Quiz 528

Related: Economics, Microeconomics

145 Questions

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Quiz 528

True / False

1. Economists try to address their subject with a scientist’s objectivity.

a. True
b. False

2. Economists devise theories, collect data, and then analyze these data in an attempt to verify or
refute their theories.
a. True
b. False

3. The scientific method is the dispassionate development and testing of theories about how the
world works.
a. True
b. False

4. The scientific method can be applied to the study of economics.

a. True
b. False

5. While the scientific method is applicable to studying natural sciences, it is not applicable to
studying a nation’s economy.
a. True
b. False

6. For economists, conducting experiments is often difficult and sometimes impossible.

a. True
b. False
7. Economists usually have to make do with whatever data the world happens to give them.
a. True
b. False

8. It is difficult for economists to make observations and develop theories, but it is easy for
economists to run experiments to generate data to test their theories.
a. True
b. False

9. Since economists cannot use natural experiments offered by history, they must use carefully
constructed laboratory experiments instead.
a. True
b. False

10. Historical episodes are not valuable to economists.

a. True
b. False

11. Historical episodes allow economists to illustrate and evaluate current economic theories.
a. True
b. False

12. Good assumptions simplify a problem without substantially affecting the answer.
a. True
b. False

13. Assumptions can simplify the complex world and make it easier to understand.
a. True
b. False

14. Economists often find it worthwhile to make assumptions that do not necessarily describe the
real world.
a. True
b. False

15. Economists use one standard set of assumptions to answer all economic questions.
a. True
b. False

16. Economic models are most often composed of diagrams and equations.
a. True
b. False

17. Economic models omit many details to allow us to see what is truly important.
a. True
b. False
18. Economic models can help us understand reality only when they include all details of the
economy.
a. True
b. False

19. An economic model can accurately explain how the economy is organized because it is
designed to include, to the extent possible, all features of the real world.
a. True
b. False

20. All scientific models, including economic models, simplify reality in order to improve our
understanding of it.
a. True
b. False

21. The circular-flow diagram explains, in general terms, how the economy is organized and how
participants in the economy interact with one another.
a. True
b. False

22. A circular-flow diagram is a visual model of the economy.

a. True
b. False

23. The circular flow model is not used anymore because it fails to perfectly replicate real world
situations.
a. True
b. False

24. In the circular-flow diagram, households and firms are the decision makers.
a. True
b. False

25. In the circular-flow diagram, firms produce goods and services using the factors of
production.
a. True
b. False

26. In the circular-flow diagram, factors of production are the goods and services produced by
firms.
a. True
b. False

27. In the circular-flow diagram, factors of production include land, labor, and capital.
a. True
b. False
28. In the circular-flow diagram, firms own the factors of production and use them to produce
goods and services.
a. True
b. False

29. In the circular-flow diagram, firms consume all the goods and services that they produce.
a. True
b. False

30. In the circular-flow diagram, the two types of markets in which households and firms interact
are the markets for goods and services and the markets for factors of production.
a. True
b. False

31. In the markets for goods and services in the circular-flow diagram, households are buyers
and firms are sellers.
a. True
b. False

32. In the markets for the factors of production in the circular-flow diagram, households are
buyers and firms are sellers.
a. True
b. False

33. In the circular-flow diagram, one loop represents the flow of goods, services, and factors of
production, and the other loop represents the corresponding flow of dollars.
a. True
b. False

34. In the circular-flow diagram, one loop represents the flow of goods and services, and the
other loop represents the flow of factors of production.
a. True
b. False

35. In the circular-flow diagram, payments for labor, land, and capital flow from firms to
households through the markets for the factors of production.
a. True
b. False

36. The production possibilities frontier is a graph that shows the various combinations of
outputs that the economy can possibly produce given the available factors of production and the
available production technology.
a. True
b. False

Figure 2-14
37. Refer to Figure 2-14. If this economy uses all its resources in the dishwasher industry, it
produces 35 dishwashers and no doghouses.
a. True
b. False

