Exam 2: Thinking Like an Economist

The bowed shape of the production possibilities frontier can be explained by the fact that

A microeconomist - as opposed to a macroeconomist - might study

When studying the effects of public policy changes, economists

Which markets are represented in the simple circular-flow diagram?

In the circular-flow diagram, another name for goods and services produced by firms is

Economists at which administrative department help design tax policy?

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.

Which of the following transactions does not take place in the markets for factors of production in the circular-flow diagram?

Figure 2-14 -Refer to Figure 2-14. It is possible for this economy to produce 75 doghouses.

Economists regard events from the past as

Economists believe that production possibilities frontiers are often bowed because

For economists, conducting experiments is often difficult and sometimes impossible.

Figure 2-19 In the following graph the x-axis shows the number of times a commuter rail train stops at a station per hour and the y-axis shows the number of commuter rail passengers per hour. Commuter Rail Passengers by Frequency of Service -Refer to Figure 2-19. A policymaker observes this graph and concludes that increasing the frequency of commuter rail service is a certain way to get more commuters to choose the commuter rail instead of driving their own cars. You warn the policymaker about making a reverse causality mistake with which of the following statements?

Factors of production are

The production possibilities frontier illustrates

In the circular-flow diagram, which of the following items flows from firms to households through the markets for the factors of production?

The scientific method can be applied to the study of economics.

Figure 2-8 -Refer to Figure 2-8. Efficient production is represented by which point(s)?

Because it is difficult for economists to use experiments to generate data, they generally must

Which of the following statements best captures the relationship between microeconomics and macroeconomics?