Exam 2: Thinking Like an Economist: Part B

The opportunity cost of something is what you give up to get it.

Unemployment causes production levels to be inefficient.

Deciding that A causes B when in fact B causes A is a mistake called omitted variable bias.

The duties of the Council of Economic Advisers are to advise the president of the United States and to determine U.S.monetary policy.

Macroeconomics is the study of economy-wide phenomena.

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

Figure 2-14 -Refer to Figure 2-14.This economy fully employs its resources when it produces 35 dishwashers and zero doghouses.

In the circular-flow diagram,households and firms are the decision makers.

"Minimum wage laws result in unemployment" is a normative statement,while "the minimum wage should be higher" is a positive statement.

In the ordered pair (10,30),10 is the y-coordinate and 30 is the z-coordinate.

Since economists cannot use natural experiments offered by history,they must use carefully constructed laboratory experiments instead.

When two variables move in opposite directions,the curve relating them is upward sloping,and we say the variables are positively related.

In the circular-flow diagram,firms produce goods and services using the factors of production.

Historical episodes are not valuable to economists.

If new government regulations designed to protect wetlands remove very productive farmland from production,then the production possibilities frontier will shift inward.

Good assumptions simplify a problem without substantially affecting the answer.

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.

Figure 2-14 -Refer to Figure 2-14.If this economy uses all its resources in the dishwasher industry,it produces 35 dishwashers and no doghouses.

Economists at the U.S.Department of Justice help enforce the nation's antitrust laws.

Points inside the production possibilities frontier represent feasible levels of production.