Microeconomics chapter 2

Which of the following issues is related to microeconomics? a. the impact of technology on economic growth b. the impact of the deficit on saving c. the impact of oil prices on auto production d. the impact of money on inflation

c. the impact of oil prices on auto production

Which of the following is not a factor of production? a. land b. labor c. capital d. money

money

"Total revenue rises when the quantity sold increases and prices remain constant" is an example of a

positive economic statement.

The scientific method requires that

scientists be objective

In the markets for factors of production in the circular-flow diagram, households are _________ and firms are __________.

sellers, buyers

Positive statements are

statements of description that can be tested

Differences in scientific judgment between economists are similar to all of the following except

two biologists arguing about the fairness of health insurance premiums

Andrew earns $10 per hour working at a library.

Factors of Production

Kyoko earns $20,000 from her 10% ownership of Acme Industrial.

Factors of Production

The advice of economists is the only thing a policymaker has to consider when implementing a proposed policy.

False

Andrew earns $8 per hour working at a fast-food restaurant.

Firm to Household

Janet earns a profit of $5,000 from her grocery business.

Firm to Household

Kyoko earns $10,000 from 40% ownership of her family business.

Firm to Household

Van earns $12 per hour working at a salon.

Firm to Household

Beth pays a storekeeper $4 for a bag of oranges.

Goods and Services

Eleanor spends $50 for a swimming lesson.

Goods and Services

Amy pays a storekeeper $1 for a quart of milk.

Household to Firm

Beth pays a storekeeper $2 for a quart of yogurt.

Household to Firm

Deborah spends $100 for a piano lesson.

Household to Firm

Eleanor spends $40 to get a haircut.

Household to Firm

The effect of an increase in income tax on national income

Macroeconomics

The effect of government regulations on auto emissions

Macroeconomics

The effect of minimum-wage law on unemployment

Macroeconomics

The impact of higher national saving on economic growth

Macroeconomics

The relationship between the inflation rate and changes in the quantity of money

Macroeconomics

The relationship between the inflation rate and the unemployment rate

Macroeconomics

A family's decision about how much income to save

Microeconomics

A firm's decision about how many workers to hire

Microeconomics

A firm's decision about whether to continue production or to shut down

Microeconomics

A firm's decision on which production method to use

Microeconomics

A student's decision about how to allocate his time between studying two subjects

Microeconomics

The effect of a change in price of one good on a related good

Microeconomics

The effect of externality on the quantity produced by the market

Microeconomics

The effect of government subsidies on the agricultural industry

Microeconomics

The effect of rent control on the housing market

Microeconomics

Society ought to require welfare recipients to look for jobs.

Normative

The government must take action to reduce the unemployment rate.

Normative

Economists from which administrative department help the president formulate spending plans and regulatory policies?

Office of Management and Budget

Investment increases when interest rates fall.

Positive

Policy makers face trade-off between equality and efficiency.

Positive

The government can increase labor productivity by improving public education.

Positive

A survey of professional economists revealed that more than three-fourths of them agreed with a number of statements. Which of the following statement is NOT one of those propositions?

The United States should restrict employers from outsourcing work to foreign countries.

Which of the following statements regarding the circular-flow diagram is true?

The factors of production are owned by households.

In which of the following cases is the assumption most reasonable?

To address the benefits of trade, an economist assumes that there are two people and two goods.

Which of the following will not shift a country's production possibilities frontier outward?

a reduction in unemployment

Economic growth is depicted by

a shift in the production possibilities frontier outward.

Which of the following is most likely to produce scientific evidence about a theory?

a tenured economist employed at a leading university analyzing the impact of bank regulations on rural lending

Which of the following statements is normative? a. The unemployment rate should be lower. b. Printing too much money causes inflation. c. People work harder if the wage is higher. d. Large government deficits cause an economy to grow more slowly.

a. The unemployment rate should be lower.

When an economy is operating _______ its production possibilities frontier, we know that there are unused resources of inefficiencies in the economy.

inside

In making which of the following statements is an economist acting more like a scientist? a. The rate of inflation should be reduced because it robs the elderly of their savings. b. A reduction in unemployment benefits will reduce the unemployment rate. c. The state should increase subsidies to universities because the future of our country depends on education. d. The unemployment rate should be reduced because unemployment robs individuals of their dignity.

b. A reduction in unemployment benefits will reduce the unemployment rate.

Which of the following statements about microeconomics and macroeconomics is not true? a. Microeconomics and macroeconomics cannot be entirely separated. b. The study of very large industries is a topic within macroeconomics. c. Microeconomics is a building block for macroeconomics. d. Macroeconomics is concerned with economy-wide phenomena.

b. The study of very large industries is a topic within macroeconomics.

Economic models are

built with assumptions

What are the two basic reasons why economists often appear to give conflicting advice to policymakers?

differences in scientific judgment and values

Suppose two economists are arguing about policies that deal with unemployment. One economist says, "The government could lower unemployment by one percentage point if it would just increase government spending by 50 billion dollars." The other economist responds, "That's ridiculous. If the government spent an additional 50 billion dollars, it would reduce unemployment by only one-tenth of 1 percent, and that effect would only be temporary!" These economists

disagree because they have different scientific judgments.

Suppose two economists are arguing about policies that deal with unemployment. One economist says, "The government should fight unemployment because it is the greatest social evil." The other economist responds, "That's ridiculous. Inflation is the greatest social evil." These economists

disagree because they have different values.

Points on the production possibilities frontier are

efficient

In the simple circular-flow diagrams, the participants in the economy are

households and firms