ECON-1022

Science in Economics

-Economists find it more difficult to conduct experiments. -Theory and observation are important in economics as well as in other sciences. -Rely upon the natural experiments offered by history.

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?

-The economy experiences economic growth. -There is a technological advance in the toy industry, but the greeting card industry experiences no such advance. -There is a technological advance in the greeting card industry, but the toy industry experiences no such advance.

Why Economists Disagree

-They sometimes disagree about the validity of alternative positive theories about the world. -They may have different values and, therefore, different normative views about what policy should try to accomplish.

Economic models

-constructed to mirror reality as closely as possible, and in this respect economic models are no different from other scientific models. -can be useful, even if they are not particularly realistic

A circular-flow diagram is a model that

-helps to explain how participants in the economy interact with one another. -helps to explain how the economy is organized.

positive statements

-which attempt to describe the world as it is -can be confirmed or refuted, normative statements cannot.

normative statements

-which attempt to prescribe how the world should be.

Corn Wheat 2000 0 1600 700 1200 1300 800 1800 400 2200 0 2500 Refer to Table 2-5. Table 2-5 shows one set of production possibilities. Which of the following combinations of corn and wheat is not currently attainable but would be attainable if there was an improvement in overall production technology?

1000 bushels of corn and 2000 bushels of wheat

The following table contains some production possibilities for an economy for a given year: Tennis Rackets Tennis Balls 100 8000 200 6500 300 ? Refer to Table 2-2. If the production possibilities frontier is bowed outward, then "?" could be

4500

According to the circular-flow diagram, if Denny is the owner of a landscaping business and he just received $50 for mowing Mrs. Pendleton's lawn,

Denny acts as a firm who interacted in the markets for goods and services with Mrs. Pendleton.

Which of the following transactions takes place in the markets for the factors of production in the circular-flow diagram?

Dylan receives a salary for his work as a financial analyst for an investment firm.

Indiadesh is a country that produces two goods, textiles and computers. Last year, Indiadesh produced 50,000 textiles and 1300 computers. This year it produced 45,000 textiles and 1100 computers. Given no further information, which of the following events could explain this change?

Indiadesh experienced a reduction in resources.

An economic outcome is said to be efficient if the economy is

getting all it can get from the scarce resources it has available

In the circular-flow diagram, which of the following items flows from households to firms through the markets for the factors of production?

land, labor, and capital

The production possibilities frontier provides an illustration of the principle that

people face trade-offs.

In the circular-flow diagram, which of the following items does not flow from households to firms?

profit

The two loops in the circular-flow diagram represent

the flows of inputs and outputs and the flow of dollars.

Which of the following areas of study typifies microeconomics as opposed to macroeconomics?

the impact of minimum-wage laws on employment in the fast food industry

If an economy is producing efficiently, then

there is no way to produce more of one good without producing less of another good.