Exam 2: Thinking Like an Economist

In a simple circular-flow diagram, the two types of markets in which households and firms interact are the markets for goods and services and the markets for factors of production.

Given a two-good production possibilities frontier, a technological improvement in the production of one good will cause the frontier to pivot outward.

Graph 2-4 -Refer to Graph 2-4. On the production possibilities frontier shown, the opportunity cost to the economy of getting 10 additional roller blades by moving from point A to point B is:

Almost all economists oppose barriers to free trade.

Graph 2-3 -Refer to Graph 2-3. On the production possibilities frontier shown, at which point or points is it NOT possible for this economy to produce?

Economists use models in order to:

A survey of business, government and academic economists revealed widespread disagreement on ten propositions about economic policy.

The demand curve demonstrates:

Using this outline (Graph 2-10), insert arrows and complete the circular-flow diagram representing the interactions between households and firms in a simple economy. Explain briefly the various parts of the diagram. Graph 2-10

If the y-axis label is price, and the x-axis label is quantity, what would occur if there was a change in the cost of producing the good/service?

Graph 2-9 -Refer to Graph 2-9. In the graph shown, the movement from point A to point C is a:

Normative statements describe how the world is, while positive statements prescribe how the world should be.

Why do economists use graphs?

In a circular-flow diagram:

In a circular-flow diagram, one loop shows the flow of real goods and services and the other loop shows the corresponding flow of dollars.

An economic model can accurately explain how the economy is organised because it is designed to include every feature of the real world.

In a circular-flow diagram, spending on goods and services flows from households to firms and income flows from firms to households.

If the y-axis label is price, and the x-axis label is quantity, what would occur, if there was a change in tastes and preferences?

Data to test economic theories generally come from:

Australia harvests five to seven million kangaroos a year. Consider the statement 'Australia would be better off if the harvest of kangaroos was banned'. This is an example of a normative statement.