Microeconomics Ch. 2 – Flashcards
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Economists regard events from the past as a. 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, because those events are capable of helping us to understand the past, the present, and the future.
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d. interesting and valuable, because those events are capable of helping us to understand the past, the present, and the future.
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Which of the following statements is true? a. Few economic models incorporate assumptions. b. Different economic models employ different sets of assumptions. c. good economic models should attempt to mimic reality as closely as possible. d. Economic models, to be accepted, must be tested by conducting experiments.
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d. Economic models, to be accepted, must be tested by conducting experiments.
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Which of the following is not true about most economic models? a. They are composed of equations and diagrams. b. They contribute very little to economists' understanding of the real world. c. They omit many features of the real-world economy. d. In constructing models, economists make assumptions.
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b. They contribute very little to economists' understanding of the real world.
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Economic models are built with a. recommendations concerning public policies. b. facts about the legal system. c. assumptions. d. statistical forecasts.
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c. assumptions.
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A circular-flow diagram is a model that a. helps to explain how participants in the economy interact with one another. b. helps to explain how the economy is organized. c. incorporates the markets for the factors of production. d. All of the above are correct.
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d. All of the above are correct.
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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.
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b. households are sellers in the markets for the factors of production.
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In the circular-flow diagram, a. factors of production flow from government to firms. b. goods and services flow from households to firms. c. income paid to the factors of production flows from firms to households. d. spending on goods and services flow from firms to households.
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c. income paid to the factors of production flows from firms to households.
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Which of these terms are used interchangeably? a. "good and services" and "inputs" b. "goods and services" and "factors of production" c. "inputs" and "factors of production" d. "land, labor and capital" and "goods and services"
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c. "inputs" and "factors of production"
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Another term for factors of production is a. inputs. b. output. c. goods. d. services.
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a. inputs.
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In the simple circular-flow diagram, households a. are represented, but firms are not represented. b. own the factors of production. c. are buyers of inputs. d. directly receive revenue from the sale of goods and services.
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b. own the factors of production.
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Which two groups of decisionmakers are included in the simple circular-flow diagram? a. markets and government b. households and government c. firms and government d. households and firms
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d. households and firms
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In the markets for the factors of production, a. households are sellers and firms are buyers. b. households are buyers and firms are sellers. c. households and firms are both buyers. d. households and firms are both sellers.
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a. households are sellers and firms are buyers.
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Which of the following is the most accurate statement about production possibilities? a. An economy can produce only on the production possibilities frontier. b. An economy can produce at any point inside or outside a production possibilities frontier. c. An economy can produce at any point on or inside the production possibilities frontier, but not outside the frontier. d. An economy can produce at any point inside the production possibilities frontier, but not on or outside the frontier.
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c. An economy can produce at any point on or inside the production possibilities frontier, but not outside the frontier.
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Which of the following concepts can not be illustrated by the production possibilities frontier? a. efficiency b. opportunity cost c. equity d. tradeoffs
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c. equity
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The bowed-out shape of the production possibilities frontier can be explained by the fact that a. scarcity is a fact of life. b. economic growth is always occurring. c. the opportunity cost of one good in terms of the other depends on how much of each good the economy is producing. d. an assumption that is made in constructing a production possibilities frontier is that tradeoffs are unimportant.
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c. the opportunity cost of one good in terms of the other depends on how much of each good the economy is producing.
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Suppose a nation is currently producing at a point inside its production possibilities frontier. We know that a. the nation is producing beyond its capacity, and inflation will occur. b. the nation is not using all available resources or is using interior technology or both. c. the nation is producing an efficient combination of goods. d. there will be a large opportunity cost if the nation tries to increase production of any good.
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b. the nation is not using all available resources or is using inferior technology or both.
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A production possibilities frontier shifts outward when a. the economy experiences economic growth. b. the desires of the economy's citizens change. c. at least one of the basic principles of economics is violated. d. opportunity costs are lessened.
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a. the economy experiences economic growth.
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When economists are trying to explain the world, they are a. scientists. b. policy advisers. c. in the realm of microeconomics rather than macroeconomics. d. in the realm of normative economics rather than positive economics.
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a. scientists.
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Which is the best statement about the roles of economists? a. Economists are best viewed as policymakers. b. Economists are best viewed as scientists. c. In trying to explain the world, economists are policymakers; in trying to improve the world, they are scientists. d. In trying to explain the world, economists are scientists; in trying to improve the world, they are policymakers.
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d. In trying to explain the world, economics are scientists; in trying to improve the world, they are policymakers.
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A normative statement describes how the world a. was in the past. b. is in the present. c. will be in the future. d. ought to be.
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d. ought to be.
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Economists consider normative statements to be a. descriptive, making a claim about how the world is. b. statements about the normal condition of the world. c. prescriptive, making a claim about how the world ought to be. d. statements which establish production goals for the economy.
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c. prescriptive, making a claim about how the world ought to be.
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Which of the following is an example of a positive statement? a. Prices rise when the government prints too much money. b. If welfare payments increase, the world will be a better place. c. Inflation is more harmful to the economy than is unemployment. d. When public policies are evaluated, the benefits to the economy of improved equity should be considered more important than the costs of reduced efficiency.
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a. Prices rise when the government prints too much money.
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Which of these statements is a normative statement (as opposed to a positive statement)? a. Gasoline prices ought to be lower than they are now. b. The federal government should raise taxes on the wealthy people. c. The social security system is a good system and it deserves to be preserved as it is. d. All of the above are normative statements.
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d. All of the above are normative statements.
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Which of the following is an example of a normative statement? a. If the price of a product decreases, people's willingness to buy that product will increase. b. Reducing tax rates on the wealthy would benefit the nation. c. If the national saving rate were to increase, so would the rate of economic growth. d. All of the above are correct.
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b. Reducing tax rates on the wealthy would benefit the nation.
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You know an economist has crossed the line from scientist to policy adviser when he or she a. claims that the problem at hand is widely misunderstood by non-economists. b. talks about the evidence. c. makes normative statements. d. makes positive statements.
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c. makes normative statements.
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The slope of a straight line is calculated by a. rise divided by run. b. run divided by rise. c. rise minus run. d. rise plus run.
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a. rise divided by run.
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The slope of a line is calculated by the a. change in the value of x divided by the change in the value of y. b. change the value of y divided by the change in the value of x. c. horizontal distance divided by the vertical distance. d. value of y divided by value of x.
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b. change in the value of y divided by the change in the value of x.
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When two variables have a negative correlation, a. they tend to move in opposite directions. b. they tend to move in the same direction. c. one variable will move while the other remains constant. d. the movement of the two variables in unpredictable.
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a. they tend to move in opposite directions.
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When a relevant variable that is not named on either axis changes, a. there will be a movement along the curve. b. the curve will rotate clockwise about the original point. c. the curve will be unaffected since only the variables on the axis affect the curve. d. the curve will shift.
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d. the curve will shift.
