Econ Lesson 2 Quiz

Economic models a. incorporate simplifying assumptions that often contradict reality, but also help economists better understand reality. b. are usually detailed replications of reality. c. are people who act out the behavior of firms and households so that economists can study this behavior. d. are useful to researchers but not to teachers because economic models omit many details of the real-world economy.

A

Factors of production are a. assumed to be owned by firms in the circular-flow diagram. b. used to produce goods and services. c. also called output. d. abundant in most economies.

B

A demand curve shows the relationship between price and a. income and quantity demanded. b. production. c. quantity demanded. d. income.

C

A model can be accurately described as a a. device that is useful only to the people who created it. b. realistic and carefully constructed theory. c. simplification of reality. d. theoretical abstraction with very little value.

C

A normative economic statement such as "The minimum wage should be abolished" a. would require data but not values to be evaluated. b. could not be evaluated by economists acting as policy advisers. c. would require values and data to be evaluated. d. would likely be made by an economist acting as a scientist.

C

Any point on a country's production possibilities frontier represents a combination of two goods that an economy a. will never be able to produce. b. can produce using some portion, but not all, of its resources and technology. c. may be able to produce in the future with more resources and/or superior technology. d. can produce using all available resources and technology.

D

Macroeconomics is the study of a. international trade. b. individual decision makers. c. markets for large products. d. economy-wide phenomena.

D

Microeconomics is the study of a. how money affects the economy. b. how the economy as a whole works. c. how government affects the economy. d. how individual households and firms make decisions.

D

One way to characterize the difference between positive statements and normative statements is as follows: a. Positive statements involve advice on policy matters, whereas normative statements are supported by scientific theory and observation. b. Positive statements tend to reflect optimism about the economy and its future, whereas normative statements tend to reflect pessimism about the economy and its future. c. Economists outside of government tend to make normative statements, whereas government-employed economists tend to make positive statements. d. Positive statements offer descriptions of the way things are, whereas normative statements offer opinions on how things ought to be.

D

The circular-flow diagram a. is an economic model. b. incorporates two types of decision makers: households and firms. c. represents the flows of inputs, outputs, and dollars. d. All of the above are correct.

D