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MICROECONOMICS - Chapter 2
[أسئلة مراجعة مجهود شخصي - MICROECONOMICS]
MICROECONOMICS (Chapter 2)

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1) Economists, like mathematicians, physicists, and biologists,

make use of the scientific method.

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

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

All of the above are correct.

2) The essence of science is

the laboratory experiment.

the scientific method.

the study of nature, but not the study of society.

All of the above are correct.

3) The essence of science is

the laboratory experiment.

the scientific method.

the study of nature, but not the study of society.

All of the above are correct.

4) The scientific method is applicable to studying

natural sciences, but not social sciences.

social sciences, but not natural sciences.

both natural sciences and social sciences.

None of the above is correct.

5) The goal of an economist who formulates new theories is to

provide an interesting framework of analysis, whether or not the framework turns out to be of much use in understanding how the world works.

provoke stimulating debate in scientific journals.

contribute to an understanding of how the world works.

demonstrate that economists, like other scientists, can formulate testable theories.

6) One thing economists do to help them understand how the real world works is

make assumptions.

ignore the past.

try to capture every aspect of the real world in the models they construct.

All of the above are correct.

7) Economists make assumptions in order to

mimic the methodologies employed by other scientists.

minimize the number of experiments that yield no useful data.

minimize the likelihood that some aspect of the problem at hand is being overlooked.

focus their thinking on the essence of the problem at hand.

8) For an economist, the idea of making assumptions is regarded generally as a

bad idea, since doing so leads to the omission of important ideas and variables from economic models.

bad idea, since doing so invariably leads to data-collection problems.

good idea, since doing so helps to simplify the complex world and make it easier to understand.

good idea, since economic analysis without assumptions leads to complicated results that the general public finds hard to understand.

9) Economists make assumptions to

provide issues for political discussion.

make a complex world easier to understand.

make it easier to teach economic concepts and analysis.

create policy alternatives that are incomplete or subject to criticism.

10) An economic theory about international trade that is based on the assumption that there are only two countries trading two goods

is useless, since the real world has many countries trading many goods.

can be useful only in situations involving two countries and two goods.

can be useful in the classroom, but is useless in the real world.

can be useful in helping economists understand the complex world of international trade involving many countries and many goods.

11) A model can be accurately described as a

theoretical abstraction with very little value.

device that is useful only to the people who created it.

realistic and carefully constructed theory.

simplification of reality.

12) In building economic models, economists often omit

assumptions.

theories.

details.

equations.

13) Economic models

are not useful because they omit many real-world details.

are usually composed of diagrams and equations.

are useful because they do not omit any real-world details.

are usually plastic representations of the economy.

14) Economic models are built with

recommendations concerning public policies.

facts about the legal system.

assumptions.

statistical forecasts.

15) The circular-flow diagram is an example of

a laboratory experiment.

an economic model.

a mathematical model.

All of the above are correct.

16) The circular-flow diagram is a

visual model of the economy.

visual model of the relationships among money, prices, and businesses.

model that shows the effects of government on the economy.

mathematical model of how the economy works.

17) The circular-flow diagram

is an economic model.

incorporates two types of decision makers: households and firms.

represents the flows of inputs, outputs, and dollars.

All of the above are correct.

18) Which of the following statements about the circular-flow diagram is correct?

One must imagine that the economy operates without money in order to make sense of the diagram.

The diagram leaves out details that are not essential for understanding the economic transactions that occur between households and firms.

The government cannot be excluded as a decision maker in a circular-flow diagram.

All of the above are correct.

19) In the simple circular-flow diagram, the participants in the economy are

firms and government.

households and firms.

households and government.

households, firms, and government.

20) Which two groups of decision makers are included in the simple circular-flow diagram?

markets and government

households and government

firms and government

households and firms

21) In the circular-flow diagram, firms produce

goods and services using factors of production.

output using inputs.

factors of production using goods and services.

Both (a) and (b) are correct.

