Econ 105 Unit 1 Reading quizzes (ch1-3)

shift of the PPF away from the origin.

Economic growth in the economy can be portrayed in the model of the production possibilities frontier as a:

usually composed of diagrams and equations. created by making assumptions. simplified versions of economic theories.

Economic models are:

different economists espouse different theories, so they believe different things are going on in the economy. different economists have different values and priorities in economic matters. different economists make different assumptions to theories, leading them to different conclusions in economic matters.

Economists tend to disagree with each other because:

simplify economic theories, so as to make it possible to answer economic questions.

Economists use assumptions in order to:

decide what and how much should be produced.

Even though markets do a great job in organizing economic activity, governments are needed to do all of the following EXCEPT:

national defense and consumer goods.

Guns and butter are used to represent the classic societal tradeoff between spending on

Iowa has a comparative advantage in the production of corn.

If Iowa's opportunity cost of corn is lower than Oklahoma's opportunity cost of corn, then

all producers and consumers

In a market economy, the decisions of what and how much to produce are generally made by:

markets, sometimes called exchanges.

In the circular-flow model of the economy, all of the following are considered factors of production except:

True

Interdependence among individuals and interdependence among nations are both based on the gains from trade.

the opportunity cost

Whatever must be given up to obtain some item is known as:

George Bernard Shaw

"If all economists were laid end to end, they would not reach a conclusion." Who made this whimsical observation?

analyze data on workers.

A duty of economists at the Department of Labor is to

increase in the short run.

A government that implements a policy designed to reduce inflation can expect unemployment to:

Any price that will cover the additional cost of an additional passenger to the airline.

A plane from Los Angeles to New York is about to take off, but it still has a few seats empty. If the average cost per seat is $500, what price should the airline charge passengers in standby to fill in those remaining seats? (Consider that quantitative decisions are made at the margin.)

False

A production possibilities frontier is a graph that shows the combination of outputs that an economy should produce.

the rate of tradeoff between the two goods being produced depends on how much of each good is being produced.

A production possibilities frontier is bowed outward when

The United States should withdraw from the North American Free Trade Agreement (NAFTA).

A survey of professional economists revealed that more than three-fourths of them agreed with fourteen economic propositions. Which of the following is not one of those propositions?

laws that reduce pollution raise costs of production and reduce incomes.

A tradeoff exists between a clean environment and a higher level of income in that

input requirements per unit of output.

Absolute advantage is found by comparing different producers'

an invisible hand

According to Adam Smith, what guides market forces in a market economy?

the model describes two circular flows: one for inputs and one for outputs.

All of the following are characteristics of the circular-flow model of the economy, EXCEPT:

Prices rise when the government prints too much money

All of the following are principles that deal with individual decision making, EXCEPT:

when the economy is self-sufficient.

An economy's production possibilities frontier is also its consumption possibilities frontier

government guiding economic activity. Today many countries that had this system have abandoned it.

Central planning refers to

opportunity cost

Comparative advantage is related most closely to which of the following?

economy-wide phenomena, including inflation, unemployment, and economic growth.

Macroeconomics is the study of:

are more efficient.

One advantage market economies have over centrally-planned economies is that market economies

Positive statements offer descriptions of the way things are, whereas normative statements offer opinions on how things ought to be.

One way to characterize the difference between positive statements and normative statements is as follows:

do so because they get something in return.

People who provide you with goods and services

rapid increases in the quantity of money in the economy.

Rapid and persistent inflation occurs mainly due to:

Jill has an absolute advantage over Jim in reviewing articles.

Suppose that Jill can type 10 pages per hour on the computer, while Jim can only type 8. Further suppose that Jill can review 5 articles per hour while Jim can only review 2. Based on this, we can say that:

was created in 1946 and consists of three members and a staff of several dozen economists.

The Council of Economic Advisers

what you give up to get that item.

The opportunity cost of an item is

free trade tends to cause bankruptcies and high unemployment.

The principle of comparative advantage suggests all of the following, EXCEPT:

individuals. societies. families.

The principle that "people face tradeoffs" applies to

absolute advantage

The situation in which one producer can produce a good using less resources than other producers is known as:

Economics

The study of how society manages its scarce resources:

rely upon one another for the goods and services we consume.

When an economist points out that you and millions of other people are interdependent, he or she is referring to the fact that we all

both persons generally gain from the exchange.

When two individuals trade voluntarily:

Economic theories represent irrefutable facts.

Which of the following is FALSE, regarding economics as a science?

Higher interest rates will cause people to borrow and invest less.

Which of the following is an example of a positive statement?

The opportunity cost of producing one more unit of one of the goods remains constant at any point along a curved PPF.

Which of the following is false regarding the production possibilities frontier (PPF) for the economy?

A nation with an absolute advantage in the production of a good may have a comparative advantage in the production of the same good.

Which of the following is true regarding the principle of absolute advantage?

Comparative advantage is determined by which person or group of persons can produce a given quantity of a good using the fewest resources.

Which of the following statements about comparative advantage is not true?