ECN 212 Adaptive Quiz #2.1

Suppose an economist develops a theory that higher gas prices lead people to take more local vacations. According to the scientific method, which of the following is the economist's next step? Gather up support from other economists who agree with the theory. Publish the theory as is. Devise another theory that contradicts the initial one. Collect and analyze data.

Collect and analyze data.

Which of the following statements about economic models is NOT correct? Economic models leave out irrelevant details. Economists use assumptions to construct models. Economic models are often composed of equations and diagrams. Economic models are not useful because they oversimplify the real world.

Economic models are not useful because they oversimplify the real world.

In order to understand how the real world works, economists try to capture every aspect of the real world in their models that they construct True False

False

The production possibilities frontier is a graph that shows the various combinations of output that an economy should produce. True False

False

The scientific method is only applicable to studying the natural sciences. True False

False

When an economy is operating _______ its production possibilities frontier, we know that there are unused resources of inefficiencies in the economy. on or inside outside inside on

Inside

Which of the following statements about the circular-flow diagram is NOT correct? It represents the flows of inputs, outputs, and dollars. It incorporates all aspects of the real economy. It helps explain how participants in the economy interact with one another. It is an economic model.

It incorporates all aspects of the real economy.

In the circular-flow diagram, which of the following items does NOT flow from firms to households? goods wages output labor

Labor

Which of the following statements about economic models is correct? Models are not helpful in solving public policy debates. It is not appropriate for models to incorporate equations or diagrams. Models assume away irrelevant details, allowing us to see what is truly important. The more details a model includes, the better the model.

Models assume away irrelevant details, allowing us to see what is truly important.

In the circular-flow diagram, which of the following do firms NOT do? Produce factors of production Use factors of production to produce output Hire workers Produce goods and services.

Produce factors of production

In the circular-flow diagram, which of the following do households NOT do? Produce goods and services. Sell their labor to firms. Buy goods and services that firms produce. Own the factors of production.

Produce goods and services.

True

Refer to the Figure. Consider the production possibilities frontier for an economy that produces only sofas and cars. The opportunity cost of each car is the slope of the production possibilities frontier. True False

2/3 of a car.

Refer to the Figure. Consider the production possibilities frontier for an economy that produces only sofas and cars. The opportunity cost of each sofa is not constant. 600 cars. 3/2 cars. 2/3 of a car.

L, M

Refer to the Figure. Efficient production is represented by which point(s)? L, M, Q Q L, M, N, O, and P L, M

0 dryers and 100 washers

Refer to the Figure. If this economy devotes all of its resources to the production of washers, then it will produce 80 dryers and 50 washers 80 dryers and 0 washers 60 dryers and 50 washers 0 dryers and 100 washers

it gives up 80 sweaters to get 60 bushels of apples.

Refer to the Figure. If this society moves from point R to point U, it gives up 20 bushels of apples to get 60 sweaters. it gives up 80 sweaters to get 60 bushels of apples. it gives up 160 sweaters to get 140 bushels of apples. it gives up 60 bushels of apples to get 80 sweaters.

C and D

Refer to the Figure. Jeff receives his first paycheck for working as a waiter. To which of the arrows does this transaction directly contribute? C and D C only A and B B only

Box D to Box B

Refer to the Figure. Max works as a CPA for a corporation and is paid a salary in exchange for the accounting services he performs. Jim owns land and rents his land to companies in exchange for rent payments. If Max's income is represented by a flow of dollars from Box D to Box B of this circular-flow diagram, then Jim's income is represented by a flow of dollars from Box D to Box B Box C to Box D Box C to Box A Box A to Box C

it does not have the resources and technology to produce that level of output.

Refer to the Figure. The economy cannot currently produce at point C because it would be inefficient to produce there. it does not have the resources and technology to produce that level of output. it is not using the most efficient production process. it is not using all of its resources.

