Deck 2: Thinking Like an Economist

Question 1

Historical episodes allow economists to illustrate and evaluate economic theories of the present.

Answer 1

True

Question 2

Economic models are most often composed of diagrams and equations.

Answer 2

True

Question 3

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

Answer 3

True

Question 4

Since economists cannot use natural experiments offered by history,they must use carefully constructed laboratory experiments instead.

Question 5

Economists often find it worthwhile to make assumptions that do not necessarily describe the real world.

Question 6

Economists usually have to make do with whatever data the world happens to give them.

Question 7

All scientific models,including economic models,simplify reality in order to improve our understanding of it.

Question 8

Assumptions can simplify the complex world and make it easier to understand.

Question 9

Economists devise theories,collect data,and then analyze these data in an attempt to verify or refute their theories.

Question 10

Good assumptions simplify a problem without substantially affecting the answer.

Question 11

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

Question 12

The scientific method is the dispassionate development and testing of theories about how the world works.

Question 13

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.

Question 14

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

Question 15

Historical episodes are not valuable to economists.

Question 16

Economic models can help us understand reality only when they include all details of the economy.

Question 17

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.

Question 18

Economists use one standard set of assumptions to answer all economic questions.

Question 19

Economic models omit many details to allow us to see what is truly important.

Question 20

While the scientific method is applicable to studying natural sciences,it is not applicable to studying a nation's economy.

Question 21

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.

Question 22

In the markets for goods and services in the circular-flow diagram,households are buyers and firms are sellers.

Question 23

In the circular-flow diagram,households and firms are the decision makers.

Question 24

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

Question 25

In the circular-flow diagram,factors of production include land,labor,and capital.

Question 26

In the circular-flow diagram,firms consume all the goods and services that they produce.

Question 27

Figure 2-14

-Refer to Figure 2-14.It is possible for this economy to produce 45 doghouses and 30 dishwashers.

Question 28

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

Question 29

In the circular-flow diagram,factors of production are the goods and services produced by firms.

Question 30

In the circular-flow diagram,firms produce goods and services using the factors of production.

Question 31

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.

Question 32

Figure 2-14

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

Question 33

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

Question 34

In the circular-flow diagram,firms own the factors of production and use them to produce goods and services.

Question 35

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.

Question 36

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

Question 37

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.

Question 38

Figure 2-14

-Refer to Figure 2-14.It is possible for this economy to produce 30 doghouses and 20 dishwashers.

Question 39

Figure 2-14

-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.

Question 40

Figure 2-14

-Refer to Figure 2-14.It is possible for this economy to produce 75 doghouses.

Question 41

Figure 2-14

-Refer to Figure 2-14.Unemployment could cause this economy to produce at point B.

Question 42

Figure 2-14

-Refer to Figure 2-14.The opportunity cost of moving from point A to point D is 10 dishwashers.

Question 43

Points outside the production possibilities frontier represent infeasible levels of production.

Question 44

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

Question 45

Points inside the production possibilities frontier represent feasible levels of production.

Question 46

The opportunity cost of something is what you give up to get it.

Question 47

Points on the production possibilities frontier represent efficient levels of production.

Question 48

Figure 2-14

-Refer to Figure 2-14.Point B represents an inefficient outcome for this economy.

Question 49

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.

Question 50

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.

Question 51

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.

Question 52

Points inside the production possibilities frontier represent inefficient levels of production.

Question 53

Figure 2-14

-Refer to Figure 2-14.Points A,B,and D represent efficient outcomes for this economy.

Question 54

Figure 2-14

-Refer to Figure 2-14.Points A,B,and D represent feasible outcomes for this economy.

Question 55

Figure 2-14

-Refer to Figure 2-14.The opportunity cost of moving from point B to point D is 15 doghouses.

Question 56

Unemployment causes production levels to be inefficient.

Question 57

Figure 2-14

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

Question 58

Figure 2-14

-Refer to Figure 2-14.Points B and C represent infeasible outcomes for this economy.

Question 59

Figure 2-14

-Refer to Figure 2-14.The opportunity cost of moving from point B to point A is zero.

Question 60

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.

Question 61

A technological advance in the production of the first good increases the opportunity cost of the first good in terms of the second good.

Question 62

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

Question 63

Economists believe that production possibilities frontiers rarely have a bowed shape.

Question 64

Economic growth causes a production possibilities frontier to shift outward.

Question 65

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

Question 66

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

Question 67

When a production possibilities frontier is bowed outward,the opportunity cost of the first good in terms of the second good is higher when the economy is producing much of the second good and little of the first good than it is when the economy is producing little of the second good and much of the first good.

Question 68

When a production possibilities frontier is bowed outward,the opportunity cost of the second good in terms of the first good is higher when the economy is producing much of the second good and little of the first good than it is when the economy is producing little of the second good and much of the first good.

Question 69

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.

Question 70

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.

Question 71

Macroeconomics is the study of economywide phenomena.

Question 72

The production possibilities frontier shows the opportunity cost of one good as measured in terms of the other good.

Question 73

Microeconomics and macroeconomics are closely intertwined.

Question 74

A production possibilities frontier will be bowed outward if some of the economy's resources are better suited to producing one good than another.

Question 75

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

Question 76

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

Question 77

Microeconomics is the study of how households and firms make decisions and how they interact in specific markets.

Question 78

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

Question 79

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.

Question 80

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