Exam 2: Thinking Like an Economist

Figure 2-8 -Refer to Figure 2-8.What would happen if this economy moved from point C to point E

Since natural experiments offered by history cannot be used in economics,carefully constructed laboratory experiments must be used.

The prairie dog has always been considered a problem for Canadian 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.Cattlemen are now fencing off prairie dog towns on their land so these towns will not be disturbed by their cattle.Draw a production possibilities frontier demonstrating a rancher's production option between cattle production and prairie dog production,showing increasing opportunity cost and what would happen in each of the following situations (using a separate graph for each situation): 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 grey wolf back into the wild in their province,ranchers decide not to use 25% 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 hectares of grassland each for grazing. e.A drought destroys most of the available grass for grazing of cattle,but not prairie dogs since they also eat plant roots.

What is the opportunity cost of obtaining more of one good,as it relates to the production possibilities frontier

What are factors of production

What happens in the markets for factors of production

What is the ordered pair that represents the origin on a graph

Why are production possibilities frontiers usually bowed outward

Where do the most common data for testing economic theories come from

Figure 2-10 -Refer to Figure 2-10.How are the price of roses and the quantity of roses related

All people use models in their everyday lives,and I am no exception in this regard.While meteorologists use extremely complex weather forecasting models,my model is much simpler.My model predicts that if it is cold in the morning,it will be cold in the afternoon. a.Why do I need such a silly model,instead of using more reliable forecasts that are easily and freely available b.What is the main assumption of my model c.How did I choose the assumption underlying my model d.Is my assumption (and,therefore,my model) realistic e.Is my model useful f.How can I improve the predictions of my model g.What is your model of weather forecasting when deciding what to wear for the day h.What other simple models of weather forecasting can you imagine

How do economists view positive statements

Which statement best characterizes the money held by households in the circular-flow diagram

Which statement best describes economic models

Figure 2-1 -Refer to Figure 2-1.Which arrow shows the flow of income payments

What does microeconomics study

For economists,what are the two types of statements about the world

Figure 2-1 -Refer to Figure 2-1.Which arrow shows the flow of spending by households

What did a survey that asked the opinion of academic,business,and government economists on ten propositions about economic policy find

What is a common thread between economics and other sciences,such as physics