Exam 2: Thinking Like an Economist

Economic growth causes a production possibilities frontier to shift outward.

If Jake chooses to buy fewer pizzas per month at each price,what will happen to his demand curve

Suppose there are two countries,Freedonia and Sylvania,which have identical amounts of resources,identical technologies,and identical populations.Both produce two types of goods,consumer goods and capital goods,and they both always operate on their production possibilities frontiers.The only difference is that this year Freedonia chooses to produce relatively more consumer goods than Sylvania.What will happen as a result

What does a circular-flow diagram do

What are the three propositions about which most economists agree most often (in order from first to third)

In the simple circular-flow diagram,in which market are firms sellers

Figure 2-1 -Refer to Figure 2-1.Which arrow shows the flow of goods and services

What is a duty of Human Resources Canada

If an economist develops a theory about international trade based on the assumption that there are only two countries and two goods,what is most likely

Figure 2-10 -Refer to Figure 2-10 .What are the curves shown

This exercise will show you how different theories (models) can lead to very different courses of action.Suppose we ask the following question: Does income inequality promote economic growth and society's overall prosperity Suppose two economists come up with the following theories (models): Economist A believes that wealth accumulation in just a few hands increases savings because consumption is necessarily limited.Higher savings,in turn,allow investing in new production facilities that increase the country's overall income and everybody is better off.So,Economist A advocates a non-equalitarian society.Economist B thinks that a very unequal distribution of wealth will increase capacities of production beyond the purchasing power of an essentially poor mass of consumers.For a while,consumers will increase their consumption,and prosperity,by borrowing from the rich,but eventually they will not be able to repay their debts and the economy will collapse for lack of demand.At that point,investing in new production facilities becomes unnecessary.In conclusion,Economist B thinks that extreme income inequality is counterproductive. a.What are the policy implications of the two theories (In other words,does it matter which theory is correct) b.How would a scientist determine which theory is correct c.Under what conditions would each of the two models be correct Could one use both models under different circumstances

Use the following demand curve to answer the following questions: a.How would point A be represented as an ordered pair b.What type of curve is this c.Does this curve show a positive or negative correlation between price and quantity d.Compute the slope of D₁ between points A and C. e.What is the slope of D₁ between points C and E Why would you NOT have to calculate this answer f.What is it called if we move from D₁ to D₂ g.How do you know that the slope of D₂ is the same as the slope of D₁

Figure 2-4 -Refer to Figure 2-4.What is the opportunity cost in terms of toothbrushes of getting 10 additional toasters by moving from point B to point A

A production possibilities frontier is a graph that shows the various combinations of outputs the economy can possibly produce given its factors of production and technology.

Suppose there are two countries,Freedonia and Sylvania,which have identical amounts of resources,identical technologies,and identical populations.Both produce two types of goods,consumer goods and capital goods,and they both always operate on their production possibilities frontiers.The only difference is that this year Sylvania chooses to produce relatively more capital goods than Freedonia.What will happen as a result

What does it mean if an economy is producing efficiently

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

A circular-flow diagram is a visual model of how an economy is organized.

Table 2-1 Production Possibilities for Toyland -Refer to Table 2-1.What is the opportunity cost to Toyland of increasing the production of dolls from 300 to 400

What does the x-coordinate give