Exam 2: Thinking Like an Economist

Draw a production possibilities frontier showing increasing opportunity cost of hammers in terms of horseshoes. a.On the graph, identify the area of feasible outcomes and the area of infeasible outcomes. b.On the graph, label a point that is efficient and a point that is inefficient. c.On the graph, illustrate the effect of the discovery of a new vein of iron ore, a resource needed to make both horseshoes and hammers, on this economy. d.On a second graph, illustrate the effect of a new computerized assembly line in the production of hammers on this economy.

John Maynard Keynes believed the ideas of economists to be

Figure 2-15 -Refer to Figure 2-15. Consider the production possibilities frontier for an economy that produces only sofas and cars. The opportunity cost of one car is

Where can an economy not produce?

Economic models are most often composed of diagrams and equations.

Figure 2-1 -Refer to Figure 2-1. Raymond buys a refrigerator for his new home. To which of the arrows does this transaction directly contribute?

Graphs such as bar graphs and pie charts are limited in that they

Economists build economic models by

A production possibilities frontier shifts outward when

What you must give up to get something else is called the

Figure 2-11 -Refer to Figure 2-11. The shift of the production possibilities frontier from A to B illustrates

Figure 2-18 Relationship between Price and Restaurant Meals -Refer to Figure 2-18. In the ordered pair (8, 24)

Economic models

Figure 2-4 -Refer to Figure 2-4. Inefficient production is represented by which point(s)?

Figure 2-5 -Refer to Figure 2-5. The opportunity cost of obtaining 40 additional dryers by moving from point D to point C is

Suppose an economist develops a theory that higher food prices arise from higher gas prices. According to the scientific method, which of the following is the economist's next step?

Which of the following statements is correct?

In the circular-flow diagram,

Figure 2-22 -Refer to Figure 2-22. Is a move from point A to point B considered a shift of the curve or a movement along the curve?

Figure 2-7 -Refer to Figure 2-7. Efficient production is represented by which point(s)?