ECON Midterm

Which of the following statements about economic models is correct? a.Economic models are built to mirror reality exactly. b.Economic models are useful, but they should not be used for the purpose of improving public policies. c.Because economic models omit many details, they allow us to see what is truly important. d.Economic models seldom incorporate equations or diagrams

c.Because economic models omit many details, they allow us to see what is truly important.

In building economic models, economists often omit a.assumptions. b.theories. c.details. d.equations.

c.details.

Which markets are represented in the simple circular-flow diagram? a.markets for goods and services and markets for financial assets b.markets for factors of production and markets for financial assets c.markets for goods and services and markets for factors of production d.markets for goods and services and markets for imports and exports

c.markets for goods and services and markets for factors of production

In the simple circular-flow diagram, a.households own the factors of production. b.households buy all the goods and services that firms produce. c.land, labor, and capital flow from households to firms. d.All of the above are correct.

d.All of the above are correct.

In the circular-flow diagram, firms produce a.goods and services using factors of production. b.output using inputs. c.factors of production using goods and services. d.Both (a) and (b) are correct

d.Both (a) and (b) are correct

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

D.simplification of reality

s

a.used to produce goods and services.

Factors of production are a.the mathematical calculations firms make in determining their optimal production levels. b.social and political conditions that affect production. c.the physical relationships between economic inputs and outputs. d.inputs into the production process

d.inputs into the production process

In the circular-flow diagram, which of the following is not a factor of production? a.labor b.land c.capital d.money

d.money

In the circular-flow diagram, which of the following items flows from firms to households through the marketsfor the factors of production? a.goods and services b.land, labor, and capital c.dollars spent on goods and services d.wages, rent, and profit

d.wages, rent, and profit

In the circular-flow diagram, which of the following items does not flow from firms to households? a.goods b.services c.capital d.profit

C. Capital

The goal of an economist who formulates new theories is to a.provide an interesting framework of analysis, whether or not the framework turns out to be of muchuse in understanding how the world works. b.provoke stimulating debate in scientific journals. c.contribute to an understanding of how the world works. d.demonstrate that economists, like other scientists, can formulate testable theories.

C.contribute to an understanding of how the world works.

In the circular-flow diagram, which of the following items does not flow from households to firms? a.revenue b.land, labor, and capital c.factors of production d.profit

D. profit

One thing economists do to help them understand how the real world works is a.make assumptions. b.ignore the past. c.they try to capture every aspect of the real world in the models they construct. d.All of the above are correct.

A. make assumptions.

Which of the following statements about models is correct? a.The more details a model includes, the better the model. b.Models assume away irrelevant details. c.Models cannot be used to explain how the economy functions. d.Models cannot be used to make predictions

B.Models assume away irrelevant details.

In the simple circular-flow diagram, who consumes the goods and services that firms produce? a.households only b.firms only c.both households and firms d.neither households nor firms

a.households only

The scientific method is a.the use of modern technology to understand the way the world works. b.the use of controlled laboratory experiments to understand the way the world works. c.the dispassionate development and testing of theories about how the world works. d.the search for evidence to support preconceived theories about how the world work

C.the dispassionate development and testing of theories about how the world works.

In the markets for the factors of production in the circular-flow diagram, a.households are sellers and firms are buyers. b.households are buyers and firms are sellers. c.households and firms are both buyers. d.households and firms are both sellers

a.households are sellers and firms are buyers.

In the markets for factors of production in the circular-flow diagram, a.households provide firms with labor, land, and capital. b.households provide firms with savings for investment. c.firms provide households with goods and services. d.firms provide households with profit

a.households provide firms with labor, land, and capital.

Which of the following statements about the circular-flow diagram is correct? a.One must imagine that the economy operates without money in order to make sense of the diagram. b.The diagram leaves out details that are not essential for understanding the economic transactionsthat occur between households and firms. c.The government cannot be excluded as a decision maker in a circular-flow diagram. d.All of the above are correct.

b.The diagram leaves out details that are not essential for understanding the economic transactionsthat occur between households and firms.

Which of the following is not correct about most economic models? a.They are composed of equations and diagrams. b.They contribute very little to economists' understanding of the real world. c.They omit many features of the real-world economy. d.In constructing models, economists make assumptions.

b.They contribute very little to economists' understanding of the real world.

The circular-flow diagram is an example of a.a laboratory experiment. b.an economic model. c.a mathematical model. d.All of the above are correct

b.an economic model.

In the circular-flow diagram, in the markets for a.goods and services, households and firms are both sellers. b.goods and services, households are buyers and firms are sellers. c.the factors of production, households are buyers and firms are sellers. d.the factors of production, households and firms are both buyers.

b.goods and services, households are buyers and firms are sellers.

In the simple circular-flow diagram, the participants in the economy are a.firms and government. b.households and firms. c.households and government. d.households, firms, and government.

b.households and firms.

In the circular-flow diagram, a.firms are buyers in the markets for goods and services. b.households are sellers in the markets for the factors of production. c.firms are sellers in the markets for factors of production and in the markets for goods and services. d.dollars that are spent on goods and services flow directly from firms to households

b.households are sellers in the markets for the factors of production.

In the circular-flow diagram, a.taxes flow from households to firms, and transfer payments flow from firms to households. b.income payments flow from firms to households, and sales revenue flows from households tofirms. c.resources flow from firms to households, and goods and services flow from households to firms. d.inputs and outputs flow in the same direction as the flow of dollars, from firms to households

b.income payments flow from firms to households, and sales revenue flows from households tofirms.

In the circular-flow diagram, a.profit flows from households to firms. b.labor flows from households to firms. c.services flow from households to firms. d.All of the above are correct

b.labor flows from households to firms.

In the circular-flow diagram, a.firms own the factors of production. b.the factors of production are labor, land, and capital. c.the factors of production are also called "output." d.All of the above are correct.

b.the factors of production are labor, land, and capital.

In the circular-flow diagram, which of the following items flows from households to firms through the marketsfor goods and services? a.goods and services b.dollars paid to land, labor, and capital c.dollars spent on goods and services d.wages, rent, and profit

c.dollars spent on goods and services

In the markets for goods and services in the circular-flow diagram, a.households provide firms with savings for investment. b.households provide firms with labor, land, and capital. c.firms provide households with output. d.firms provide households with profit

c.firms provide households with output.

In the markets for goods and services in the circular-flow diagram, a.households and firms are both buyers. b.households and firms are both sellers. c.households are buyers and firms are sellers. d.households are sellers and firms are buyers.

c.households are buyers and firms are sellers.

In the circular-flow diagram, a.factors of production flow from government to firms. b.goods and services flow from households to firms. c.income paid to the factors of production flows from firms to households. d.spending on goods and services flows from firms to households.

c.income paid to the factors of production flows from firms to households.

In the circular-flow diagram, in the markets for a.goods and services, households and firms are both sellers. b.goods and services, households are sellers and firms are buyers. c.the factors of production, households are sellers and firms are buyers. d.the factors of production, households and firms are both buyers.

c.the factors of production, households are sellers and firms are buyers.

A circular-flow diagram is a model that a.helps to explain how participants in the economy interact with one another. b.helps to explain how the economy is organized. c.incorporates all aspects of the real economy. d.Both (a) and (b) are correct.

d.Both (a) and (b) are correct.

q

d.households and firms