CHAPTER 2: SHORT ANSWER Flashcards
What is the role of households in the two types of markets in the circular flow model?
Household by and consume goods and services in the market for goods and services
They own and sell factors of production in the markets for factors of production
What is the role of firms in the two types of markets in the circular flow model?
Firms produce and sell goods and services in the markets for goods and services
They hire and use factors of production in the market for factors of production.
Why would a production possibilities frontier have a negative slope ( slope downwards and to the right?)
If an economy is operating efficiently, production choices have opportunity cost. If we want more of one thing, we must have less of another.
Why is the production possibilities frontier bowed outward?
Resources are specialized and thus are not equally well suited for producing different outputs.
What are the two subfields within economics? Which is more likely to be a building block of the other? Why?
Microeconomics and macroeconomics.
Microeconomics is more of the building block of macroeconomics.
When macro issues for example, unemployment are analyzed, the behavior of households and firms also need to be considered.
When an economist makes a normative statement, is he or she more likely to be acting as a scientist or a policy maker? Why?
As a policymaker: normative statements are prescriptions about what ought to be and are somewhat based on value judgments
Which statements are testable: positive statements or normative statements? Why?
Positive statement or statements of fact and are refutable by examining evidence.
Provide two reasons why economist disagree.
Economist may have different scientific judgments. Also they may have different values.
Name to economic propositions oh much more than 90% of economists agree.
A ceiling on rents reduces the quantity and quality of housing available.
Tariffs and import quotas usually reduced general economic welfare.
Describe the scientific method
Developing and testing of the theory by observing testing and observing again
Devise a theory
Collect data
Refute or verify
