ECO 201 Ch 2

The circular-flow diagram illustrates that, in markets for the factors of production,

households are sellers, and firms are buyers.

An economy produces hot dogs and hamburgers. If a discovery of the remarkable health benefits of hot dogs were to change consumers' preferences, it would

move the economy along the production possibilities frontier.

A production possibilities frontier shifts outward when

the economy experiences economic growth.

All of the following topics fall within the study of microeconomics EXCEPT

the influence of the government budget deficit on economic growth.

When an economy is operating inside its production possibilities frontier, we know that

there are unused resources or inefficiencies in the economy.

Which of the following is a positive, rather than a normative, statement?

Law X will reduce national income.

Suppose Jessica goes to the store to buy fruit. If she only buys mangos, she can buy 6. If she only buys papayas, she can buy 18. Each time she buys one mango she gives up buying 3 papayas. Based on this information, which of the following linear equations is a correct representation of Jessica's budget constraint? (assume P=papayas and M = mangos)

M = 6 - 1/3P

Which one of the following relationships is most likely to be stochastic rather than deterministic?

The relationship between the number of hours students study and their GPAs.

Which of the following would most likely be described as "infrastructure" in Lexington?

Upper Street

An economic model is

a simplified representation of some aspect of the economy.

A point inside the production possibilities frontier is

feasible but not efficient.

The simple circular-flow diagram is a model that includes only some key players in the real economy. Which of the following key players are omitted from the simple circular-flow model?

government

Production possibilities frontiers are usually bowed outward. This is because

resources are specialized; that is, some are better at producing particular goods rather than other goods.

When economists are trying to explain the world, they are

scientists