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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
