Answer the following statement true (T) or false (F)
1) An economic model is an ideal or utopian type of economy that society should strive to obtain
through economic policy.
2) Because economic generalizations are simplifications from reality, they are impractical and
useless.
3) If economic theories are solidly based on relevant facts, then appropriate economic policy
becomes obvious and uncontroversial.
4) Normative statements are expressions of facts.
1) F
2) F
3) F
4) F
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The natural unemployment rate is 4 percent and the actual unemployment rate is 7 percent. According to Okun's Law, how does of real GDP compare to potential GDP?
What will be an ideal response?
What do most economists believe concerning the relation between the price level and real output?
Which of the following is true?
A. In Bertrand oligopoly each firm believes that its rivals will hold their output constant if it changes its output. B. In oligopoly a change in marginal cost never has an effect on output or price. C. In Cournot oligopoly firms produce an identical product at a constant marginal cost and engage in price competition. D. None of the answers is correct.
Which of the following is NOT a correct description of opportunity cost of capital?
A) It is the normal rate of return on investment. B) It is normally included in accounting costs. C) It is the income sacrificed by not investing in another firm. D) It is an implicit cost.