Thinking Like An Economist Part V

Figure 2-3 147. Refer to Figure 2-3. At which point is this economy producing its maximum possible quantity of tubas? a. J b. L c. M d. N ANS: D 148. Refer to Figure 2-3. This economy has the ability to produce at which point(s)? a. J, K, M, N b. K, M, N c. K, N d. M ANS: B 149. Refer to Figure 2-3. This economy cannot produce at which point(s)? a. J b. J, L c. J, L, M d. L ANS: B 150. Refer to Figure 2-3. Efficient production is represented by which point(s)? a. J, K, N b. K, M, N c. K, N d. L, M ANS: C 151. Refer to Figure 2-3. Inefficient production is represented by which point(s)? a. J, L b. J, L, M c. K, N d. M ANS: D 152. Refer to Figure 2-3. Unemployment could cause this economy to produce at which point(s)? a. J, L b. J, L, M c. K, N d. M ANS: D Figure 2-10 200. Refer to Figure 2-10. Which of the following events would explain the shift of the production possibilities frontier from A to B? a. The economy’s citizens developed an enhanced taste for batteries. b. The economy experienced a technological advance in the production of batteries. c. More capital became available in the economy. d. More labor became available in the economy. ANS: B 201. Refer to Figure 2-10. The shift of the production possibilities frontier from A to B illustrates a. simultaneous technological advances in the battery and bagel industries. b. a reallocation of resources away from the production of bagels and toward the production of batteries. c. economic growth. d. All of the above are correct. ANS: C Figure 2-11 202. Refer to Figure 2-11. Which of the following would most likely have caused the production possibilities frontier to shift outward from A to B? a. a decrease in unemployment b. a technological advance in the consumer goods industries c. a general technological advance d. an increase in the availability of capital-producing resources ANS: C 203. Refer to Figure 2-11. The shift of the production possibilities frontier from A to B can best be described as a. a downturn in the economy. b. economic growth. c. an enhancement of equality. d. an improvement in the allocation of resources. ANS: B 204. The field of economics is traditionally divided into two broad subfields, a. national economics and international economics. b. consumer economics and producer economics. c. private sector economics and public sector economics. d. microeconomics and macroeconomics. ANS: D 205. Microeconomics is the study of a. how money affects the economy. b. how individual households and firms make decisions. c. how government affects the economy. d. how the economy as a whole works. ANS: B 206. Macroeconomics is the study of a. individual decision makers. b. international trade. c. economy-wide phenomena. d. markets for large products. ANS: C 207. A microeconomist — as opposed to a macroeconomist — might study a. the effect of borrowing by the federal government on the inflation rate. b. the effect of rising oil prices on employment in the airline industry. c. changes in the nation’s unemployment rate over short periods of time. d. alternative policies to promote higher living standards throughout the nation. ANS: B 208. Which of the following areas of study typifies microeconomics as opposed to macroeconomics? a. the impact of minimum-wage laws on employment in the fast food industry b. the effect of changes in household saving rates on the growth rate of national income c. the impact of faster money growth on the rate of inflation d. a comparison of alternative tax policies and their respective impacts on the rate of the nation’s economic growth ANS: A 209. Which of the following would likely be studied by a microeconomist rather than a macroeconomist? a. the effect of foreign direct investment on economic growth b. the effect of a sales tax on the cigarette industry c. the effect of an investment tax credit on the economy’s capital stock d. the effect of a war on government spending ANS: B 210. A macroeconomist — as opposed to a microeconomist — might study a. the effect of agricultural price support programs on the cotton industry b. the effect on U.S. steel producers of an import quota imposed on foreign steel c. the effect of an increasing inflation rate on national living standards d. the effect of an increase in the price of imported coffee beans on the U.S. coffee industry ANS: C 211. Which of the following areas of study typifies macroeconomics as opposed to microeconomics? a. the effects of rent control on the availability of housing in New York City b. the economic impact of tornadoes on cities and towns in Oklahoma c. how tariffs on shoes affects the shoe industry d. the effect on the economy of changes in the nation’s unemployment rate ANS: D 212. Which of the following would likely be studied by a macroeconomist rather than a microeconomist? a. the effect of an increase in the cigarette tax on smokers b. the effect of foreign competition on the domestic textile industry c. the effect