To be useful, a model must
A) predict accurately all of the time.
B) predict more accurately than other models that have been developed.
C) have assumptions that have been verified by empirical testing.
D) explain and predict the behavior of every individual.
Ques. 2The production possibilities curve bows out because
A) production is efficient.
B) of the law of increasing additional cost.
C) production is inefficient.
D) resources are not being fully utilized.
Ques. 3Suppose that a new study finds that eating more peanut butter will improve a person's health. As a result
A) the demand for peanut butter will fall.
B) the demand for peanut butter will rise.
C) the price of peanut butter will fall.
D) a smaller amount of peanut butter will be purchased.
Ques. 4Describe the market process that should occur if the price of a product is below its equilibrium price; now describe what would occur if the price is above its equilibrium price, assuming no market interference.
What will be an ideal response?
Ques. 5Ultimately, the real burden of paying for Social Security benefits will be paid for by
A) taxes levied on workers.
B) Social Security trust fund bonds.
C) new federally issued Treasury bills.
D) a new tax levied on businesses.
Ques. 6When there is an external benefit, the unregulated market
A) overproduces the good or service.
B) underproduces the good or service.
C) reaches the most efficient solution.
D) maximizes public welfare.
Ques. 7If two competing models are offered to explain a certain economic phenomenon, the better model is the one
A) that is the newest since newer models are better than old models.
B) with the fewest unrealistic assumptions.
C) that more often predicts with most accuracy.
D) that is not subject to empirical verification.
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