True/False
Indicate whether the statement is true or
false.
|
|
|
1.
|
The circular flow diagram is a visual model of how the government directs and
controls the economy of a nation.
|
|
|
2.
|
In the market for factors of production households buy factors of production and
firms sell factors of production.
|
|
|
3.
|
Macroeconomics is the study of economy-wide phenomena including inflation,
unemployment, and economic growth.
|
|
|
4.
|
A normative statement describes how the world ought to be.
|
|
|
5.
|
When economists try to predict the number of workers a firm will employ, they
are involved in macroeconomics.
|
Multiple Choice
Identify the choice that best completes the
statement or answers the question.
|
|
|
1.
|
Economists often substitute for laboratory experiments by using
a. | natural experiments offered by history. | b. | computer-generated
experiments and simulations. | c. | studies conducted by sociologists and other
behavioural scientists. | d. | All of the
above. |
|
|
|
2.
|
In the circular-flow diagram,
a. | households are sellers in the resource market and the product
market. | b. | firms are buyers in the product market. | c. | households are
sellers in the resource market. | d. | firms are sellers in the resource
market. |
|
|
|
3.
|
If an economy is producing efficiently
a. | in order to produce more of one good, less of another good can be
produced. | b. | more of both goods can be produced. | c. | it is possible to produce more of one good
without producing less of the other. | d. | more of a good cannot be
produced. |
|
|
|
4.
|
You know an economist has crossed the line from scientist to policy adviser when
he or she
a. | explains just the facts. | b. | makes positive statements. | c. | can't reach a
conclusion. | d. | makes normative statements. |
|
|
|
5.
|
Almost all economists agree that rent control programs
a. | improve the availability and quality of rental accommodation. | b. | increase the
efficiency of the housing market. | c. | reduce the availability and quality of rental
housing. | d. | is a very inexpensive way to help the most needy members of
society. |
|
|
|
6.
|
Which statement best illustrates the concept of positive economics?
a. | When the money supply grows at a faster rate, the average price level will
rise. | b. | A system of wage subsidies should be used to reduce poverty. | c. | The economy should
grow at a faster rate. | d. | The rate of inflation should be
lowered. |
|
|
|
7.
|
An economic model is
a. | designed to be as confusing as possible | b. | better the more
complex it is | c. | designed to simplify reality | d. | a device that economists use to ensure that the
general public does not understand basic economic issues |
|
|
|
8.
|
Microeconomics is the study of
a. | how households and firms make decisions and how they interact in the
market | b. | economy-wide phenomena | c. | inflation, unemployment, and economic
growth | d. | the impact of government actions on the economy |
|
|
|
9.
|
A production possibilities frontier shows
a. | the prices at which alternative goods will be produced | b. | the input
combinations that allow a country to produce a given amount of output | c. | the tax revenue a
government receives at various tax rates | d. | the various combinations of two goods a country
can produce given the available factors of production and the available production
technology |
|
|
|
10.
|
Which of the following would be of concern to a microeconomist?
a. | The nation’s unemployment rate is higher today than in the
past. | b. | The unemployment rate is higher in Canada than in Mexico. | c. | The rate of economic
growth will increase in the future. | d. | Import restrictions on sugar will raise the
price of sugar. |
|
|
|
11.
|
The curved shape of the production possibilities frontier can be explained
by
a. | the fact that some resources are better suited for some types of production than are
other resources | b. | constant cost production | c. | scarcity | d. | economic
growth |
|
|
|
12.
|
Economists may disagree
a. | because there are no fads in economics | b. | because they have no differences in
values | c. | because there can be differences in scientific
judgements | d. | because perceptions of reality are always
correct |
|
|
|
13.
|
Positive economics deals exclusively with statements that
a. | favourably describe a situation | b. | pertain to facts | c. | describe the
past | d. | are always true |
|
|
|
14.
|
According to the text the use of assumptions
a. | is unique to economics | b. | can make the world easier to
understand | c. | is a good way to shift the blame to someone else | d. | makes all economic
predictions irrelevant |
|
|
|
15.
|
Which of the following is not part of the scientific method?
a. | developing theories | b. | gathering data | c. | determining whether
the theories are consistent with the data | d. | prescribing appropriate government
policy |
|
Short Answer
|
|
|
1.
|
Answer the following questions based on the information below for the economy of
a country in a given year. All figures are in millions.
Combinations
(points) | Computers
(per year) | Grain
(tonnes per year) | A | 16 | 0 | B | 14 | 4 | C | 12 | 7 | D | 9 | 10 | E | 5 | 12 | F | 0 | 13 | | | |
a. If this
economy is producing at point C what is the opportunity cost of moving to point B?
b. Suppose
this economy is currently producing 5 million computers and 10 million tonnes of grain, would this be
efficient?
|
|
|
2.
|
What is the slope of a line?
|
|
|
3.
|
Use the data below to answer the questions that follow:
a. Calculate the
slope for every change in the Y and X variables.
b. What type of relationship is there
between these two variables?
|
|
|
4.
|
What is an economic model?
|
|
|
5.
|
What is the circular flow diagram?
|