Econ 101- CHP 2

Suppose Indiana produces only steel and corn, with fixed amounts of land, labor, and capital resources. Which of the following best sets the stage for economic growth? The unemployment rate in Indiana rises from 5% to 6%. The percentage of Indiana residents with a college degree rises from 25% to 30%. The United States imports more and more low-cost steel from Asian countries. The Midwest has a devastating drought.

The percentage of Indiana residents with a college degree rises from 25% to 30%.

Which of the following is FALSE about the circular-flow diagram? Households are the primary demanders of goods and services. Money flows from households to firms as households offer factors of production for sale. Firms are the primary suppliers of goods and services. Money flows in the direction opposite to goods and services and factors of production.

Money flows from households to firms as households offer factors of production for sale.

Unemployment decreased to its lowest level in 10 years last month. This statement is: a value judgment. a positive economic statement. an example of an opportunity cost. a normative economic statement.

a positive economic statement.

When a nation's economy grows: it has been able to reach full employment. it has moved to a more consumer-oriented position on its production possibility frontier. its production possibility frontier shifts inward. its production possibility frontier shifts outward.

its production possibility frontier shifts outward.

Economists usually assume that production is subject to increasing opportunity costs because: not all resources are equally suited to producing every good. individuals desire constantly increasing opportunities to make themselves better off. if production is efficient, it is not possible to increase the production of all goods simultaneously. higher production usually results in more inflation.

not all resources are equally suited to producing every good.

To achieve the gains from trade, each nation should specialize in the production of a good or service if: its production possibility frontier is farther from the origin than that of any other country. its production possibility frontier is closer to the origin than that of any other country. the country can make the product using fewer resources than any other country. the country can make the product while forgoing fewer alternative products than any other country.

the country can make the product while forgoing fewer alternative products than any other country.

Economists who are asked to choose between two government policies may disagree because: they make the same value judgments about the desirability of the policies. economists are trained ignore facts and focus on theory. they base their conclusions on models that make different assumptions. as a matter of course, economists often take opposing points of view so that all sides of a question may be discusse

they base their conclusions on models that make different assumptions.

If they spend all night writing computer programs, Laurence can write 10 programs, and Carrie Anne can write 5. If they spend all night making sunglasses, Laurence can make 6 pairs, and Carrie Anne can make 4. Given this information and supposing Laurence and Carrie Anne have constant opportunity costs, we know that _____ has an absolute advantage in _____. Carrie Anne; programs but not in sunglasses. Carrie Anne; both programs and sunglasses. Laurence; both programs and sunglasses. Laurence; programs but not in sunglasses.

If they spend all night writing computer programs, Laurence can write 10 programs, and Carrie Anne can write 5. If they spend all night making sunglasses, Laurence can make 6 pairs, and Carrie Anne can make 4. Given this information and supposing Laurence and Carrie Anne have constant opportunity costs, we know that _____ has an absolute advantage in _____. Carrie Anne; programs but not in sunglasses. Carrie Anne; both programs and sunglasses. Laurence; both programs and sunglasses. Laurence; programs but not in sunglasses.

Which of the following is a normative statement? The best way to encourage growth in the economy is through government spending. Children in the United States are required to go to school until they reach a certain age. The federal minimum wage is higher today than it was in 1990. Women's labor force participation rate has increased during the past 100 years.

The best way to encourage growth in the economy is through government spending.

If an economy is producing at a point on its production possibilities frontier, it is: efficient in production but not necessarily in allocation. not necessarily efficient in production or allocation. efficient in allocation but not necessarily in production. efficient in production and allocation.

efficient in production but not necessarily in allocation.

The importance of an economic model is that it allows us to: focus on the effects of only one change at a time. avoid opportunity costs. build an accurate mathematical model of the economy. build a complex and accurate model of the economy.

focus on the effects of only one change at a time.