C

Refer to the Figure. Which arrow represents the flow of factors of production? D C B A

500 bushels of wheat

The table above shows one set of production possibilities. What is the opportunity cost of increasing the production of corn from 800 bushels to 1200 bushels? 1300 bushels of wheat 500 bushels of wheat 400 bushels of wheat 200 bushels of wheat

Suppose an economy produces two goods, food and clothing. This economy always operates on its production possibilities frontier. Last year, it produced 2000 units of food and 500 articles of clothing. This year it experienced a technological advance in its clothing-making industry. As a result, this year the society wants to produce 2200 units of food and 500 articles of clothing. Which of the following statements is correct? The technological advance reduced the amount of resources needed to produce 500 articles of clothing, so these resources could be used to produce more food. In order to increase food production in these circumstances without reducing machine production, the economy must experience unemployment. Because the technological advance occurred in the clothing-making industry, increases in output can only occur in the food industry. Because the technological advance occurred in the clothing-making industry, it is not possible to increase food production without reducing clothing production below 500.

The technological advance reduced the amount of resources needed to produce 500 articles of clothing, so these resources could be used to produce more food.

Suppose an economy only produces two goods, pizza and tables. Last month, the economy produced 100 pizzas and 10 tables. This month, the same economy produced 125 pizzas and 15 tables. Which of the following statements could NOT explain this change? This month, the economy experienced a change in the opportunity cost of producing pizza. This month, the economy experienced an increase in resources. This month, the economy experienced an improvement in technology. This month, the economy reduced the unemployment on its resources.

This month, the economy experienced a change in the opportunity cost of producing pizza.

Points on the production possibilities frontier represent efficient levels of production. True False

True

Which of the following events would cause a production possibilities frontier to shift outward? an increase in the money supply a change in society's preferences for one good over another a shift in resources from the production of one good to the production of the other good a technological improvement

a technological improvement

In the markets for goods and services in the circular-flow diagram, households are _________ and firms are __________. sellers, buyers sellers, sellers buyers, buyers buyers, sellers

buyers, sellers

Any point outside a country's production possibilities frontier represents a combination of two goods that an economy will never be able to produce even with an increase in resources or superior technology. can produce using some portion, but not all, of its resources and technology. can produce using all available resources and technology. cannot currently produce.

cannot currently produce.

Which of the following steps does an economist not take when studying the economy? create data in a laboratory analyze data collect data devise theories

create data in a laboratory

According to the circular-flow diagram, if Molly is an employee who delivers packages for Deliver Dynomite, she participates in the markets for goods and services exchanging labor for income goods and services exchanging packages for wages, rent, and profit factors of production exchanging packages for revenue factors of production exchanging labor for income

factors of production exchanging labor for income

Economists make assumptions to better match the complexity of the real world. represent their political bias. make models easier for students to understand. focus their thinking.

focus their thinking.

In the circular-flow diagram, which of the following items does NOT flow from households to firms? goods and services revenue factors of production Labor

goods and services

In the simple circular-flow diagrams, the participants in the economy are firms and government households, firms, and government households and markets households and firms

households and firms

When a production possibilities frontier is bowed outward, the opportunity cost of producing an additional unit of a good _________ as more of the good is produced. remains constant cannot be determined decreases increases

increases

In the markets for factors of production in the circular-flow diagram, households are _________ and firms are __________. sellers, buyers sellers, sellers buyers, buyers buyers, sellers

sellers, buyers

Which of the following would likely be studied by a microeconomist rather than a macroeconomist? the effect of gas prices on the profitability of snowplow companies in New England barriers to effective international trade the effect of changes in health care standards on gross domestic product the effect of national debt on the interest rate

the effect of gas prices on the profitability of snowplow companies in New England

Which of the following would likely be studied by a macroeconomist rather than a microeconomist? how tariffs affect the cotton industry the effects of borrowing by the federal government the effect of rent control on housing in New York City the effect of an increase in the gas tax on fuel consumption

the effects of borrowing by the federal government

In the circular-flow diagram, which of the following is NOT a factor of production? revenue capital labor land

revenue