ECON 2123 Midterm Practice (CH. 1)

A production possibilities frontier shifts outward when: a. at least one of the basic principles of economics is violated. b. the desires of the economy's citizens change. c. opportunity costs are lessened. d. the economy experiences economic growth.

Which of the following statements about economic models is correct? a. Because economic models omit many details, they allow us to see what is truly important. b. Economic models seldom incorporate equations or diagrams. c. Economic models are built to mirror reality exactly. d. Economic models are useful, but they should not be used for the purpose of improving public policies.

An economic outcome is said to be efficient if the economy is a. using all of the scarce resources it has available. b. conserving on resources, rather than using all available resources. c. able to produce more than what is currently being produced without additional resources. d. getting all it can get from the scarce resources it has available.

Which of the following concepts cannot be illustrated by the production possibilities frontier? a. equality b. trade-offs c. efficiency d. opportunity cost

On a bowed production possibilities frontier, as you move down along the curve a. more of one good must be given up to receive one unit of the other good. b. the opportunity cost increases. c. All of the above are correct. d. the available production technology does not change.

Which of the following is an example of a normative, as opposed to positive, statement? a. Gasoline prices ought to be lower than they are now. b. The federal government should raise taxes on wealthy people. c. The social security system is a good system and it deserves to be preserved as it is. d. All of the above are normative statements.

Normative statements are a. backward-looking, whereas positive statements are forward-looking. b. descriptive, whereas positive statements are prescriptive. c. forward-looking, whereas positive statements are backward-looking. d. prescriptive, whereas positive statements are descriptive.

Which of the following statements is correct about the roles of economists? a. In trying to explain the world, economists are policy advisers; in trying to improve the world, they are scientists. b. In trying to explain the world, economists are scientists; in trying to improve the world, they are policy advisers. c. Economists are best viewed as policy advisers. d. Economists are best viewed as scientists.

The production possibilities frontier illustrates a. the trade-off between efficiency and equality. b. the combination of output that an economy should produce. c. the combination of output that each member of society should consume. d. None of the above is correct.

When economists are trying to help improve the world, they are a. scientists. b. in the realm of macroeconomics rather than microeconomics. c. in the realm of positive economics rather than normative economics. d. policy advisers.

When economists are trying to explain the world, they are a. scientists. b. in the realm of normative economics rather than positive economics. c. policy advisers. d. in the realm of microeconomics rather than macroeconomics.

Economic models a. are usually composed of diagrams and equations. b. are usually plastic representations of the economy. c. are not useful because they omit many real-world details. d. are useful because they do not omit any real-world details.

In a certain economy, jam and bread are produced, and the economy currently operates on its production possibilities frontier. Which of the following events would allow the economy to produce more jam and more bread, relative to the quantities of those goods that are being produced now? a. Unemployed labor is put to work producing jam and bread. b. The economy puts its idle capital to work producing jam and bread. c. The economy experiences economic growth. d. All of the above are correct.

An economic outcome is said to be efficient if the economy is a. conserving on resources, rather than using all available resources. b. using all of the scarce resources it has available. c. getting all it can get from the scarce resources it has available. d. able to produce more than what is currently being produced without additional resources.

The opportunity cost of obtaining more of one good is shown on the production possibilities frontier as the a. number of dollars that must be spent to produce it. b. amount of resources that must be devoted to its production. c. market price of the additional amount produced. d. amount of the other good that must be given up.

The production possibilities frontier provides an illustration of the principle that a. people respond to incentives. b. governments can sometimes improve market outcomes. c. people face trade-offs. d. trade can make everyone better off.

Which of the following is a correct statement about production possibilities frontiers? a. An economy can produce only on the production possibilities frontier. b. An economy can produce at any point on or inside the production possibilities frontier, but not outside the frontier. c. An economy can produce at any point inside or outside a production possibilities frontier. d. An economy can produce at any point inside the production possibilities frontier, but not on or outside the frontier.

An assumption an economist might make while studying international trade is a. All of the above are possible assumptions. b. there are only two countries. c. technology does not change. d. countries only produce two goods.

Which of the following is an example of a positive, as opposed to normative, statement? a. Prices rise when the government prints too much money. b. When public policies are evaluated, the benefits to the economy of improved equality should be considered more important than the costs of reduced efficiency. c. Inflation is more harmful to the economy than unemployment is. d. If welfare payments increase, the world will be a better place.

Which of the following is an example of a normative, as opposed to positive, statement? a. The elimination of trade restrictions would increase an economy's standard of living. b. Reducing tax rates on the wealthy would benefit the nation. c. If the price of a product decreases, people's willingness to buy that product will increase. d. If the national saving rate were to increase, so would the rate of economic growth.

Positive statements are a. claims about how the world is. b. made by economists speaking as policy advisers. c. prescriptive. d. claims about how the world should be.

"Prices rise when the quantity of money rises rapidly" is an example of a a. negative economic statement. b. positive economic statement. c. normative economic statement. d. statement that contradicts one of the basic principles of economics.

The bowed shape of the production possibilities frontier can be explained by the fact that a. economic growth is always occurring. b. the opportunity cost of one good in terms of the other depends on how much of each good the economy is producing. c. all resources are scarce. d. the only way to get more of one good is to get less of the other.

Normative statements are a. prescriptive, whereas positive statements are descriptive. b. backward-looking, whereas positive statements are forward-looking. c. descriptive, whereas positive statements are prescriptive. d. forward-looking, whereas positive statements are backward-looking.

An economic outcome is said to be efficient if the economy is a. getting all it can get from the scarce resources it has available. b. using all of the scarce resources it has available. c. able to produce more than what is currently being produced without additional resources. d. conserving on resources, rather than using all available resources.

In a certain economy, toys and greeting cards are produced, and the economy currently operates on its production possibilities frontier. Which of the following events would allow the economy to produce more toys and more greeting cards, relative to the quantities of those goods that are being produced now? a. The economy experiences economic growth. b. There is a technological advance in the toy industry, but the greeting card industry experiences no such advance. c. There is a technological advance in the greeting card industry, but the toy industry experiences no such advance. d. All of the above are correct.