Ch. 2 & 3 Quiz

The principle of comparative advantage does not provide answers to certain questions. One of those questions is

How are the gains from trade shared among the parties to a trade?

Consider two individuals — Marquis and Serena — each of whom would like to wear sweaters and eat tasty food. The gains from trade between Marquis and Serena are most obvious in which of the following cases?

Marquis's skills are such that he can produce only sweaters, and Serena's skills are such that she can produce only tasty food.

Which of the following trade-offs does the production possibilities frontier illustrate?

Once an economy has reached the efficient points on its production possibilities frontier, the only way of getting more of one good is to get less of the other

Unemployment would cause an economy to

produce inside its production possibilities frontier.

Economists believe that production possibilities frontiers are often bowed because

resources are not completely adaptable

When economists are trying to explain the world, they are

scientists

In the circular-flow diagram,

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

Any point on a country's production possibilities frontier represents a combination of two goods that an economy

can produce using all available resources and technology.

Sometimes economists disagree because their scientific judgments differ. Which of the following instances best reflects this source of disagreement?

One economist believes the government should tax a household's income; another economist believes the government should tax a household's consumption.

One way to characterize the difference between positive statements and normative statements is as follows:

Positive statements offer descriptions of the way things are, whereas normative statements offer opinions on how things ought to be.

Which of the following statements best captures the relationship between microeconomics and macroeconomics?

When economists are trying to explain the world, they are

The gains from trade are

a result of more efficient resource allocation than would be observed in the absence of trade.

Trade can make everybody better off because it

allows people to specialize according to comparative advantage.

The circular-flow diagram is an example of

an economic model

The production possibilities frontier is a graph that shows the various combinations of output that an economy

can produce

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

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

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

households and firms

A person can benefit from specialization and trade by obtaining a good at a price that is

lower than his or her opportunity cost of that good.

One thing economists do to help them understand how the real world works is

make assumptions

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

microeconomics and macroeconomics.

When economists are trying to help improve the world, they are

policy advisers

The bowed shape of the production possibilities frontier can be explained by the fact that

the opportunity cost of one good in terms of the other depends on how much of each good the economy is producing.

If labor in Mexico is less productive than labor in the United States in all areas of production,

then both Mexico and the United States still can benefit from trade

If an economy is producing efficiently, then

there is no way to produce more of one good without producing less of another good.

Because it is difficult for economists to use experiments to generate data, they generally must

use whatever data the world gives them.