38. Refer to Figure 2-14. It is possible for this economy to produce 75 doghouses.
a. True
b. False

39. Refer to Figure 2-14. It is possible for this economy to produce 30 doghouses and 20
dishwashers.
a. True
b. False

40. Refer to Figure 2-14. It is possible for this economy to produce 45 doghouses and 30
dishwashers.
a. True
b. False

41. Refer to Figure 2-14. When this economy produces 30 doghouses and 25 dishwashers there
is full employment.
a. True
b. False

42. Refer to Figure 2-14. This economy fully employs its resources when it produces 35
dishwashers and zero doghouses.
a. True
b. False

43. Refer to Figure 2-14. Given the technology available for manufacturing doghouses and
dishwashers, this economy does not have enough of the factors of production to support the level
of output represented by point C.
a. True
b. False

44. Refer to Figure 2-14. Points A, B, and D represent feasible outcomes for this economy.
a. True
b. False

45. Refer to Figure 2-14. Points B and C represent infeasible outcomes for this economy.
a. True
b. False

46. Refer to Figure 2-14. Points A, B, and D represent efficient outcomes for this economy.
a. True
b. False
47. Refer to Figure 2-14. Point B represents an inefficient outcome for this economy.
a. True
b. False

48. Refer to Figure 2-14. Unemployment could cause this economy to produce at point B.
a. True
b. False

49. Refer to Figure 2-14. The opportunity cost of moving from point A to point D is 10
dishwashers.
a. True
b. False

50. Refer to Figure 2-14. The opportunity cost of moving from point B to point D is 15
doghouses.
a. True
b. False

51. Refer to Figure 2-14. The opportunity cost of moving from point B to point A is zero.
a. True
b. False

52. Refer to Figure 2-14. The opportunity cost of an additional doghouse increases as more
doghouses are produced.
a. True
b. False

Figure 2-17

53. Refer to Figure 2-17. Point B represents an inefficient outcome for this economy.
a. True
b. False

54. Refer to Figure 2-17. The opportunity cost of moving from point A to point B is zero.
a. True
b. False

55. Refer to Figure 2-17. The opportunity cost of producing an additional pair of shoes increases
as more shoes are produced.
a. True
b. False

56. Refer to Figure 2-17. This economy fully employs its resources when it produces 4000 shoes
and zero t-shirts.
a. True
b. False
57. Refer to Figure 2-17. It is possible for this economy to produce 1000 shoes.
a. True
b. False

58. With the resources it has, an economy can produce at any point on or outside the production
possibilities frontier, but it cannot produce at points inside the frontier.
a. True
b. False

59. Points inside the production possibilities frontier represent feasible levels of production.
a. True
b. False

60. Points inside the production possibilities frontier represent inefficient levels of production.
a. True
b. False

61. Points on the production possibilities frontier represent efficient levels of production.
a. True
b. False

62. Points outside the production possibilities frontier represent infeasible levels of production.
a. True
b. False

63. If a major union goes on strike, then the country would be operating inside its production
possibilities frontier.
a. True
b. False

64. An outcome is said to be efficient if an economy is getting all it can from the scarce
resources it has available.
a. True
b. False

65. An outcome is said to be efficient if an economy is conserving the largest possible quantity
of its scarce resources while still meeting the basic needs of society.
a. True
b. False

66. A production point is said to be efficient if there is no way for the economy to produce more
of one good without producing less of another.
a. True
b. False
67. If an economy can produce more of one good without giving up any of another good, then
the economy’s current production point is inefficient.
a. True
b. False

68. Unemployment causes production levels to be inefficient.

a. True
b. False

69. The opportunity cost of something is what you give up to get it.
a. True
b. False

70. The production possibilities frontier shows the opportunity cost of one good as measured in
terms of the other good.
a. True
b. False

71. When a production possibilities frontier is bowed outward, the opportunity cost of one good
in terms of the other is constant.
a. True
b. False

72. When a production possibilities frontier is bowed outward, the opportunity cost of one good
in terms of the other depends on how much of each good is being produced.
a. True
b. False

73. When a production possibilities frontier is bowed outward, the opportunity cost of the first
good in terms of the second good increases as more of the second good is produced.
a. True
b. False

74. When a production possibilities frontier is bowed outward, the opportunity cost of the second
good in terms of the first good increases as more of the second good is produced.
a. True
b. False

