CHAPTER 02 - Chapter2 ThinkingLikeanEconomist 1....

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Chapter 2 Thinking Like an Economist 1. A simplifying assumption a. affects the important conclusions of an economic model. b. increases the level of detail in an economic model. c. limits the validity of an economic model’s conclusion. d. eliminates unnecessary details from an economic model. ANSWER: d eliminates unnecessary details from an economic model. SECTION: 1 OBJECTIVE: 2 2. The ultimate purpose of an economic model is to a. explain reality as completely as possible. b. establish assumptions that closely resemble reality. c. help us to understand economic behavior. d. guide government policy decisions. ANSWER: c help us to understand economic behavior. SECTION: 1 OBJECTIVE: 2 3. An economic model a. uses equations to understand normative economic phenomena. b. often omits crucial elements. c. simplifies reality in order to focus on crucial elements. d. cannot be proven wrong. ANSWER: c simplifies reality in order to focus on crucial elements. SECTION: 1 OBJECTIVE: 2 3. Which of the following activities would occur in a market for factors of production? a. Reesa buys a new computer to help balance her personal checkbook. b. Randy pays a speeding ticket. c. Ian mows his grass. d. General Motors hires additional workers to run a third-shift at a factory. ANSWER: d General Motors hires additional workers to run a third shift at a factory. SECTION: 1 OBJECTIVE: 3 4. Which of the following activities would occur in a market for goods and services? a. Harry mows his grass. b. General Motors hires additional workers to run a third shift at a factory. c. Jane bakes pies for Thanksgiving dinner. d. Dolly buys a ticket to a ball game. ANSWER: d Dolly buys a ticket to a ball game. SECTION: 1 OBJECTIVE: 3 7
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8 Chapter 2/Thinking Like an Economist 5. The three sources of income for the household are a. taxes, subsidies from the government, and rent. b. wages, rent, and profit. c. wages, rent, and subsidies from the government. d. wages, rebates, and rent. ANSWER: b wages, rent, and profit. SECTION: 1 OBJECTIVE: 3 6. Households play what role(s) in the circular flow diagram? a. purchasers of factors of production and sellers of services b. purchasers of factors of production and sellers of goods c. purchasers of goods and services only d. purchasers of goods and services and sellers of factors of production ANSWER: d purchasers of goods and services and sellers of factors of production
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CHAPTER 02 - Chapter2 ThinkingLikeanEconomist 1....

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