Multiple Choice Questions
1. An economic model is
a. A mechanical machine that replicates the functioning of the economy.
b. A fully detailed, realistic description of the economy.
c. A simplified representation of some aspect of the economy.
d. A computer program that predicts the future of the economy.
2. The circular-flow diagram illustrates that, in markets for the factors of production,
a. Households are sellers, and firms are buyers.
b. Households are buyers, and firms are sellers.
c. Households and firms are both buyers.
d. Households and firms are both sellers.
3. A point inside the production possibilities frontier is
a. Efficient, but not feasible.
b. Feasible, but not efficient.
c. Both efficient and feasible.
d. Neither efficient nor feasible.
4. An economy produces hot dogs and hamburgers. If a discovery of the remarkable health benefits of hot dogs were to change consumers' preferences, it would
a. Expand the production possibilities frontier.
b. Contract the production possibilities frontier.
c. Move the economy along the production possibilities frontier.
d. Move the economy inside the production possibilities frontier.
5. All of the following topics fall within the study of microeconomics EXCEPT
a. The impact of cigarette taxes on the smoking behavior of teenagers.
b. The role of Microsoft's market power in the pricing of software.
c. The effectiveness of antipoverty programs in reducing homelessness.
d. The influence of the government budget deficit on economic growth.
6. Which of the following is a positive, rather than a normative, statement?
a. Law X will reduce national income.
b. Law X is a good piece of legislation.
c. Congress ought to pass law X.
d. The president should veto law X.