22) Factors of production are

the mathematical calculations firms make in determining their optimal production levels.

social and political conditions that affect production.

the physical relationships between economic inputs and outputs.

inputs into the production process.

23) Factors of production are

used to produce goods and services.

also called output.

abundant in most economies.

assumed to be owned by firms in the circular-flow diagram.

24) In the circular-flow diagram, which of the following is not a factor of production?

labor

land

capital

money

25) In the circular-flow diagram,

firms own the factors of production.

the factors of production are labor, land, and capital.

the factors of production are also called "output."

All of the above are correct.

26) Which of these terms are used interchangeably?

"goods and services" and "inputs"

"goods and services" and "factors of production"

"inputs" and "factors of production"

"land, labor, and capital" and "goods and services"

27) Another term for factors of production is

inputs.

output.

goods.

services.

28) In economics, capital refers to

the finances necessary for firms to produce their products.

buildings and machines used in the production process.

the money households use to purchase firms' output.

stocks and bonds.

29) In the simple circular-flow diagram, households

are the only decision makers.

own the factors of production.

are buyers of inputs.

consume only some of the goods and services that firms produce.

30) In the simple circular-flow diagram,

households own the factors of production.

households buy all the goods and services that firms produce.

land, labor, and capital flow from households to firms.

All of the above are correct.

31) In the simple circular-flow diagram, who consumes the goods and services that firms produce?

households only

firms only

both households and firms

neither households nor firms

32) In the circular-flow diagram, another name for goods and services produced by firms is

factors of production.

output.

inputs.

resources.

33) Which markets are represented in the simple circular-flow diagram?

markets for goods and services and markets for financial assets

markets for factors of production and markets for financial assets

markets for goods and services and markets for factors of production

markets for goods and services and markets for imports and exports

34) In the markets for goods and services in the circular-flow diagram,

households and firms are both buyers.

households and firms are both sellers.

households are buyers and firms are sellers.

households are sellers and firms are buyers.

35) In the circular-flow diagram, in the markets for

goods and services, households and firms are both sellers.

goods and services, households are buyers and firms are sellers.

the factors of production, households are buyers and firms are sellers.

the factors of production, households and firms are both buyers.

36) In the circular-flow diagram, in the markets for

goods and services, households and firms are both sellers.

goods and services, households are sellers and firms are buyers.

the factors of production, households are sellers and firms are buyers.

the factors of production, households and firms are both buyers.

37) In the markets for the factors of production in the circular-flow diagram,

households are sellers and firms are buyers.

households are buyers and firms are sellers.

households and firms are both buyers.

households and firms are both sellers.

38) Which of the following transactions does not take place in the markets for factors of production in the circular-flow diagram?

a landowner leases land to a farmer

a farmer hires a teenager to help with harvest

a construction company rents trucks for its business

a woman buys corn for dinner

39) In the circular-flow diagram,

firms are buyers in the markets for goods and services.

households are sellers in the markets for the factors of production.

firms are sellers in the markets for factors of production and in the markets for goods and services.

dollars that are spent on goods and services flow directly from firms to households.

40) In the circular-flow diagram,

factors of production flow from government to firms.

goods and services flow from households to firms.

income paid to the factors of production flows from firms to households.

spending on goods and services flows from firms to households.

41) In the circular-flow diagram, which of the following items does not flow from households to firms?

revenue

land, labor, and capital

factors of production

profit

42) In the circular-flow diagram, which of the following items flows from firms to households through the markets for goods and services?

goods and services

dollars paid to land, labor, and capital

dollars spent on goods and services

wages, rent, and profit

43) The production possibilities frontier is a graph that shows the various combinations of output that an economy can possibly produce given the available factors of production and

society's preferences.

the available production technology.

a fair distribution of the output.

the available demand for the output.

44) The production possibilities frontier is a graph that shows the various combinations of output that an economy

should produce.

wants to produce.

can produce.

demands.

