Exam 2: Thinking Like an Economist

Graph 2-4 -Refer to Graph 2-4.On the production possibilities frontier shown, the opportunity cost to the economy of getting 10 additional roller blades by moving from point A to point B is:

A circular-flow diagram is a simple, equation-based model of how an economy is organised.

All statements made by economists are made only as statements of fact.True or false? Explain.

Economic models are generally constructed with:

All scientific models, including economic models, simplify reality in order to improve our understanding of it.

Graph 2-3 -Refer to Graph 2-3.On the production possibilities frontier shown, which point represents the maximum possible production of CDs?

In a circular-flow diagram, one loop shows the flow of real goods and services and the other loop shows the corresponding flow of dollars.

On a production possibilities frontier, production is inefficient if the production point is:

Using this outline (see Graph 2-10), insert arrows and complete the circular-flow diagram representing the interactions between households and firms in a simple economy.Explain briefly the various parts of the diagram.Graph 2-10

The circular-flow diagram is a type of simple model that:

A normative statement is one that:

The slope of a line is calculated as:

Treating everyone equitably is a common value shared by all economists.

Graph 2-6 -Refer to Graph 2-6.According to the graph, the shift of the production possibilities frontier from frontier A to frontier B was most likely caused by which of the following?

Lionel is studying economics but is also a passionate soccer player.Draw and explain his production possibilities frontier.If he suddenly breaks his leg and is no longer able to play soccer, what will happen to his frontier?

Graph 2-5 -Refer to Graph 2-5.In the production possibilities frontier shown, the shift of the frontier from A to B was most likely caused by which of the following?

Normative statements are essentially value judgements about the issue being considered.

The difference between natural scientists and economists is that natural scientists do not use simplifying assumptions in their models.

Table 2-1 $\text { Production possibilities for Poland }$ Vodka (l) Potatoes (kg) 1000 0 850 400 650 760 430 900 175 1200 0 1700 -Refer to Table 2-1.What is the opportunity cost of increasing the production of potatoes from 900 kg to 1200 kg?

Graph 2-6 -Refer to Graph 2-6.In the graph shown, the movement from frontier A to B can best be described as: