Chapter 2 Quiz

If the economy were operating at point E, a. 20 additional units of eggs can be produced with no impact on bacon production. b. the opportunity cost of 20 additional units of eggs is 20 units of bacon. c. the opportunity cost of 20 additional units of eggs is 10 units of bacon. d. the opportunity cost of 20 additional units of eggs is 30 units of bacon.

a. 20 additional units of eggs can be produced with no impact on bacon production.

Which of the following statements regarding the circular-flow diagram is true? a. The factors of production are owned by households. b. If Susan works for IBM and receives a paycheck, the transaction takes place in the market for goods and services. c. If IBM sells a computer, the transaction takes place in the market for factors of production. d. The factors of production are owned by firms. e. None of the above is true.

a. The factors of production are owned by households.

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

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

Economic growth is depicted by a. a shift in the production possibilities frontier outward. b. a movement along a production possibilities frontier toward capital goods. c. a movement from inside the curve toward the curve. d. a shift in the production possibilities frontier inward.

a. a shift in the production possibilities frontier outward.

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 a. disagree because they have different scientific judgments. b. disagree because they have different values. c. really don't disagree at all. It just looks that way. d. do none of the above.

a. disagree because they have different scientific judgments.

Points on the production possibilities frontier are a. efficient. b. inefficient. c. unattainable. d. normative. e. none of the above.

a. efficient.

Which of the following will not shift a country's production possibilities frontier outward? a. an increase in the labor force b. a reduction in unemployment c. an increase in the capital stock d. an advance in technology

b. a reduction in unemployment

Which of the following is most likely to produce scientific evidence about a theory? a. an economist employed by the AFL/CIO doing research on the impact of trade restrictions on workers' wages b. a tenured economist employed at a leading university analyzing the impact of bank regulations on rural lending c. a radio talk show host collecting data on how capital markets respond to taxation d. a lawyer employed by General Motors addressing the impact of air bags on passenger safety

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

Economic models are a. usually made of wood and plastic. b. built with assumptions. c. useless if they are simple. d. created to duplicate reality.

b. built with assumptions.

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 a. disagree because they have different scientific judgments. b. disagree because they have different values. c. really don't disagree at all. It just looks that way. d. do none of the above.

b. disagree because they have different values.

As we move from point A to point D, a. the opportunity cost of eggs in terms of bacon is constant. b. the opportunity cost of eggs in terms of bacon rises. c. the economy becomes less efficient. d. the opportunity cost of eggs in terms of bacon falls. e. the economy becomes more efficient.

b. the opportunity cost of eggs in terms of bacon rises.

If the economy is operating at point C, the opportunity cost of producing an additional 15 units of bacon is a. 40 units of eggs. b. 10 units of eggs. c. 20 units of eggs. d. 50 units of eggs. e. 30 units of eggs.

c. 20 units of eggs.

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

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

In which of the following cases is the assumption most reasonable? a. To address the impact of taxes on income distribution, an economist assumes that everyone earns the same income. b. To estimate the speed at which a beach ball falls, a physicist assumes that it falls in a vacuum. c. To address the benefits of trade, an economist assumes that there are two people and two goods. d. To address the impact of money growth on inflation, an economist assumes that money is strictly coins.

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

Point F represents a. a combination of production that can be reached if we reduce the production of eggs by 20 units. b. a combination of production that is inefficient because there are unemployed resources. c. a combination of production that can be reached if there is a sufficient advance in technology. d. none of the above.

c. a combination of production that can be reached if there is a sufficient advance in technology.

Positive statements are a. statements of prescription that involve value judgments. b. macroeconomic. c. statements of description that can be tested. d. microeconomic.

c. statements of description that can be tested.

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

c. the impact of oil prices on auto production

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

d. The unemployment rate should be lower.

Which of the following is not a factor of production? a. land b. labor c. capital d. money e. All of the above are factors of production.

d. money

The scientific method requires that a. scientists use test tubes and have clean labs. b. scientists use precision equipment. c. only incorrect theories are tested. d. scientists be objective. e. only correct theories are tested.

d. scientists be objective.