Exam 2: Thinking Like an Economist

Suppose an economy produces two goods, food and machines. This economy always operates on its production possibilities frontier. Last year, it produced 91 units of food and 48 machines. This year, it is producing 92 units of food and 53 machines. Which of the following would NOT explain the increase in output?

The tradeoff between the production of different goods can change because of technological improvement over time.

What is a circular-flow diagram?

When is an economic outcome said to be efficient?

Complete the following statement: When economists are trying to explain the world they are

What is the goal of theories?

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

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

In the factors of production market, how do households and firms interact?

Figure 2-8 -Refer to Figure 2-8. Which of the following combinations is impossible for this economy to produce?