45) Any point on a country's production possibilities frontier represents a combination of two goods that an economy

will never be able to produce.

can produce using all available resources and technology.

can produce using some portion, but not all, of its resources and technology.

may be able to produce in the future with more resources and/or superior technology.

46) Which of the following is a correct statement about production possibilities frontiers?

An economy can produce only on the production possibilities frontier.

An economy can produce at any point inside or outside a production possibilities frontier.

An economy can produce at any point on or inside the production possibilities frontier, but not outside the frontier.

An economy can produce at any point inside the production possibilities frontier, but not on or outside the frontier.

47) Where can an economy not produce?

inside its production possibilities frontier

on its production possibilities frontier

outside its production possibilities frontier

at the endpoints of its production possibilities frontier

48) An economic outcome is said to be efficient if the economy is

using all of the scarce resources it has available.

conserving on resources, rather than using all available resources.

getting all it can get from the scarce resources it has available.

able to produce more than what is currently being produced without additional resources.

49) Production is efficient if the economy is producing at a point

on the production possibilities frontier.

outside the production possibilities frontier.

on or inside the production possibilities frontier.

inside the production possibilities frontier.

50) If an economy is producing efficiently, then

there is no way to produce more of one good without producing less of another good.

it is possible to produce more of both goods without increasing the quantities of inputs that are being used.

it is possible to produce more of one good without producing less of another good.

it is not possible to produce more of any good at any cost.

51) An economy's production of two goods is efficient if

all members of society consume equal portions of the goods.

the goods are produced using only some of society’s available resources.

it is impossible to produce more of one good without producing less of the other.

the opportunity cost of producing more of one good is zero.

52) The field of economics is traditionally divided into two broad subfields,

national economics and international economics.

consumer economics and producer economics.

private sector economics and public sector economics.

microeconomics and macroeconomics.

53) Microeconomics is the study of

how money affects the economy.

how individual households and firms make decisions.

how government affects the economy.

how the economy as a whole works.

54) Macroeconomics is the study of

individual decision makers.

international trade.

economy-wide phenomena.

markets for large products.

55) Which of the following areas of study typifies microeconomics as opposed to macroeconomics?

the impact of minimum-wage laws on employment in the fast food industry

the effect of changes in household saving rates on the growth rate of national income

the impact of faster money growth on the rate of inflation

a comparison of alternative tax policies and their respective impacts on the rate of the nation’s economic growth

56) Which of the following would likely be studied by a microeconomist rather than a macroeconomist?

the effect of foreign direct investment on economic growth

the effect of a sales tax on the cigarette industry

the effect of an investment tax credit on the economy’s capital stock

the effect of a war on government spending

57) For economists, statements about the world are of two types:

assumptions and theories.

true statements and false statements.

specific statements and general statements.

positive statements and normative statements.

58) Normative statements are

prescriptive, whereas positive statements are descriptive.

descriptive, whereas positive statements are prescriptive.

backward-looking, whereas positive statements are forward-looking.

forward-looking, whereas positive statements are backward-looking.

59) Positive statements are

prescriptive.

claims about how the world should be.

claims about how the world is.

made by economists speaking as policy advisers.

60) Normative statements are

descriptive.

claims about how the world should be.

claims about how the world is.

made by economists speaking as scientists.

61) Positive statements are not

descriptive.

prescriptive.

claims about how the world is.

made by economists speaking as scientists.

62) Normative statements are not

descriptive.

prescriptive.

claims about how the world should be.

made by economists speaking as policy advisers.

63) A statement describing how the world is

is a normative statement.

is a positive statement.

would only be made by an economist speaking as a policy adviser.

would only be made by an economist employed by the government.

64) Equality means distributing society's resources in the most efficient manner.

True

False

65) With careful planning, we can usually get something that we like without having to give up something else that we like.

True

False

66) The classic tradeoff between "guns and butter" states that when a society spends more on national de-fense, it has less to spend on consumer goods to raise the standard of living.

