Economics Quiz

Households and economies have each of the following in common EXCEPT both

• must allocate scarce resources.

• must have a central decisionmaker.

• face many decisions.

• must allocate the goods and services they produce.

A common thread between economics and other sciences such as physics is that

• both deal primarily with abstract concepts.

• a Ph.D. is required to truly understand any science.

• experiments are most often conducted in a lab.

• real-world observations often lead to theories.

In the circular-flow diagram,

• households are sellers in the resource market.

• spending on goods and services flows from firms to households.

• firms are sellers in the resource market and the product market.

• firms are buyers in the product market.

Good economic models

• cause economics to be misunderstood by the general public.

• often leave out important variables, causing serious errors.

• omit many details to allow us to see what is truly important.

• are designed to give a complete picture of a given relationship.

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

• specific statements and general statements.

• true statements and false statements.

• assumptions and theories.

• positive statements and normative statements.

Economists make assumptions

• to make certain that all necessary variables are included.

• because all scientists make assumptions.

• to diminish the chance of wrong answers.

• to make the world easier to understand.

Which of the following would NOT be considered a factor of production?

• land

• labor

• money

• capital

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

• private sector economics and public sector economics.

• consumer economics and producer economics.

• microeconomics and macroeconomics.

• national economics and international economics.

Which of the following is the most accurate statement about economic models?

• Economic models attempt to mirror reality exactly.

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

• Economic models cannot be used in the real world because they omit details.

• Economic models are useful, but should not be used for policymaking.

Which of the following is NOT true concerning models?

• Models simplify reality.

• Models cannot be used to make predictions.

• Models can explain how the economy is organized.

• Models assume away irrelevant details.