Macro HW 2

Economists view normative statements as: a) prescriptive, making a claim about how the world ought to be. b) descriptive, making a claim about how the world is. c) statements about the normal condition of the world. d) pessimistic, putting the worst possible interpretation on things.

A

In the markets for factors of production in the circular-flow diagram: a) households provide firms with labor, land, and capital b) households provide firms with savings for investment c) firms provide households with goods and services d) firms provide households with revenue

A

Just like models constructed in other areas of science economic models: a) incorporate assumptions that contradict reality b) incorporate all details of the real world c) complicate reality d) avoid the use of diagrams and equations

A

The opportunity cost of moving from point K to point L is: (Refer to picture) a) 0 cups of coffee b) 1 donut c) 2 donuts d) 4 cups of coffee

A

An economic model can accurately explain how the economy is organized because it is designed to include, to the extent possible, all features of the real world. a) True b) False

B

Efficient production is represented by which points(s)? (Refer to picture) a) J b) J, K c) J, K, L d) J, K, M

B

A technological advance in the production of the first good increases the opportunity cost of the first good in terms of the second good. a) True b) False

A

Assumptions can simplify the complex world and make it easier to understand: a) True b) False

A

To reach point L, the economy would have to: (Refer to picture) a) acquire more resources or experience a technological advance b) begin using its available resources more efficiently than it is currently using them c) shift resources away from the production of nails and toward the production of hammers d) none of the above are correct; the economy will never be able to reach point L

A

Which shape refers to the markets for goods and services? (Refer to picture) a) oval A b) oval B c) rectangle 1 d) rectangle 2

A

For this economy, as more and more hammers are produced, the opportunity cost of an additional hammer produced, in terms of nails: (Refer to picture) a) remains constant b) increase c) decreases d) This answer cannot be determined from the graph

B

In the circular-flow diagram: a) profit flows from households to firms b) labor flows from households to firms c) services flow from households to firms d) all of the above are correct

B

There is only one explanation for why economists give conflicting advice on policy issues, and it is that they have different values about what policy should try to accomplish. a) True b) False

B

What is flowing from rectangle 1 to oval A? (Refer to picture) a) revenue b) goods and services sold c) factors of production d) labor, land, and capital

B

What is the opportunity cost to Footville of increasing the production of shoes from 400 to 600? (Refer to picture) a) 400 socks b) 300 socks c) 200 socks d) 100 socks

B

With the resources it has, an economy can produce at any point on or outside the production possibilities frontier, but it cannot produce at points inside the frontier. a) True b) False

B

Economists speaking like policy advisers make a) claims about how the world is. b) descriptive statements. c) normative statements d) More than one of the above is correct.

C

Economists view positive statements as: a) affirmative, justifying existing economic policy. b) optimistic, putting the best possible interpretation on things. c) descriptive, making a claim about how the world is. d) prescriptive, making a claim about how the world ought to be.

C

In a certain economy, jam and bread are produced, and the economy currently operates on its production possibilities frontier. Which of the following events would allow the economy to produce more jam and more bread, relative to the quantities of those goods that are being produced now? a) unemployed labor is put to work producing jam and bread b) the economy puts its idle capital to work producing jam and bread c) the economy experiences economic growth d) all of the above

C

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 the factors of production flows from firms to households d) spending on goods and services flows from firms to households

C

Suppose this economy is producing at point D. Which of the following statements would best explain this situation? (Refer to picture) a) The economy has insufficient resources to produce at a more desirable point. b) The economy's available technology prevents it from producing at a more desirable point. c) There is widespread unemployment in the economy. d) Any of the above statements would be a legitimate explanation for this situation.

C

The bowed shape of the production possibilities frontier can be explained by the fact that: a) all resources are scarce b) economic growth is always occuring c) the opportunity cost of one good in terms of the other depends on how much of each good the economy is producing d) the only way to get more of one good is to get less of the other

C

Which of the following is an activity undertaken by the actors in rectangle 2? (Refer to picture) a) produce and sell goods and services b) hire and use factors of production c) own and sell factors of production d) exchange goods and services between firms and households

C

Because it is difficult for economists to use experiments to generate data, they generally must: a) do without data b) substitute assumptions for data when data are unavailable c) rely upon hypothetical data that were previously concocted by other economists d) use whatever data the world gives them

D

Economists make assumptions to: a) mimic the methodologies employed by other scientists. b) minimize the number of experiments that yield no useful data. c) minimize the likelihood that some aspect of the problem at hand is being overlooked. d) focus their thinking on the essence of the problem at hand.

D

If the production possibilities frontier is bowed outward, then "?" could be: (Refer to picture) a) 6,000 b) 5,500 c) 5,000 d) 4,500

D

If this economy devotes all of its resources to the production of blankets, then it will produce: (Refer to picture) a) 0 blankets and 360 pillows. b) 200 blankets and 240 pillows. c) 320 blankets and 120 pillows. d) 360 blankets and 0 pillows.

D

Which of the following is not a result of the shift of the economy's production possibilities frontier from Panel (a) to Panel (b)? (Refer to picture) a) the tradeoff between the production of donuts and coffee changes b) the opportunity cost of a cup of coffee is higher at all levels of coffee production c) production of 4 donuts and 2 cups of coffee becomes possible d) production of 1 donut and 4 cups of coffee becomes efficient

D

Which of the following statements in correct? (Refer to picture) a) the opportunity cost of an additional 200 shoes is constant at 200 socks b) the opportunity cost of an additional 200 shoes in constant at 300 socks c) Footville's production possibilities frontier is a straight, downward-sloping line d) the opportunity cost of an additional 200 shoes increases as more socks are produced

D

Which of the following transactions does not take place in the markets for factors of production in the circular-flow diagram? a) a landowner leases land to a farmer b) a farmer hires a teenager to help with harvest c) a construction company rents trucks for its business d) a woman buys corn for dinner

D