Exam 2: Thinking Like an Economist

Figure 2-14 Consider the production possibilities curve for a country that can produce sweaters, apples (in bushels), or a combination of the two. -Refer to Figure 2-14. Which point(s) on the graph is(are) efficient production possibilities?

Unemployment causes production levels to be inefficient.

Figure 2-9 Panel (a) Panel (b) -Refer to Figure 2-9, Panel (a). The movement from point M to point K could be caused by

Examples of graphs of a single variable include pie charts, bar graphs, and time-series graphs.

The institution that sets the nation's monetary policy is called the

In the circular-flow diagram, in the markets for

Most economists agree that a large federal budget deficit has what type of effect on the economy?

Figure 2-9 Panel (a) Panel (b) -Refer to Figure 2-9, Panel (a). The opportunity cost of moving from point K to point L is

Table 2-4 Production Possibilities for Picnicland -Refer to Table 2-4. What is the opportunity cost to Picnicland of increasing the production of hotdogs from 450 to 900?

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.

Figure 2-17 -Refer to Figure 2-17. The slope of the curve between points A and B is

In the circular flow diagram, when Daphne purchases a new mobile phone, she participates in the markets for

Figure 2-2 -Refer to Figure 2-2. Boxes C and D of this circular-flow diagram represent

Figure 2-23 -Refer to Figure 2-23. It is possible for this economy to produce 45 doghouses and 30 dishwashers.

Figure 2-20 Relationship Between Years of Education and Annual Income -Refer to Figure 2-20. Senator Smith observes the graph and concludes that people who earn higher incomes attend school for more years. Senator Jones observes the graph and concludes that people who attend school for more years earn higher incomes. Who is correct?

Figure 2-13 -Refer to Figure 2-13. One difference between points F and G is that

When economists are trying to help improve the world, they are

Figure 2-7 -Refer to Figure 2-7. What is the opportunity cost of moving from point L to point M?

Economists at which of the following offices help formulate spending plans and regulatory policies?

An outcome is said to be efficient if an economy is conserving the largest possible quantity of its scarce resources while still meeting the basic needs of society.