Chapter 2
Thinking Like an Economists
TRUE OR FALSE
1.
Economists devise theories, collect data, and then analyze these data in an attempt to
verify or refute their theories. (T)
2.
While
the
scientific
method
is
applicable
to
studying
natural
sciences,
it
is
not
applicable to studying a nation鈥檚 economy. (F)
3.
It is difficult for economists to make observations and develop theories, but it is easy
for economists to run experiments to generate data to test their theories. (F)
4.
Good assumptions simplify a problem without substantially affecting the answer. (T)
5.
Assumptions can simplify the complex world and make it easier to understand. (T)
6.
Economic models omit many details to allow us to see what is truly important. (T)
7.
The circular-flow diagram explains, in general terms, how the economy is organized
and how participants in the economy interact with one another. (T)
8.
In the circular-flow diagram, households and firms are the decision makers. (T)
9.
In the circular-flow diagram, factors of production are the goods and services produced
by firms. (F)
10.
In
the
circular-flow
diagram,
firms
own
the
factors
of
production
and
use
them
to
produce goods and services. (F)
11.
In the circular-flow diagram, one loop represents the flow of goods and services, and
the other loop represents the flow of factors of production. (F)
12.
The production possibilities frontier is a graph that shows the various combinations of
outputs that the economy can possibly produce given the available factors of production
and the available production technology. (T)
13. Refer to Figure 2-1,
if this economy uses all its resources in the dishwasher industry,
it produces 35 dishwashers and no doghouses. (T)
Figure 2-1
14. Refer to Figure 2-1,
it is possible for this economy to produce 75 doghouses. (F)
15. Refer to Figure 2-1,
it is possible for this economy to produce 30 doghouses and 20
dishwashers. (T)
16. Refer to Figure 2-1,
it is possible for this economy to produce 45 doghouses and 30
dishwashers. (F)
17. Refer to Figure 2-1,
unemployment could cause this economy to produce at point B.
(T)
18. Refer to Figure 2-1,
the opportunity cost of moving from point A to point D is 10
dishwashers. (T)