Exam 2: Thinking Like an Economist

Economists believe that production possibilities frontiers rarely have a bowed shape.

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

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

As a substitute for laboratory experiments, economists use evidence available through history's

Who would be more likely to study the effects of government spending on the unemployment rate, a macroeconomist or a microeconomist?

In the simple circular-flow diagram, which of the following is not true?

When constructing a production possibilities frontier, which of the following assumptions is not made?

Table 2-4 Mobile Phones Pizzas 0 10,000 200 8,000 500 6,000 900 4,000 1400 2,000 2000 0 -Refer to Table 2-4. Consider the production possibilities table for an economy that produces only mobile phones and pizzas. What is the opportunity cost of increasing production of pizzas from 4,000 to 6,000?

Figure 2-11 ​ -Refer to Figure 2-11. The opportunity cost of moving from point A to point B is zero.

In the circular-flow diagram, one loop represents the flow of goods, services, and factors of production, and the other loop represents the corresponding flow of dollars.

Where can an economy not produce?

Points on the production possibilities frontier represent efficient levels of production.

It is difficult for economists to make observations and develop theories, but it is easy for economists to run experiments to generate data to test their theories.

Figure 2-12 ​ ​ ​ ​ ​ ​ -Suppose a war in the Middle East interrupts the flow of crude oil and oil prices skyrocket around the world. For economists, this historical episode serves as a

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

An economic model can accurately explain how the economy is organized because it is designed to include, to the extent possible, all features of the real world.

A production point is said to be efficient if there is no way for the economy to produce more of one good without producing less of another.

Figure 2-10 ​ ​ ​ ​ ​ -Refer to Figure 2-10. Point B represents an inefficient outcome for this economy.

The production possibilities frontier provides an illustration of the principle that

The president of the United States receives tax policy advice from economists in the