Microeconomics Quiz #2
Economists face an obstacle that many other scientists do not face. What is this obstacle?
It is often difficult and sometimes impossible to perform experiments in economics.
Economists believe that production possibilities frontiers are often bowed because
resources are not completely adaptable.
A model can be accurately described as a...
simplification of reality
The production possibilities frontier is a graph that shows the various combinations of output that an economy can possibly produce given the available factors of production and
society's preferences.
Suppose a nation is currently producing at a point inside its production possibilities frontier. We know that
the nation is not using all available resources or is using inferior technology or both.
The dispassionate development and testing of theories about how the world works...
Scientific Method
Economists, like mathematicians, physicists, and biologists do 3 things....
1. make use of the scientific method 2.try to address their subject with a scientist's objectivity 3. devise theories, collect data, and the analyze these data in an attempt to verify or refute their theories.
The production possibilities frontier is a graph that shows the various combinations of output that an economy
can produce.
What is a correct statement about production possibilities frontier?
An economy can produce at any point on or inside the production possibilities frontier, but not outside the frontier.
Which of the following is an example of a normative, as opposed to positive, 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. The elimination of trade restrictions would increase an economy's standard of living.
B
In a certain economy, toys and greeting cards are produced, and the economy currently operates on its production possibilities frontier. Which of the following events would allow the economy to produce more toys and more greeting cards, relative to the quantities of those goods that are being produced now? a. The economy experiences economic growth. b. There is a technological advance in the toy industry, but the greeting card industry experiences no such advance. c. There is a technological advance in the greeting card industry, but the toy industry experiences no such advance. D. All of the above are correct.
D
Sometimes economists disagree because their scientific judgments differ. Which of the following instances best reflects this source of disagreement? a. One economist believes income tax cuts are unfair to those with low incomes; another economist believes income tax cuts are not unfair to those with low incomes. b. One economist believes unemployment causes more human suffering than does inflation; another economist believes inflation causes more human suffering than does unemployment. c. One economist believes the policies of the Democratic party offer the best hope for America's future; another economist believes the policies of the Republican party offer the best hope for America's future. d. One economist believes increases in the minimum wage increase unemployment; another economist believes increases in the minimum wage do not increase unemployment.
D
What does the circular-flow diagram leave out?
The diagram leaves out details that are not essential for understanding the economic transactions that occur between households and firms.
Suppose an economy produces two goods, food and machines. This economy always operates on its production possibilities frontier. Last year, it produced 1000 units of food and 47 machines. This year it experienced a technological advance in its machine-making industry. As a result, this year the society wants to produce 1050 units of food and 47 machines. What happened through this technological advance?
The technological advance reduced the amount of resources needed to produce 47 machines, so these resources could be used to produce more food.
In economics, capital refers to
buildings and machines used in the production process.
Any point on a country's production possibilities frontier represents a combination of two goods that an economy
can produce using all available resources and technology.
Economists make assumptions in order to...
focus their thinking on the essence of the problem at hand.
An economic outcome is said to be efficient if the economy is....
getting all it can get from the scarce resources it has available.
For an economist, the idea of making assumptions is regarded generally as a....
good idea, since doing so helps to simplify the complex world and make it easier to understand.
The most common data for testing economic theories come from....
historical episodes of economic change.
On a bowed production possibilities frontier, as you move down along the curve, 3 things happen...
more of one good must be given up to receive one unit of the other good. the available production technology does not change. the opportunity cost increases.
The production possibilities frontier provides an illustration of the principle that
people face trade-offs.
The bowed shape of the production possibilities frontier can be explained by the fact that
the opportunity cost of one good in terms of the other depends on how much of each good the economy is producing.