Question 1

Which of the following best describes the two main roles economists play?

Accepted Answer

Scientists: try to explain the world; Policy advisors: try to improve it

Question 2

In the circular-flow diagram, which of the following is true about the flow of dollars between households and firms?

Accepted Answer

Households pay firms for goods and services and receive income for factors of production

Question 3

Suppose a country can produce either 5,000 tons of soybeans or 100 airplanes. What is the opportunity cost of producing one airplane?

Accepted Answer

$\frac{5,000}{100} = 50$ tons of soybeans

Question 4

Which point on a Production Possibilities Frontier (PPF) represents an inefficient use of resources?

Accepted Answer

A point inside the PPF

Question 5

If the PPF for an economy is bowed outward, what does this indicate?

Accepted Answer

Increasing opportunity cost

Question 6

Which of the following statements is a positive statement?

Accepted Answer

Prices rise when the government increases the quantity of money.

Question 7

What is the slope of the PPF interpreted as?

Accepted Answer

The opportunity cost of one good in terms of the other

Question 8

If economic growth occurs due to improved technology, what happens to the PPF?

Accepted Answer

It shifts outward

Question 9

Which of the following is NOT a reason why economists might disagree on policy advice?

Accepted Answer

All economists use the same models and assumptions

Question 10

In the circular-flow diagram, who are the sellers in the market for factors of production?

Accepted Answer

Households

Question 11

Which of the following best describes microeconomics?

Accepted Answer

The study of how households and firms make decisions and interact in markets

Question 12

If a country moves from point B (20 airplanes, 4,000 tons of soybeans) to point C (50 airplanes, 2,500 tons of soybeans) on its PPF, what is the opportunity cost of producing the additional 30 airplanes?

Accepted Answer

$4,000 - 2,500 = 1,500$ tons of soybeans

Question 13

Which of the following is a normative statement?

Accepted Answer

The government should raise the minimum wage.

Question 14

Why do economists use models?

Accepted Answer

To simplify reality and focus on what is truly important

Question 15

Which of the following would cause the PPF to shift outward?

Accepted Answer

An improvement in production technology

Question 16

If the opportunity cost of producing mountain bikes increases as more are produced, what does this imply about the shape of the PPF?

Accepted Answer

It is bowed outward

Question 17

Which of the following is NOT a function of the Council of Economic Advisers?

Accepted Answer

Sets monetary policy

Question 18

What is the main difference between positive and normative statements?

Accepted Answer

Positive statements can be tested with evidence; normative statements are value judgments

Question 19

If a point lies above the PPF, what does this indicate?

Accepted Answer

The production combination is not possible given current resources and technology

Question 20

Which of the following best explains why the PPF might be bowed outward?

Accepted Answer

Different workers have different skills and opportunity costs

Thinking Like an Economist: Chapter 2 Study Notes

Study Guide - Practice Questions

Study Guide - Flashcards