Exam 2: Economic Models

Which of the following two statements is a positive statement? Which is a normative statement? I. The federal minimum wage in 2014 was $7.25 an hour. II. The minimum wage should be high enough that families will not live in poverty.

In the circular-flow diagram, the factor market is where:

Which of the following is a normative statement?

An economy is said to have a comparative advantage if it:

If an economy has to sacrifice only one unit of good X for each unit of good Y produced throughout the relevant range, then its production possibility frontier has:

Use the following to answer questions: -(Table: Production Possibilities Schedule II) Look at the table Production Possibilities Schedule II. The production of 14 units of consumer goods and 1 unit of capital goods per period would result in:

Use the following to answer questions : Figure: Sugar and Freight Trains -(Figure: Sugar and Freight Trains) Look at the figure Sugar and Freight Trains. Suppose the economy is operating at point C. The opportunity cost of producing the fourth freight train would be:

You are reading an editorial in your local newspaper. The editorial says: "The United States had a trade deficit of $18.4 billion in February 2008. This is a clear indication to our leaders that we must renegotiate our trade agreements with China to make them fairer for the American worker." What part of this editorial is positive and what part is normative?

Explain why economists believe that production possibility frontiers have a bowed-out curvature rather than a straight line.

Use the following to answer questions: Scenario: Linear Production Possibility Frontier Largetown has a linear production possibility frontier, and it produces socks and shirts with 80 hours of labor. The table shows the number of hours of labor necessary to produce one pair of socks or one shirt. -(Scenario: Linear Production Possibility Frontier) Look at the scenario Linear Production Possibility Frontier. If Largetown decides to devote half of its labor time to the production of socks and half of the time to the production of shirts, it can produce _____ shirts and _____ pairs of socks.

Use the following to answer questions : Figure: Guns and Butter -(Figure: Guns and Butter) Look at the figure Guns and Butter. Suppose the economy produced 8 guns and 12 pounds of butter per period.

Use the following to answer questions : -(Table: Wheat and Aluminum) Look at the table Wheat and Aluminum. The United States and Germany can produce both wheat and aluminum. The table shows, in tonnage, the maximum annual output combinations of wheat and aluminum that can be produced. Which of the following choices represents a possible trade based upon specialization and comparative advantage?

Explain how technological progress is a source of economic growth.

Mark and Julie are going to sell brownies and cookies for their third annual fundraiser bake sale. In one day, Mark can make 40 brownies or 20 cookies, and Julie can make 15 brownies or 15 cookies. What is Mark's opportunity cost to produce one brownie?

In 2000, financial experts announced that they:

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

Suppose Poland is producing on its production possibilities frontier, and it decides to increase the production of steel and decrease the production of vodka. The bowed-out production possibility frontier suggests that there will be a(n) _____ opportunity cost of producing more steel.

Economic models are:

An economy is said to have a comparative advantage in the production of a good if it can produce that good:

In one hour, the United States can produce 25 tons of steel or 250 automobiles. In one hour, Japan can produce 30 tons of steel or 275 automobiles. This information implies that: