Introduction

Which of the following does positive economics NOT rely on?

• Facts

• data

• observable phenomena

• opinions

Why do many think of normative economics as subjective?

• It is based on opinions.

• It is based on econometric models.

• It can be biased based on the author's interpretation of the data.

• It changes with shifts in econometric variables.

Which of the following is a normative statement?

• Taxes should be higher.

• Lower taxes would result in lower revenues.

• A 2% increase in foreign investment is associated with a 0.5% rise in economic growth.

• Lower taxes would result in a 12% increase in spending.

In economics, scarcity means that:

• There are not enough resources to go around.

• The world is rapidly running out of resources.

• There is a finite amount of resources.

• Resources will never run out.

Which of the following best describes the difference between microeconomics and macroeconomics?

• Microeconomics is about efficiency; Macroeconomics is about equity

• Microeconomics is about how much total output there is in an economy; Macroeconomics is about how much individual firms produce.

• Microeconomics is about individuals, households, and firms; Macroeconomics is about economies as a whole

• Microeconomics is about normative analysis; Macroeconomics is about positive analysis

What is necessary for the effective functioning of a market system?

• prohibitions on transferring ownership

• weak enforcement of ownership claims

• well-defined system of property rights

• central control of resources of production

• centrally coordinated prices

Which of the following are characteristics of a scarce resource?

• There is a fixed quantity of the resource available but no demand for it.

• The resource has unlimited supply and limited demand.

• The supply of the resource exceeds the demand of the resource.

• There is limited supply of a resource with no demand for that resource.

• There is a demand for that resource with limited supply.

When a firm decides on the right mix of capital and labor to use, which of the three basic economic questions does it answer?

• When to produce goods and services?

• How to produce goods and services?

• Where to produce goods and services?

• To whom do these goods and services go?

• What to produce?

What are the four categories of resources?

• Machines, technology, minerals, and energy resources

• Land resources, labor, capital goods, and entrepreneurship

• Forest, minerals, ocean, and energy resources

• Information technology, physical capital, financial capital, and high skilled workers

Two agents with identical resources can each make the same two goods: baseball trophies and racing medals.

Which of the following best captures the idea of absolute advantage for these two agents?

• One agent has higher opportunity costs of one good, and the other agent has higher opportunity costs of the other good.

• An agent is able to produce more of a good or service than another economic agent given the same resources.

• One agent is able to sell its goods at for a higher price than the other.

• Both agents have identical opportunity costs. (Choice E)E

• One economic agent has a lower opportunity cost of one good, and another economic agent has a lower opportunity cost of a different good.