EC 201 Chapter 2 - Thinking Like an Economist 11. On the diagram provided, illustrate overall economic 1. Economists play two roles in society: growth and development. (1) S Delarrie (2) P advisor. (D 2. A is a highly simplified representation of a more complicated reality. (A) 3. Because of scarcity, society must Consumer a. seek ways to remove scarcity b. seek perfect solutions C. deal with trade offs d. eliminate human wants 12. Consider the above diagram, indicate what points A - D represent. 4. True / False In order for a model to be effective, it must be as detailed as possible. Point A: Efficient / Inefficient / Unobtainable allocation of resources. 5. Ceteris Paribus means: Point B: Efficient / Inefficient / Unobtainable allocation of resources. 6. Assumptions are in building economic models. Point C: Efficient / Inefficient / Unobtainable a. optional b. unnecessary allocation of resources C. normative d. essential 7. The Production Possibilities Frontier (PPF) model makes the Point D: Efficient / Inefficient / Unobtainable allocation of resources. following assumptions: (1) Technology is 13. A POSITIVE statement describes the world as it is / as it should be. (2) Quantity of is fixed 14. A NORMATIVE statement describes the world (3) The economy produces goods. as it is / as it should be 8. If the PPF model is bowed, it represents a 15. Indicate for each of the following statements if it is POSITIVE constant / declining / diminishing / increasing (P)or NORMATIVE (N). opportunity cost. Prices rise when the government increases the 9. If the PPF model is a straight line, it represents a quantity of money. (positive / normative) constant / declining / diminishing / increasing The government should print less money. opportunity cost. positive / normative A tax cut is needed to stimulate the economy. 10. On the diagram provided, illustrate economic growth and (positive / normative development for the production of one good. An increase in the price of burritos will cause an increase in consumer demand for music downloads. Nati (positive / normative Defense 16. Economist disagree because they have alternative9. If the PPF model is a straight line, it represents a quantity of money. (positive / normative) constant / declining / diminishing / increasing The government should print less money. opportunity cost. (positive / normative) A tax cut is needed to stimulate the economy. 10. On the diagram provided, illustrate economic growth and (positive / normative) development for the production of one good. An increase in the price of burritos will cause an increase in consumer demand for music downloads. Natl (positive / normative) Defense 16. Economist disagree because they have alternative positive / normative theories. 17. Economist disagree because they have different positive / normative values. Consumer 18. Microeconomics analyses the actions of Goods firms / individuals / households
