Exam 2: Thinking Like an Economist

Figure 2-3 -Refer to Figure 2-3. Efficient production is represented by which point(s)?

Economic models

When a production possibilities frontier is bowed outward, the opportunity cost of one good in terms of the other depends on how much of each good is being produced.

The production possibilities frontier is used to illustrate some basic economic ideas, including

If Erin's income decreases and, as a result, she chooses to buy fewer milkshakes per month at each price, then her demand curve will

Because it is difficult for economists to use experiments to generate data, they generally must

When studying the effects of public policy changes, economists

A survey of professional economists revealed that more than three-fourths of them agreed with fourteen economic propositions. Which of the following is not one of those propositions?

Table 2-5 Cooki=s (in dazens) Caffe (inguund) 1000 0 800 350 600 650 400 800 200 1000 0 1150 -Refer to Table 2-5. Table 2-5 shows one set of production possibilities. Which of the following statements is correct?

The circular-flow diagram explains, in general terms, how the economy is organized and how participants in the economy interact with one another.

In the markets for the factors of production in the circular-flow diagram, households are buyers and firms are sellers.

The prairie dog has always been considered a problem for American 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 each. Cattlemen are now fencing off prairie dog towns on their land so these towns will not be disturbed by their cattle.Draw a rancher's production possibilities frontier showing increasing opportunity cost of cattle production in terms of prairie dog production. Using a separate graph for each situation, show what would happen to the initial production possibilities frontier in each of the following situations: 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 gray wolf back into the wild in their state, ranchers decide to withhold 25 percent 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 acres of grassland each for grazing. e.A drought destroys most of the available grass for grazing of cattle, but not for prairie dogs since they also eat plant roots.

Points outside the production possibilities frontier represent infeasible levels of production.

Which of the following is not an example of a graph of a single variable?

The production possibilities frontier is a graph that shows the various combinations of output that an economy

With the resources it has, an economy can produce at any point on or outside the production possibilities frontier, but it cannot produce at points inside the frontier.

The President counts among his economic advisors the Congressional Budget Office.

Figure 2-17 Relationship Between Years of Education and Annual Income -Refer to Figure 2-17. The graph above is a

The Council of Economic Advisers' Economic Report of the President discusses recent developments in the economy and presents the council's analysis of current policy issues.

Figure 2-5 -Refer to Figure 2-5. The opportunity cost of this economy moving from point D to point B is