Exam 2: Economic Models: Trade-Offs and Trade

Economic models that make unrealistic assumptions may be useful in analyzing some economic problems.

In building models, economists avoid making any assumptions that might leave out any aspect of reality.

Which statement is positive? Which statement is normative? I. The federal minimum wage in 2016 was $7.25 an hour. II) The minimum wage should be high enough that families will not live in poverty.

Use the following to answer questions: \\ -(Figure: Strawberries and Submarines II) Use Figure: Strawberries and Submarines II. Suppose the economy is operating at point B. Achieving production at point F would require that the economy:

Absolute advantage is the basis for gains from trade.

An apple is a resource sold in the factor market.

The fact that two variables always move together over time:

Which statement is TRUE?

An economic model is a simplified version of reality that is used to analyze real-world economic situations.

Use the following to answer questions: \\ -(Table: Production Possibilities Schedule II) Use Table: Production Possibilities Schedule II. If the economy is producing at alternative X, the opportunity cost of producing at Y instead of X is _____ units of consumer goods per period.

Use the following to answer questions: \\ -(Table: Trade-off of Study Time and Leisure Time) Use Table: Trade-off of Study Time and Leisure Time. A student sleeps 8 hours per day and divides the remaining time between study and leisure time. The table shows the combinations of study and leisure time that can be produced in the 16 waking hours of each day. Suppose this student is studying 4 hours and spending 10 hours doing leisure activities. This point is:

Technological improvements will:

Which statement is TRUE?

"The current unemployment rate of 9% is too high" is a _____ statement.

Economists generally believe that a country should specialize in the production of a good or service if the:

Labor and capital are the only two factors of production.

If they spend all night writing computer programs, Laurence can write 10 programs, and Carrie Anne can write 5. If they spend all night making sunglasses, Laurence can make 6 pairs, and Carrie Anne can make 4. Given this information and supposing Laurence and Carrie Anne have constant opportunity costs, we know that _____ has an absolute advantage in _____.

On any given production possibility frontier, we see the minimum quantity of one good that can be produced for any given production of the other.

In the factor market, households buy goods and services.

Use the following to answer questions: \\ -(Figure: Production Possibility Frontier) Use Figure: Production Possibilities Frontier. The combination of cars and computers at point H: