Exam 2: Thinking Like an Economist

When a production possibilities frontier is bowed outward, the opportunity cost of the first good in terms of the second good increases as more of the second good is produced.

The Council of Economic Advisers

Which of the following is an example of a capital input?

Which of the following statements about economic models is correct?

Figure 2-15 -Refer to Figure 2-15. Consider the production possibilities frontier for an economy that produces only sofas and cars. When society moves from point A to point B,

In the circular-flow diagram, firms produce goods and services using the factors of production.

A production possibilities frontier will be bowed outward if some of the economy's resources are better suited to producing one good than another.

In the markets for factors of production in the circular-flow diagram,

When two variables move in opposite directions, the curve relating them is upward sloping, and we say the variables are positively related.

Figure 2-17​ -Refer to Figure 2-17. It is possible for this economy to produce 1000 shoes.

In the circular-flow diagram, factors of production are the goods and services produced by firms.

Most economists agree that a large federal budget deficit has what type of effect on the economy?

Figure 2-22 -Refer to Figure 2-22. Given that price is measured on the vertical axis, quantity is measured on the horizontal axis, and that the curves are downward-sloping, what type of curves are depicted here?

The most common data for testing economic theories come from

Figure 2-8 -Refer to Figure 2-8. To reach point L, the economy would have to

Some, but not all, government economists are employed within the administrative branch of government. Which of the following government agencies employs economists outside of the administrative branch?

Economists devise theories, collect data, and then analyze these data in an attempt to verify or refute their theories.

The production possibilities frontier provides an illustration of the principle that

In the simple circular-flow diagram, the participants in the economy are

Yi and Avik are both economists. Yi thinks that taxing consumption, rather than income, would result in higher household saving because income that is saved would not be taxed. Avik does not think that household saving would respond much to a change in the tax laws. In this example, Yi and Avik