75. A production possibilities frontier has a bowed shape if the opportunity cost is constant at all
levels of output.
a. True
b. False

76. Economists believe that production possibilities frontiers rarely have a bowed shape.
a. True
b. False
77. A production possibilities frontier will be bowed outward if some of the economy’s resources
are better suited to producing one good than another.
a. True
b. False

78. The trade-off between the production of one good and the production of another good can
change over time because of technological advances.
a. True
b. False

79. A technological advance in the production of the first good increases the opportunity cost of
the first good in terms of the second good.
a. True
b. False

80. While the production possibilities frontier is a useful model, it cannot be used to illustrate
economic growth.
a. True
b. False

81. Economic growth causes a production possibilities frontier to shift outward.

a. True
b. False

82. If new government regulations designed to protect wetlands remove very productive
farmland from production, then the production possibilities frontier will shift inward.
a. True
b. False

83. Production possibilities frontiers can be used to illustrate scarcity, trade-offs, opportunity
cost, efficiency, unemployment, technological advances, and economic growth.
a. True
b. False

84. Microeconomics is the study of how households and firms make decisions and how they
interact in specific markets.
a. True
b. False

85. Macroeconomics is the study of economy-wide phenomena.

a. True
b. False

86. The effects of borrowing by the federal government would be studied by a microeconomist
rather than a macroeconomist.
a. True
b. False

87. The effects of foreign competition on the U.S. textile industry would be studied by a
microeconomist rather than a macroeconomist.
a. True
b. False

88. A macroeconomist, rather than a microeconomist, would study the effects on a market from
two firms merging.
a. True
b. False

89. Microeconomics and macroeconomics are closely intertwined.

a. True
b. False

90. When economists are trying to explain the world, they are scientists, and when they are
trying to help improve the world, they are policy advisers.
a. True
b. False

91. Economists acting as scientists make positive statements, while economists acting as policy
advisers make normative statements.
a. True
b. False

92. Normative statements describe how the world is, while positive statements prescribe how the
world should be.
a. True
b. False

93. Positive statements are descriptive, while normative statements are prescriptive.
a. True
b. False

94. Positive statements can be evaluated using data alone, but normative statements cannot.
a. True
b. False

95. Evaluating normative statements involves values as well as facts.

a. True
b. False

96. "Society would be better off if the welfare system were abolished" is a normative statement,
not a positive statement.
a. True
b. False

97. "Other things equal, an increase in supply causes a decrease in price" is a normative
statement, not a positive statement.
a. True
b. False

98. "Minimum wage laws result in unemployment” is a normative statement, while “the
minimum wage should be higher” is a positive statement.
a. True
b. False

99. “The US should not restrict employers from outsourcing work to foreign countries” is a
normative statement.
a. True
b. False

100. Trade-offs are involved in most policy decisions.

a. True
b. False

101. Since 1946, the president of the United States has received guidance from the Council of
Economic Advisers.
a. True
b. False

102. The Council of Economic Advisers consists of thirty members and a staff of several dozen
economists.
a. True
b. False

103. The duties of the Council of Economic Advisers are to advise the president of the United
States and to determine U.S. monetary policy.
a. True
b. False

104. The Council of Economic Advisers’ Economic Report of the President discusses recent
developments in the economy and presents the council’s analysis of current policy issues.
a. True
b. False

105. The President counts among his economic advisors the Congressional Budget Office.
a. True
b. False
106. Economists at the U.S. Department of the Treasury help design U.S. coins and paper
money.
a. True
b. False

107. Economists at the U.S. Department of Justice help enforce the nation’s antitrust laws.
a. True
b. False

108. Economists work both inside and outside the administrative branch of the U.S. government.
a. True
b. False

109. The Congressional Budget Office, which is staffed by economists, provides Congress with
independent evaluations of policy proposals.
a. True
b. False

110. There is only one explanation for why economists give conflicting advice on policy issues,
and it is that they have different values about what policy should try to accomplish.
a. True
b. False

111. Economists may disagree about the validity of alternative positive theories about how the
world works.
a. True
b. False

