Exam 2: Thinking Like an Economist: Part B

Economic growth causes a production possibilities frontier to shift outward.

A production possibilities frontier has a bowed shape if the opportunity cost is constant at all levels of output.

Positive statements are descriptive,while normative statements are prescriptive.

The trade-off between the production of one good and the production of another good can change over time because of technological advances.

Figure 2-14 -Refer to Figure 2-14.Point B represents an inefficient outcome for this economy.

While the production possibilities frontier is a useful model,it cannot be used to illustrate economic growth.

A production point is said to be efficient if there is no way for the economy to produce more of one good without producing less of another.

If a line passes through the points (20,5)and (10,10),then the slope of the line is 1/2.

An economic model can accurately explain how the economy is organized because it is designed to include,to the extent possible,all features of the real world.

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

The Congressional Budget Office,which is staffed by economists,provides Congress with independent evaluations of policy proposals.

The slope of a line is the ratio of the vertical distance covered to the horizontal distance covered along the line.

Historical episodes allow economists to illustrate and evaluate current economic theories.

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

In the circular-flow diagram,factors of production are the goods and services produced by firms.

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

Assumptions can simplify the complex world and make it easier to understand.

The slope of an upward-sloping line is positive,and the slope of a downward-sloping line is negative.

The circular flow model is not used anymore because it fails to perfectly replicate real world situations.

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