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; firms pay households for factors of production

Question 3

Suppose a country can produce either 5,000 tons of soybeans or 100 airplanes, or any combination in between. What is the opportunity cost of producing one airplane if the PPF is a straight line?

Accepted Answer

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

Question 4

Which of the following points 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 about opportunity costs?

Accepted Answer

Opportunity costs are increasing

Question 6

Which of the following statements is a positive statement?

Accepted Answer

"Minimum-wage laws cause unemployment."

Question 7

What is the main reason economists use models?

Accepted Answer

To simplify reality and focus on what is truly important

Question 8

If an economy 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 30 more airplanes?

Accepted Answer

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

Question 9

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

Accepted Answer

An improvement in production technology

Question 10

Which of the following best distinguishes microeconomics from macroeconomics?

Accepted Answer

Microeconomics studies how households and firms make decisions; macroeconomics studies inflation, unemployment, and economic growth

Question 11

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

Accepted Answer

Households

Question 12

Why might economists disagree on policy recommendations?

Accepted Answer

They may have different scientific judgments and different values

Question 13

If the opportunity cost of producing 1 airplane is 50 tons of soybeans, what is the opportunity cost of producing 1 ton of soybeans?

Accepted Answer

$$\frac{1}{50}$$ airplanes

Question 14

Which of the following is NOT a reason the PPF might be bowed outward?

Accepted Answer

All resources are perfectly adaptable to all uses

Question 15

Which of the following government agencies is responsible for setting monetary policy in the United States?

Accepted Answer

The Federal Reserve

Question 16

A statement such as "A large federal budget deficit has an adverse effect on the economy" is considered:

Accepted Answer

A positive statement

Question 17

If a country is producing at a point inside its PPF, what does this imply about its resources?

Accepted Answer

Some resources are underutilized

Question 18

Which of the following is an example of a normative statement?

Accepted Answer

"The government should print less money."

Question 19

If the president receives advice from economists but chooses not to follow it, what is a likely reason based on the study materials?

Accepted Answer

Other advisers and political constraints influence the decision

Question 20

Which of the following best describes the slope of the PPF?

Accepted Answer

The opportunity cost of one good in terms of the other

Thinking Like an Economist: Principles of Microeconomics Chapter 2 Study Notes

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