Exam 2: Thinking Like an Economist: Part B

Figure 2-14 -Refer to Figure 2-14.Points B and C represent infeasible outcomes for this economy.

According to John Maynard Keynes,an economist must possess a rare combination of skills including being a mathematician,historian,statesman,and philosopher.

In the circular-flow diagram,one loop represents the flow of goods and services,and the other loop represents the flow of factors of production.

All scientific models,including economic models,simplify reality in order to improve our understanding of it.

The production possibilities frontier is a graph that shows the various combinations of outputs that the economy can possibly produce given the available factors of production and the available production technology.

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

With the resources it has,an economy can produce at any point on or outside the production possibilities frontier,but it cannot produce at points inside the frontier.

A macroeconomist,rather than a microeconomist,would study the effects on a market from two firms merging.

"The US should not restrict employers from outsourcing work to foreign countries" is a normative statement.

There is only one explanation for why economists give conflicting advice on policy issues,and it is that they have different values about what policy should try to accomplish.

In economics,graphs serve two purposes: they offer a way to visually express ideas,and they provide a way of finding and interpreting patterns when analyzing economic data.

Evaluating normative statements involves values as well as facts.

The broken window fallacy states that when a window breaks and someone spends money to repair it,they have created new economic activity that would not have otherwise taken place.

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

Figure 2-17​ -Refer to Figure 2-17.It is possible for this economy to produce 1000 shoes.

The scientific method can be applied to the study of economics.