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Exam 2: Thinking Like an Economist

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Question 41

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An economic model can accurately explain how the economy is organised because it is designed to include every feature of the real world.

A) True
B) False

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Question 42

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Almost all economists oppose barriers to free trade.

A) True
B) False

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Question 43

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Given a two-good production possibilities frontier, a technological improvement in the production of one good will cause the frontier to pivot outward.

In a circular-flow diagram:

Why do economists use graphs?

A survey of business, government and academic economists revealed widespread disagreement on ten propositions about economic policy.

If the y-axis label is price, and the x-axis label is quantity, what would occur if there was a change in the cost of producing the good/service?

In a simple circular-flow diagram, the two types of markets in which households and firms interact are the markets for goods and services and the markets for factors of production.

Graph 2-3 -Refer to Graph 2-3. On the production possibilities frontier shown, at which point or points is it NOT possible for this economy to produce?

In a circular-flow diagram, one loop shows the flow of real goods and services and the other loop shows the corresponding flow of dollars.

The demand curve demonstrates:

Economists use models in order to:

Graph 2-9 -Refer to Graph 2-9. In the graph shown, the movement from point A to point C is a:

Using this outline (Graph 2-10), insert arrows and complete the circular-flow diagram representing the interactions between households and firms in a simple economy. Explain briefly the various parts of the diagram. Graph 2-10

In a circular-flow diagram, spending on goods and services flows from households to firms and income flows from firms to households.

Australia harvests five to seven million kangaroos a year. Consider the statement 'Australia would be better off if the harvest of kangaroos was banned'. This is an example of a normative statement.

If the y-axis label is price, and the x-axis label is quantity, what would occur, if there was a change in tastes and preferences?

Data to test economic theories generally come from:

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

Graph 2-4 -Refer to Graph 2-4. On the production possibilities frontier shown, the opportunity cost to the economy of getting 10 additional roller blades by moving from point A to point B is: