Macroeconomics #2

A simplified representation that is used to study a real situation is called:

A model

7. If the production possibility frontier is a straight line, which of the following is true?

A) Opportunity costs are constant.

15. "Steel tariffs will prevent job losses in the steel industry" is a positive statement.

A) True

14. If the United States is more productive than Mexico in all lines of production, then the United States cannot benefit from trade with Mexico.

B) False

17. If they spend all night writing computer programs, Laurence can write 10 programs while Carrie Anne can write 5. If they spend all night making sunglasses, Laurence can make 6 while Carrie Anne can make 4. Given this information and supposing Laurence and Carrie Anne have constant opportunity costs, we know that:

B) Laurence has an absolute advantage in both programs and sunglasses.

10. Dr. Colgate is a dentist who employs an assistant, Ms. Crest. If Dr. Colgate worked all day at the front desk, she could answer 40 phone calls. If she worked all day with patients, she could clean the teeth of 40 patients. If Ms. Crest worked all day at the front desk, she could answer 60 phone calls. If she worked all day with patients, she could clean the teeth of 20 patients. Which of the following is true?

B) Ms. Crest has a comparative advantage in answering phones.

The opportunity cost of production:

B) is what you give up to produce the good.

19. Efficient production exists when the economy is:

B) operating on its production possibility frontier.

11. Assume that Colombia gives up three motorcycles for each ton of coffee it produces, while Bolivia gives up seven motorcycles for each ton of coffee it produces.

C) Colombia has a comparative advantage in coffee production and should specialize in coffee production.

13. Which of the following is an example of a positive statement?

C) The federal government pays for 46% of U.S. health care costs.

8. Assume an economy is operating on its production possibility frontier, which shows the production of military and civilian goods. If the output of military goods is increased, the output of civilian goods:

C) must decrease.

18. Technological improvements will:

C) shift the production possibility frontier outward.

12. The two flows represented in the circular-flow diagram are:

C) the flow of money and the flow of goods and services.

16. Of the following statements, which reflect(s) a normative view? I. The United States should increase the minimum wage to $10 per hour. II. There is a federal minimum wage in the United States. III. The federal minimum wage in the United States is less than $10 per hour.

D) Statement I reflects a normative view.

20. The slope of a typical production possibility frontier is:

D) negative.

9. As long as people have different ________, everyone has a comparative advantage in something.

D) opportunity costs

the models used in economics:

emphasize basic relationships by abstracting from complexities in the everyday world.

The importance of an economic model is that is allows us to:

focus on the affects of only one change at a time.

The facts that a society's production possibility frontier is bowed out pr concave to the origin of a graph demonstrates the law of:

increasing opportunity cost.

Consider a production possibility frontier for Iraq. If in 2014 Iraq's resources are not being fully utilied, Iraq will be somewhere____ of its production possibility frontier

inside