of a war on automobile prices d. the effect of an increase in the minimum wage on an economy’s overall rate of unemployment ANS: D 213. Which of the following statements best captures the relationship between microeconomics and macroeconomics? a. For the most part, microeconomists are unconcerned with macroeconomics, and macroeconomists are unconcerned with microeconomics. b. Microeconomists study markets for small products, whereas macroeconomists study markets for large products. c. Microeconomics and macroeconomics are distinct from one another, yet they are closely related. d. Microeconomics is oriented toward policy studies, whereas macroeconomics is oriented toward theoretical studies. ANS: C Sec02 - Thinking Like an Economist - The Economist as Policy Adviser MULTIPLE CHOICE 1. When economists are trying to explain the world, they are a. scientists. b. c. d. policy advisers. in the realm of microeconomics rather than macroeconomics. in the realm of normative economics rather than positive economics. ANS: A 2. When economists are trying to help improve the world, they are a. in the realm of positive economics rather than normative economics. b. in the realm of macroeconomics rather than microeconomics. c. scientists. d. policy advisers. ANS: D 3. Which of the following statements is correct about the roles of economists? a. Economists are best viewed as policy advisers. b. Economists are best viewed as scientists. c. In trying to explain the world, economists are policy advisers; in trying to improve the world, they are scientists. d. In trying to explain the world, economists are scientists; in trying to improve the world, they are policy advisers. ANS: D 4. For economists, statements about the world are of two types: a. assumptions and theories. b. true statements and false statements. c. specific statements and general statements. d. positive statements and normative statements. ANS: D 5. Normative statements are a. prescriptive, whereas positive statements are descriptive. b. descriptive, whereas positive statements are prescriptive. c. backward-looking, whereas positive statements are forward-looking. d. forward-looking, whereas positive statements are backward-looking. ANS: A 6. Positive statements are a. prescriptive. b. claims about how the world should be. c. claims about how the world is. d. made by economists speaking as policy advisers. ANS: C 7. Normative statements are a. descriptive. b. claims about how the world should be. c. claims about how the world is. d. made by economists speaking as scientists. ANS: B 8. Positive statements are not a. descriptive. b. prescriptive. c. claims about how the world is. d. made by economists speaking as scientists. ANS: B 9. Normative statements are not a. descriptive. b. prescriptive. c. claims about how the world should be. d. made by economists speaking as policy advisers. ANS: A 10. One way to characterize the difference between positive statements and normative statements is as follows: a. Positive statements tend to reflect optimism about the economy and its future, whereas normative statements tend to reflect pessimism about the economy and its future. b. Positive statements offer descriptions of the way things are, whereas normative statements offer opinions on how things ought to be. c. Positive statements involve advice on policy matters, whereas normative statements are supported by scientific theory and observation. d. Economists outside of government tend to make normative statements, whereas government-employed economists tend to make positive statements. ANS: B 11. Economists view positive statements as a. affirmative, justifying existing economic policy. b. optimistic, putting the best possible interpretation on things. c. descriptive, making a claim about how the world is. d. prescriptive, making a claim about how the world ought to be. ANS: C 12. Economists view normative statements as a. prescriptive, making a claim about how the world ought to be. b. descriptive, making a claim about how the world is. c. statements about the normal condition of the world. d. pessimistic, putting the worst possible interpretation on things. ANS: A 13. Economists speaking like scientists make a. normative statements. b. prescriptive statements. c. claims about how the world is. d. claims about how the world should be. ANS: C 14. Economists speaking like policy advisers make a. positive statements. b. descriptive statements. c. claims about how the world is. d. claims about how the world should be. ANS: D 15. Economists speaking like scientists make a. positive statements. b. prescriptive statements. c. claims about how the world should be. d. More than one of the above is correct. ANS: A 16. Economists speaking like policy advisers make a. claims about how the world is. b. descriptive statements. c. normative statements. d. More than one of the above is correct. ANS: C 17. When economists make positive statements, they are a. speaking as