Question

Consistent trade-off of one good for the other is displayed in what type of production possibility frontier?

a.	A bowed outward curve	b.	A straight upward sloping line
c.	A straight downward sloping line	d.	A bowed inward curve

Which of the following statements is false?

a.	Discussions of fairness are seen as part of normative economics.	b.	Normative economics offers value judgments about outcome.
c.	Normative economics extends beyond the question of fairness in the distribution of output.	d.	Most economists consider positive economics their primary area of expertise.

Which of the following statements is true?

a.	Economic theory should not be concerned with unintended consequences.	b.	Economic theories really can’t help us understand things that happened in the past.
c.	The art of economics consists of tracing the consequences of a policy only at one group at a time.	d.	The art of economics consists in looking at both immediate and longer effects of any act or policy.

Economic theories may be depicted by graphs.

a.	True	b.	False

Answer 1

1.Option A

The gains from specialization and trade are based on absolute advantage. When a production possibilities frontier is bowed outward, the opportunity cost of one good in terms of the other is constant. Choosing not to attend a concert so that you can study for your test is an example of a tradeoff.

2.Option D

Most economists look at what has happened and what is currently happening in a given economy to form their basis of predictions for the future.

3. Option D

Economic policies should consider the both immediate and long term effects. Economic recessions are often portrayed as short-term events. However, as a substantial body of economic literature shows, the consequences of high unemployment, falling incomes, and reduced economic activity can have lasting consequences. For example, job loss and falling incomes can force families to delay or forgo a college education for their children. Frozen credit markets and depressed consumer spending can stop the creation of otherwise vibrant small businesses

4.True

An economic model or theory is a hypothetical construct that embodies economic procedures using a set of variables in logical and/or quantitative correlations. It is a simplistic method using mathematical and other techniques created to show complicated processes. Law of demand can be presented graphically.