True

False

67) Government policies that improve equality usually increase efficiency at the same time.

True

False

68) In the short-run, society faces a tradeoff between inflation and unemployment.

True

False

69) The business cycle refers to fluctuations in economic activity such as employment and production.

True

False

70) 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.

True

False

71) How does the study of economics depend upon the phenomenon of scarcity?

Because economics is the study of how society allocates its scarce resources, if there were no scarcity, there would be no need for economics. Everyone could have all the goods and services they wanted. No one would have to make decisions based on tradeoffs, because there would be no opportunity cost associated with the decision. (It is difficult to conceive of a situation where time is not scarce, however).

If there is a market failure, such as an externality or monopoly, government regulation might improve the well-being of society by promoting efficiency. If the distribution of income or wealth is considered to be unfair by society, government intervention might achieve a more equal distribution of economic well-being.

72) One tradeoff society faces is between efficiency and equality. Define each term. If a government redistrib-utes income from the rich to the poor, explain how this action affects equality as well as efficiency in the economy.

To lower inflation, the government may choose to reduce the money supply in the economy. When the money supply is reduced, prices don't adjust immediately. Lower spending, combined with prices that are too high, reduces sales and causes workers to be laid off. Hence, the lower price level is associated with higher unemployment.

Efficiency is the property of society getting the most it can from its scarce resources. Equality is defined as the property of distributing economic prosperity evenly among the members of society. Often, these two goals conflict. When the government redistributes income from the rich to the poor, it reduces the reward for working hard. Fewer goods and services are produced and the economic pie gets smaller. When the government tries to cut the economic pie into more equal slices, the pie gets smaller. Policies aimed at achieving a more equal distribution of economic well-being, such as the welfare system, try to help those members of society who are most in need. The individual income tax asks the financially successful to contribute more than others to support the government.

73) Define opportunity cost. What is the opportunity cost to you of attending college? What was your oppor-tunity cost of coming to class today?

Whatever must be given up to obtain some item it its opportunity cost. Basically, this would be a person's second choice. The opportunity cost of a person attending college is the value of the best alternative use of that person's time, as well as the additional costs the person incurs by making the choice to attend college. For most students this would be the income the student gives up by not working plus the cost of tuition and books, and any other costs they incur by attending college that they would not incur if they chose not to attend college. A student's opportunity cost of coming to class was the value of the best opportunity the student gave up. (For most students, that seems to be sleep.)

74) Under what conditions might government intervention in a market economy improve the economy’s perfor-mance?

75) Explain how an attempt by the government to lower inflation could cause unemployment to increase in the short-run.

To lower inflation, the government may choose to reduce the money supply in the economy, When the money supply is reduced, prices don't adjust immediately, Lower spending, combined with prices that are too high, reduces sales and causes workers to be laid off, Hence, the lower price level is associated with higher unemployment.

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

True

False

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

True

False

78) Unemployment causes production levels to be inefficient.

True

False

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

True

False

80) A production possibilities frontier has a bowed shape if the opportunity cost is constant at all levels of output.

True

False

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

True

False

82) "Minimum wage laws result in unemployment" is a normative statement, while "the minimum wage should be higher" is a positive statement.

True

False

83) Trade-offs are involved in most policy decisions.

True

False

84) 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.

True

False

85) According to John Maynard Keynes, an economist must possess a rare combination of skills includ-ing being a mathematician, historian, statesman, and philosopher.

True

False

86) When a variable that is not named on either axis of a graph changes, we read the change as a movement along the curve.

True

False

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

True

False

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

True

False

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

True

False

90) Historical episodes are not valuable to economists.

True

False

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

True

False

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

True

False

93) Economic models are most often composed of diagrams and equations.

True

False

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

True

False

95) 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.

True

False

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

True

False

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

True

False

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

True

False

99) The circular flow model is not used anymore because it fails to perfectly replicate real world situations.

True

False

100) 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.

True

False

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