Ch. 2 & 3 Quiz – Flashcards
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Because it is difficult for economists to use experiments to generate data, they generally must
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use whatever data the world gives them.
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One thing economists do to help them understand how the real world works is
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make assumptions
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The circular-flow diagram is an example of
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an economic model
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In the simple circular-flow diagram, the participants in the economy are
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households and firms
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In the circular-flow diagram,
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the factors of production are labor, land, and capital.
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The production possibilities frontier is a graph that shows the various combinations of output that an economy
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can produce
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Any point on a country's production possibilities frontier represents a combination of two goods that an economy
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can produce using all available resources and technology.
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An economic outcome is said to be efficient if the economy is
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getting all it can get from the scarce resources it has available.
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If an economy is producing efficiently, then
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there is no way to produce more of one good without producing less of another good.
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Unemployment would cause an economy to
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produce inside its production possibilities frontier.
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Which of the following trade-offs does the production possibilities frontier illustrate?
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Once an economy has reached the efficient points on its production possibilities frontier, the only way of getting more of one good is to get less of the other
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The bowed shape of the production possibilities frontier can be explained by the fact that
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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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Economists believe that production possibilities frontiers are often bowed because
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resources are not completely adaptable
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The field of economics is traditionally divided into two broad subfields,
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microeconomics and macroeconomics.
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Which of the following statements best captures the relationship between microeconomics and macroeconomics?
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When economists are trying to explain the world, they are
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When economists are trying to help improve the world, they are
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policy advisers
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When economists are trying to explain the world, they are
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scientists
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Sometimes economists disagree because their scientific judgments differ. Which of the following instances best reflects this source of disagreement?
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One economist believes the government should tax a household's income; another economist believes the government should tax a household's consumption.
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Consider two individuals — Marquis and Serena — each of whom would like to wear sweaters and eat tasty food. The gains from trade between Marquis and Serena are most obvious in which of the following cases?
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Marquis's skills are such that he can produce only sweaters, and Serena's skills are such that she can produce only tasty food.
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One way to characterize the difference between positive statements and normative statements is as follows:
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Positive statements offer descriptions of the way things are, whereas normative statements offer opinions on how things ought to be.
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The principle of comparative advantage does not provide answers to certain questions. One of those questions is
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How are the gains from trade shared among the parties to a trade?
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A person can benefit from specialization and trade by obtaining a good at a price that is
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lower than his or her opportunity cost of that good.
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The gains from trade are
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a result of more efficient resource allocation than would be observed in the absence of trade.
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Trade can make everybody better off because it
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allows people to specialize according to comparative advantage.
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If labor in Mexico is less productive than labor in the United States in all areas of production,
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then both Mexico and the United States still can benefit from trade