112. Different values are not a reason for disagreement among economists.
a. True
b. False

113. In surveys of professional economists, fourteen propositions were endorsed by an

overwhelming majority of respondents.
a. True
b. False

114. Because almost all economists oppose policies that restrict trade among nations,
policymakers do not restrict imports of certain goods.
a. True
b. False

115. According to John Maynard Keynes, an economist must possess a rare combination of skills
including being a mathematician, historian, statesman, and philosopher.
a. True
b. False
116. In economics, graphs serve two purposes: they offer a way to visually express ideas, and
they provide a way of finding and interpreting patterns when analyzing economic data.
a. True
b. False

117. Examples of graphs of a single variable include pie charts, bar graphs, and time-series
graphs.
a. True
b. False

118. A pie chart is a way to display information regarding two variables.

a. True
b. False

119. In the ordered pair (10,30), 10 is the y-coordinate and 30 is the z-coordinate.
a. True
b. False

120. In the ordered pair (10,30), 10 is the horizontal location of the point and 30 is the vertical
location of the point.
a. True
b. False

121. Two variables that have a positive correlation move in the same direction.
a. True
b. False

122. Two variables that have a negative correlation move in opposite directions.
a. True
b. False

123. When two variables move in opposite directions, the curve relating them is upward sloping,
and we say the variables are positively related.
a. True
b. False

124. When two variables move in the same direction, the curve relating them is downward
sloping, and we say the variables are negatively related.
a. True
b. False

125. When a variable that is named on an axis of a graph changes, the curve shifts.
a. True
b. False
126. When a variable that is not named on either axis of a graph changes, we read the change as
a movement along the curve.
a. True
b. False

127. The concept of slope can be used to answer questions about how much one variable
responds to changes in another variable.
a. True
b. False

128. The slope of a line is equal to the change in the x-variable divided by the change in the y-
variable.
a. True
b. False

129. The slope of an upward-sloping line is positive, and the slope of a downward-sloping line is
negative.
a. True
b. False

130. The slope of a horizontal line is infinite, and the slope of a vertical line is zero.
a. True
b. False

131. The slope of a line is the ratio of the vertical distance covered to the horizontal distance
covered along the line.
a. True
b. False

132. If a line passes through the points (20,5) and (10,10), then the slope of the line is 1/2.
a. True
b. False

133. If a line passes through the points (20,5) and (10,10), then the slope of the line is -2.
a. True
b. False

134. Changes in one variable on a graph might be caused by the other variable on the graph or by
a third omitted variable.
a. True
b. False

135. Deciding that A causes B when in fact B causes A is a mistake called omitted variable bias.
a. True
b. False
136. The broken window fallacy states that when a window breaks and someone spends money
to repair it, they have created new economic activity that would not have otherwise taken place.
a. True
b. False

137. Which of the following explains why production rises in most years?
a. increases in the labor force
b. increases in the capital stock
c. advances in technological knowledge
d. All of the above are correct.

138. A relatively mild period of falling incomes and rising unemployment is called a(n)
a. depression.
b. recession.
c. expansion.
d. business cycle.

139. During a recession the economy experiences

a. rising employment and income.
b. rising employment and falling income.
c. rising income and falling employment.
d. falling employment and income.

140. During recessions

a. workers are laid off.
b. factories are idle.
c. firms may find they are unable to sell all they produce.
d. All of the above are correct.

141. Most economists use the aggregate demand and aggregate supply model primarily to
analyze
a. short-run fluctuations in the economy.
b. the effects of macroeconomic policy on the prices of individual goods.
c. the long-run effects of international trade policies.
d. productivity and economic growth.

142. Which of the following is not correct?

a. The model of aggregate demand and aggregate supply is used by most economists to analyze
short-run fluctuations.
b. During a recession firms cut back production and workers are laid off.
c. A recession is a period of declining real incomes and declining unemployment.
d. A depression is a severe recession.

143. During a recession, unemployment

a. increases.
b. decreases.
c. is equal to the natural rate of unemployment.
d. is frictional unemployment minus structural unemployment.

144. On average, over the last 50 years, real GDP has grown by about
a. 3 percent per year.
b. 2 percent per year.
c. 1 percent per year.
d. 4 percent per year.

145. In October 2009, the official unemployment rate rose to

a. 10%.
b. 8%.
c. 6%
d. 4%.