

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3
A macroeconomist would study each of the
following EXCEPT the

1. effect of changes in saving rates on GDP.
2. effect of tax policy on the rate of economic
   growth.
3. impact of monetary policy on the rate of
   inflation.
4. impact of minimum-wage laws on employment in the
   fast food industry.

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4
A normative statement describes how the world

1. is.
2. will be in the future.
3. ought to be.
4. was in the past.

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5
The President of the United States receives tax
policy advice from economists in the

1. Congressional Budget Office.
2. Federal Reserve.
3. Department of Treasury.
4. Department of Justice.

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6
Figure 2-9 image Refer to Figure 2-9. What
would you say about the relationship between
coffee and hours without sleep?
Refer to Figure 2-9. What would you say about the
relationship between coffee and hours without
sleep?

1. The more coffee a person drinks per day, the
   longer he can go without sleep.
2. There is no relationship between how much coffee
   per day a person drinks and how long they can go
   without sleep.
3. The relationship between cups of coffee per day
   and time without sleep is too unpredictable to
   consider.
4. The less coffee a person drinks per day, the more
   time he can go without sleep.

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7
Which of the following is a correct statement
about slope?

1. A horizontal line has a zero slope, and a
   vertical line has an infinite slope.
2. A horizontal line has a slope of 1, and a
   vertical line has a slope of -1.
3. A horizontal line has an infinite slope, and a
   vertical line has a zero slope.
4. None of the above are correct.

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8
Bill has noticed that increases in unemployment
insurance claims are associated with recessions,
and therefore advocates limits on unemployment
insurance so as to prevent recessions. Martha has
noticed that most drug addicts once attended
schools, and therefore advocates getting rid of
schools so as to prevent drug addiction.

1. The reasoning of both Bill and Martha suffers
   from the reverse causality problem.
2. Bills reasoning suffers from the reverse
   causality problem and Marthas reasoning suffers
   from the omitted variable problem.
3. Marthas reasoning suffers from the reverse
   causality problem and Bills reasoning suffers
   from the omitted variable problem.
4. The reasoning of both Bill and Martha suffers
   from the omitted variable problem.

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9
Which of the following is NOT true concerning
models?

1. Models assume away irrelevant details.
2. Models can explain how the economy is organized.
3. Models cannot be used to make predictions.
4. Models simplify reality.

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10
Factors of production are

1. used to produce goods and services.
2. owned by firms.
3. abundant in most economies.
4. used by both firms and households.

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11
Figure 2-1 image Refer to Figure 2-1. Which
arrow shows the flow of spending by households?
Refer to Figure 2-1. Which arrow shows the flow
of spending by households?

1. B
2. D
3. A
4. C

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12
Figure 2-2 image Refer to Figure 2-2. Factors
of production are owned by
Refer to Figure 2-2. Factors of production are
owned by

1. the government.
2. firms.
3. households.
4. All are correct.

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13
The curved shape of the production possibilities
frontier can be explained by

1. economic growth.
2. scarcity.
3. increasing cost of production.
4. constant cost of production.

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14
Figure 2-3 image Refer to Figure 2-3. Which
point represents the maximum possible production
of tubas?
Refer to Figure 2-3. Which point represents the
maximum possible production of tubas?

1. E
2. B
3. D
4. A

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15
Figure 2-4 image Refer to Figure 2-4. The
opportunity cost in terms of toothbrushes of
getting 10 additional toasters by moving from
point B to point A is
Refer to Figure 2-4. The opportunity cost in
terms of toothbrushes of getting 10 additional
toasters by moving from point B to point A is

1. 5 toothbrushes.
2. 10 toothbrushes.
3. zero, since the economy has the additional
   resources to produce 10 additional toasters.
4. 20 toothbrushes.

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16
When an economy is operating inside its
production possibilities frontier we know that

1. to produce more of one good, the economy would
   have to give up some of the other good.
2. moving to a point on its production possibilities
   frontier would be economic growth.
3. the economy is operating with efficiency.
4. there are unused resources or inefficiencies in
   the economy.

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17
Figure 2-7 image 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?
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?

1. an increase in resources necessary to produce
   capital goods
2. an increase in unemployment
3. an improvement in the technology of producing
   consumer goods
4. an increase in the overall level of technology in
   the economy

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18
Figure 2-8 image Refer to Figure 2-8.. If this
economy moved from point C to point E,
Refer to Figure 2-8.. If this economy moved from
point C to point E,

1. there would be no gain in either bathtubs or
   barrels.
2. it still would not be producing efficiently.
3. It is not possible for this economy to move from
   point C to point E without additional resources.
4. it would be producing more barrels and more
   bathtubs than at point C.

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19
Microeconomics is the study of

1. the behavior of consumers.
2. how individual households and firms make
   decisions.
3. how the economy as a whole works.
4. how government affects the economy.

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20
Which of the following would be considered a
topic of study in macroeconomics?

1. the effect of an increase in the price of
   imported coffee beans on the U.S. coffee industry
2. the effect of an increase in the price of
   imported oil on the U.S. inflation rate
3. the impact of agricultural price support programs
   in the cotton industry
4. the effect on U.S. steel producers of an import
   quota imposed on foreign steel

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