Exam 1: First Principles

Which of the following is an example of a normative statement? A.The rate of unemployment is 9%. B.A high rate of economic growth creates more jobs for the country. C.The federal government spends half of its budget on national defense. D.Everyone in America deserves to be covered by national health insurance.

Economists disagree more over normative economics than positive economics.

The models used in economics: A.are usually limited to variables that are directly related. B.are essentially not reliable because they are not testable in the real world. C.are of necessity unrealistic and not related to the real world. D.emphasize basic relationships by abstracting from complexities in the everyday world.

Of the following statements, which reflect(s) a normative view? I.The United States should increase the minimum wage to $10 per hour.II.There is a federal minimum wage in the United States.III.The federal minimum wage in the United States is less than $10 per hour. A.All are normative. B.None are normative C.Statements I and II reflect a normative view. D.Statement I reflects a normative view.

A statement that says that the minimum wage should be increased is a:

(Table: Comparative Advantage I) Look at the table Comparative Advantage I.Sweden has an absolute advantage in producing: A.cell phones only. B.herring only. C.both cell phones and herring. D.neither cell phones nor herring.

If a production possibility frontier is a straight line, it tells us that the opportunity cost of producing one more unit of good X: A.is an increasing amount of good Y. B.is a decreasing amount of good Y. C.is equal to the inverse of the amount of good Y. D.is a constant amount of good Y.

In Kessy's old kitchen, he could bake 10 cookies or mix 15 glasses of lemonade in one day.Now Kessy has a larger oven and refrigerator.How does this affect his production possibility frontier? A.It shifts out his production possibility frontier. B.It shifts in his production possibility C.frontier.He will not be efficient. D.He will not be able to produce as much as before.

Which of the following statements is true? A.Some very talented people have a comparative advantage in everything they do. B.Some very untalented people have a comparative advantage in nothing they do. C.Some very talented people have a very low opportunity cost in everything they do. D.It is possible to have an absolute disadvantage in doing something but still have a comparative advantage in the same thing.

If Brazil gives up 3 automobiles for each ton of coffee it produces, while Peru gives up 7 automobiles for each ton of coffee it produces, then: A.Brazil has a comparative advantage in automobile production and should specialize in coffee. B.Brazil has a comparative advantage in coffee production and should specialize in the production of automobiles. C.Brazil has a comparative advantage in coffee production and should specialize in coffee production. D.Brazil has a comparative advantage in automobile production and should specialize in automobile production.

"Many economists agree that income taxes should be increased for rich people" is a positive statement.

Economists are generally in support of: A.government restrictions on trade. B.free international trade. C.tariffs to restrict trade. D.subsidizing exports.

Free trade between countries: A.should be based on absolute advantage. B.will allow wealthy countries to exploit less developed C.nations.will shift the domestic production possibility frontier to the right. D.will allow for greater levels of consumption than without trade.

Figure: Production Possibility Frontier (Figure: Production Possibility Frontier) Look at the figure Production Possibilities Frontier.If the economy is producing 8 cars and 12 computers per period: A.this is an attainable choice but involves unemployment or inefficiency. B.the notion of increasing opportunity cost is invalidated. C.the economy is still efficient but has made a decision not to buy as much as it could. D.something must be done to reduce the amount of employment.

(Table: Production Possibilities Schedule II) Look at the table Production Possibilities Schedule II.If an economy is producing at alternative X, the opportunity cost to it of producing at Y is units of consumer goods per period. A.2 B.1 C.6 D.18

The production possibility frontier will shift outward for all of the following reasons except: A.an increase in the unemployment rate. B.an increase in the labor force. C.an improvement in technology. D.an increase in worker productivity.

(Table: Production of Good Z and Good X in Urbanville) Look at the table Production of Good Z and Good X in Urbanville.Suppose this represents the production possibility frontier and Urbanville is currently producing 15 of Z and 45 of X.This combination is: A.both allocatively and productively efficient. B.productively efficient. C.allocatively efficient. D.neither productively nor allocatively efficient.

Economists who are asked to choose between two different government policies may disagree because: A.they make the same value judgments about the desirability of the policies. B.they base their conclusions on models that make different assumptions. C.as a matter of course, economists often take opposing points of view so that all sides of a question may be discussed. D.economists are trained ignore facts and focus on th

Suppose the state of Oklahoma decides to produce only two goods, oil and football helmets.According to the production possibility frontier, as oil production increases, the production of football helmets will: A.increase. B.not change. C.decrease at a decreasing rate. D.decrease.

All points outside the production possibility frontier are: