Exam 2: Thinking Like an Economist

Which of the following statements are positive and which are normative? a.The minimum wage creates unemployment among young and unskilled workers. b.The minimum wage ought to be abolished. c.If the price of a product in a market decreases, then, other things equal, quantity demanded will increase. d.A little bit of inflation is worse for society than a little bit of unemployment. e.There is a tradeoff between inflation and unemployment in the short run. f. If consumer income increases, then, other things equal, the demand for automobiles will increase.g. The U.S. income distribution is not fair. h. U.S. workers deserve more liberal unemployment benefits. i. If interest rates increase, then investment will decrease.j. If welfare benefits were reduced, then the country would be better off.

According to the circular-flow diagram, if Denny is the owner of a landscaping business and he just received $50 for mowing Mrs. Pendleton's lawn,

Table 2-5 -Refer to Table 2-5. Table 2-5 shows one set of production possibilities. What is the opportunity cost of an increase in the production of wheat from 700 bushels to 1300 bushels?

Which of the following is not correct?

The art in scientific thinking is

The prairie dog has always been considered a problem for American cattle ranchers. They dig holes that cattle and horses can step in, and they eat grass necessary for cattle. Recently, ranchers have discovered that there is a demand for prairie dogs as pets. In some areas, prairie dogs can sell for as high as $150 each. Cattlemen are now fencing off prairie dog towns on their land so these towns will not be disturbed by their cattle.Draw a rancher's production possibilities frontier showing increasing opportunity cost of cattle production in terms of prairie dog production. Using a separate graph for each situation, show what would happen to the initial production possibilities frontier in each of the following situations: a.The outcome is efficient, with ranchers choosing to produce equal numbers of cattle and prairie dogs. b.As a protest against the government introducing the gray wolf back into the wild in their state, ranchers decide to withhold 25 percent of the available grassland for grazing. c.The price of prairie dogs increases to $200 each, so ranchers decide to allot additional land for prairie dogs. d.The government grants new leases to ranchers, giving them 10,000 new acres of grassland each for grazing. e.A drought destroys most of the available grass for grazing of cattle, but not for prairie dogs since they also eat plant roots.

In the circular-flow diagram, which of the following is not a factor of production?

Figure 2-14 Consider the production possibilities curve for a country that can produce sweaters, apples (in bushels), or a combination of the two -Refer to Figure 2-14. If this society is producing at point T,

An economic theory about international trade that is based on the assumption that there are only two countries trading two goods

"Other things equal, an increase in supply causes a decrease in price" is a normative statement, not a positive statement.

Figure 2-14 -Refer to Figure 2-14. It is possible for this economy to produce 45 doghouses and 30 dishwashers.

Which of the following is an example of a normative, as opposed to positive, statement?

Which of the following is not held constant when looking at an individual's demand curve?

Points inside the production possibilities frontier represent inefficient levels of production.

Duties of the Council of Economic Advisers include

Table 2-5 -Refer to Table 2-5. Table 2-5 shows one set of production possibilities. Which of the following statements is correct?

Figure 2-17 -Refer to Figure 2-17. The movement from point B to point C could have been caused by

Figure 2-21 -Refer to Figure 2-21. Your friend John created the graph above to illustrate that snowstorms are caused by more snowblowers being sold. You inform him that his interpretation is incorrect due to

Economists at which administrative department help formulate spending plans and regulatory policies?

Figure 2-5 -Refer to Figure 2-5. Efficient production is represented by which point(s)?