Exam 2: Thinking Like an Economist

Figure 2-9 Panel (a) Panel (b) -Refer to Figure 2-9, Panel (a) and Panel (b). Which of the following is not a result of the shift of the economy's production possibilities frontier from Panel (a) to Panel (b)?

Good assumptions simplify a problem without substantially affecting the answer.

Figure 2-6 -Refer to Figure 2-6. If this economy moves from point F to point G, then which of the following statements is correct?

When economists make normative statements, they are

One difference between a hypothetical benevolent king implementing the best policy and the president implementing the best policy in the real world is the president has to be concerned about

The Council of Economic Advisers

Using the outline below, draw a circular-flow diagram representing the interactions between households and firms in a simple economy. Explain briefly the various parts of the diagram.

The opportunity cost of obtaining more of one good is shown on the production possibilities frontier as the

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. What is the opportunity cost of moving from point R to point Q?

Which of these terms are used interchangeably?

Where can an economy not produce?

In the markets for the factors of production in the circular-flow diagram,

Economists speaking like scientists make

Figure 2-5 -Refer to Figure 2-5. Inefficient production is represented by which point(s)?

Figure 2-2 -Refer to Figure 2-2. If Box A of this circular-flow diagram represents firms, then which box represents households?

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.

Macroeconomics is the study of

The concept of slope can be used to answer questions about how much one variable responds to changes in another variable.

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.

Figure 2-7 -Refer to Figure 2-7. If this economy devotes all of its resources to the production of engines, then it will produce