Exam 2: Thinking Like an Economist

Which of the following statements best captures the relationship between microeconomics and macroeconomics?

A production possibilities frontier can shift outward if

Figure 2-14 -Refer to Figure 2-14.The opportunity cost of moving from point A to point D is 10 dishwashers.

Figure 2-14 -Refer to Figure 2-14.Unemployment could cause this economy to produce at point B.

Economists use one standard set of assumptions to answer all economic questions.

In the circular-flow diagram,firms own the factors of production and use them to produce goods and services.

In the circular-flow diagram,which of the following items flows from firms to households through the markets for goods and services?

The field of economics is traditionally divided into two broad subfields,

The scientific method is

Economists acting as scientists make positive statements,while economists acting as policy advisers make normative statements.

While the scientific method is applicable to studying natural sciences,it is not applicable to studying a nation's economy.

In the circular-flow diagram,which of the following items does not flow from firms to households?

Macroeconomics is the study of

If Steven's income decreases and,as a result,he chooses to buy fewer bagels per month at each price,then his demand curve will

Figure 2-6 -Refer to Figure 2-6.This economy cannot produce at which point(s)?

Figure 2-14 -Refer to Figure 2-14.Points A,B,and D represent efficient outcomes for this economy.

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.

It is difficult for economists to make observations and develop theories,but it is easy for economists to run experiments to generate data to test their theories.

An example of a price that changes only infrequently is the price of

The following table contains some production possibilities for an economy for a given month. If the production possibilities frontier is bowed outward,then "?" could be