Chapter 2 Thinking like an Economist

If a nation can produce a good more quickly than any other nation, that nation has a(n)

absolute advantage

The two loops in the circular-flow diagram represent

(i) the flows of inputs and outputs and (ii) the flow of dollars

Which point represents the situation in which the economy is producing its maximum possible quantity of tubas?

(tubas are on x axis) C

Efficient production is represented by which point or points?

A, B, C

The economy has the ability to produce at which point or points?

A, B, C, D

Which of the following is the most accurate statement about production possibilities? a.) An economy can produce only on the production possibilities frontier b.) an economy can produce at any point inside or outside a production frontier c.) an economy can produce at any point on or inside the production possibilities frontier, but not outside the frontier d.) an economy can produce at any point inside the production possibilities frontier, but not on or outside the frontier

C

With respect to how economists study the economy, which of the following statements is most accurate? a.) economists study the past, but they do not try to predict the future b.) economists use "rule of thumb" to predict the future c.) economists devise theories, collect data, and analyze the data to test the theories d.) economists use controlled experiments in much the same way that biologists and physicists do

C

Inefficient production is represented by which point or points?

D

In building economic models, economists often omit

details

Which arrow represents the flow of goods and services?

firms --> markets for goods and services--> households

In the markets for goods and services

firms provide households with output

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

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

A circular-flow diagram is a model that

helps to explain how the economy is organized helps to explain how participants in the economy incorporates the markets for the factors of production

Which arrow shows the flow of land, labor, and capital?

households --> markets for factors of production --> firms

Economists, like mathematicians, physicists, and psychologists,

make use of the scientific method make use of their own language devise theories and collect and analyze data

The field of economics is traditionally divided into two broad subfields,

microeconomists and macroeconomists