Exam 2: Thinking Like an Economist

Which statement best describes economic models

Suppose an economy produces two goods: food and machines.This economy always operates on its production possibilities frontier.Last year,it produced 45 units of food and 25 machines.This year,it is producing 50 units of food and 30 machines.Which of the following would NOT explain the increase in output

Table 2-1 Production Possibilities for Toyland -Refer to Table 2-1.How does the opportunity cost of producing an additional 100 dolls change as more dolls are produced

What does evaluating a positive statement involve

What are economists who try to improve the world considered

What is another term for factors of production

How can the production possibilities frontiers shift outward

Which of the following is an example of a product that experiences infrequent price changes

In order to provide information on two variables,what must an economist use

When a production possibilities frontier is linear,what does it show

What do the duties of the economists employed by Human Resources and Skill Development Canada include

When a production possibilities frontier shifts outward,what concept is being demonstrated

What would NOT be considered a factor of production

Figure 2-2 -Refer to Figure 2-2.In which market are households sellers

What type of statement is "When the price of gasoline goes up,more people choose to take public transit"

What are the foundation stones from which economic models are built

The purpose of this exercise is to acquaint you with some simple mathematical relationships and how they translate into graphs.Economic models can come under the form of equations such as Y=F(L),where Y is sometimes called the "dependent variable" and L is the "independent variable." F,called "function," tells us what the precise relationship between Y and L is.Theoretical relationships (models) are those that can be described by an equation like this.When equations are sufficiently simple,they can be put under the form of a curve in a graph.Consider the equation Y=2×L,where Y is the number of apple pies that Jonathan can cook in L hours.This equation describes the process of producing apple pies. a.How many pies does Jonathan cook in 2,3,4,and 5 hours b.Draw a vertical axis and label it Y; draw a horizontal axis and label it L.Show on this graph the four pairs (L,Y) you determined in part c.Draw a line connecting your four points and extend it to the left until it reaches the vertical axis. d.Identify a few assumptions that underlie your apple pie production model. e.Are your assumptions realistic f.Can you identify a few limitations of your model g.What could you use this model for?

How would any economist who says all policy decisions are easy be best described

Using this outline,draw a circular-flow diagram representing the interactions between households and firms in a simple economy.Explain briefly the various parts of the diagram.

In the goods and services market,how do households and firms interact