Chapter 2

an economic model is

• a. a mechanical machine that replicates thefunctioning of the economy

• b. a fully detailed, realistic description of theeconomy

• c. a simplified representation of some aspect of theeconomy

• d. a computer program that predicts the future ofthe economy

the circular-flow diagram illustrates that, in marketsfor the factors of production,

• a. households are sellers, and firms are buyers.

• b. households are buyers, and firms are sellers.

• c. households and firms are both buyers.

• d. households and firms are both sellers.

a point inside the production possibilities frontier is

• a. efficient but not feasible.

• b. feasible but not efficient.

• c. both efficient and feasible.

• d. neither efficient nor feasible.

all of the following topics fall within the study ofmicroeconomics EXCEPT

• a. the impact of cigarette taxes on the smokingbehavior of teenagers.

• b. the role of microsoft’s market power in the pricingof software.

• c. the effectiveness of antipoverty programs inreducing homelessness.

• d. the influence of the government budget deficit oneconomic growth.

which of the following is a positive, rather than anormative, statement?

• a. law X will reduce national income.

• b. law X is a good piece of legislation.

• c. congress ought to pass law X.

• d. the president should veto law X.

the following parts of government regularly rely onthe advice of economists:

• a. department of treasury.

• b. office of management and budget.

• c. department of Justice.

• d. all of the above.

economists may disagree because they havedifferent

• a. hunches about the validity of alternativetheories.

• b. judgments about the size of key parameters.

• c. political philosophies about the goals of publicpolicy

• d. all of the above

most economists believe that tariffs are

• a. a good way to promote domestic economicgrowth.

• b. a poor way to raise general economic well-being

• c. an often necessary response to foreign competition

• d. an efficient way for the government to raiserevenue.