Exam 2: Thinking Like an Economist

What type of statement is "When the price of gasoline goes up, more people choose to take public transit"?

What famous economist said, "The ideas of economists and political philosophers … are more powerful than is commonly understood"?

The tradeoff between the production of different goods can change because of technological improvement over time.

What revenue is received by firms from sales that is NOT used to pay for factors of production?

The purpose of this exercise is to show you how a mathematical (economic) model can be adjusted to better represent an economic phenomenon. Consider the equation Y=2×L, where Y is the number of apple pies that Jonathan can cook in L hours. This equation describes the process of producing apple pies. a. In a graph, draw the line described by the equation Y=2×L. What is the slope of this line? What does the slope represent? Note that the slope is the same for the first, second, and all subsequent hours. In other words, the slope is constant. Why is the constant slope of the line a limitation of your model? b. How should the slope change for higher values of L, the number of hours worked, to account for the fact that the worker might get tired? c. How could you modify the model to capture the change in slope you identified in part b?

In order to provide information on two variables, what must an economist use?

When a production possibilities frontier shifts outward, what concept is being demonstrated?

Figure 2-3 -Refer to Figure 2-3. Which point or points are inefficient?

Figure 2-9 -Refer to Figure 2-9. What is the correct designation of point A?

Figure 2-2 -Refer to Figure 2-2. What do boxes C and D represent?

Which of the following is an example of a product that experiences infrequent price changes?

For economists, what are the two types of statements about the world?

Figure 2-6 -Refer to Figure 2-6. What is the opportunity cost to society of moving from point B to point D?

Suppose an economy produces two goods: food and machines. This economy always operates on its production possibilities frontier. Last year, it produced 45 units of food and 25 machines. This year, it is producing 50 units of food and 30 machines. Which of the following would NOT explain the increase in output?

What is another term for factors of production?

Figure 2-8 -Refer to Figure 2-8. What would happen if this economy moved from point C to point E?

Suppose an economy produces two goods: food and machines. This economy always operates on its production possibilities frontier. Last year, it produced 65 units of food and 23 machines. This year, it is producing 72 units of food and 25 machines. Which of the following would NOT explain the increase in output?

When economists are trying to explain the world they are acting as scientists, and when they are trying to improve it, they are policymakers.

When is an economic outcome said to be efficient?