scientists. b. speaking as policy advisers. c. making claims about how the world should be. d. revealing that they are very conservative in their views of how the world works. ANS: A 18. When economists make normative statements, they are a. speaking as scientists. b. speaking as policy advisers. c. making claims about how the world is. d. revealing that they are very liberal in their views of how the world works. ANS: B 19. When economists make a. positive statements, they are speaking not as policy advisers but as scientists. b. positive statements, they are speaking not as scientists but as forecasters. c. normative statements, they are speaking not as scientists but as policy advisers. d. normative statements, they are speaking not as policy advisers but as model-builders. ANS: A 20. When economists make a. positive statements, they are speaking not as scientists but as policy advisers. b. positive statements, they are speaking not as scientists but as forecasters. c. normative statements, they are speaking not as scientists but as policy advisers. d. normative statements, they are speaking not as policy advisers but as model-builders. ANS: C 21. You know an economist has crossed the line from policy adviser to scientist when he or she a. claims that the problem at hand is widely misunderstood by non-economists. b. makes positive statements. c. talks about values. d. makes a claim about how the world should be. ANS: B 22. You know an economist has crossed the line from scientist to policy adviser when he or she a. claims that the problem at hand is widely misunderstood by non-economists. b. talks about the evidence. c. makes normative statements. d. makes a claim about how the world is. ANS: C 23. A positive economic statement such as Pollution taxes decrease the quantity of pollution generated by firms= a. would likely be made by an economist acting as a policy advisor. b. would require values and data in order to be evaluated. c. would require data but not values in order to be evaluated. d. could not be evaluated by economists acting as scientists. ANS: C 24. A normative economic statement such as The minimum wage should be abolished= a. would likely be made by an economist acting as a scientist. b. would require values and data in order to be evaluated. c. would require data but not values in order to be evaluated. d. could not be evaluated by economists acting as policy advisers. ANS: B 25. In principle, we can a. ignore positive statements when choosing among various public policy alternatives. b. ignore normative statements when choosing among various public policy alternatives. c. confirm or refute positive statements by examining evidence. d. confirm or refute normative statements by examining evidence. ANS: C 26. Which of the following is not correct? a. Evaluating statements about how the world should be involves values as well as facts. b. Positive statements can, in principle, be confirmed or refuted by examining evidence. c. Normative statements can be judged using data alone. d. Deciding what is good or bad policy is not just a matter of science. ANS: C 27. When an economist evaluates a positive statement, he or she is primarily a. examining evidence. b. evaluating values as well as facts. c. acting as a policy adviser. d. concerned with making a sound decision on how the world ought to be. ANS: A 28. Normative conclusions a. come from positive analysis alone. b. are based on ignorance of positive analysis. c. involve value judgments. d. reflect the economist’s role as scientist. ANS: C 29. Which of the following is an example of a positive, as opposed to normative, statement? a. Inflation is more harmful to the economy than unemployment is. b. If welfare payments increase, the world will be a better place. c. Prices rise when the government prints too much money. d. When public policies are evaluated, the benefits to the economy of improved equality should be considered more important than the costs of reduced efficiency. ANS: C 30. Which of the following is an example of a positive, as opposed to normative, statement? a. Income tax rates should not have been cut as they were a few years ago. b. The quantity of money has grown too slowly in recent years. c. When the quantity of money grows rapidly, inflation is a predictable consequence. d. All of the above are positive statements. ANS: C 31. Prices rise when the quantity of money rises rapidly= is an example of a a. negative economic statement. b. positive economic statement. c. normative economic statement. d. statement that contradicts one of the basic principles of economics. ANS: B 32. Which of the following is not an example of a positive, as opposed to normative, statement? a. Higher gasoline prices will reduce gasoline consumption. b. Equality is more important than efficiency. c. Trade restrictions lower our standard of living. d. If a nation wants to avoid inflation, it will restrict the growth rate of the quantity of money. ANS: B