Exam 2: Thinking Like an Economist

What does it mean if an economy is producing efficiently?

Figure 2-10 -Refer to Figure 2-10. What could have caused the movement from point B to point C?

Where do the most common data for testing economic theories come from?

"Society would be better if the welfare system were abolished" is a normative statement, not a positive statement.

What do the two loops in the circular-flow diagram represent?

Figure 2-1 -Refer to Figure 2-1. Which arrow shows the flow of goods and services?

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

-Refer to Table 2-1. What is the opportunity cost to Toyland of increasing the production of dolls from 100 to 200?

Figure 2-6 -Refer to Figure 2-6. What was the most likely cause of the movement from point C to point D?

What is the point where both x and y are zero called?

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

What do almost all economists agree on about rent control?

Which statement does NOT illustrate a characteristic of an economic model?

Figure 2-6 -Refer to Figure 2-6. If this economy put all available resources into the production of bananas, how many could it produce?

Figure 2-1 -Refer to Figure 2-1. Which arrow shows the flow of income payments?

Why are historical episodes valuable to economists?

Which of the following statements are positive and which are normative? a. The minimum wage creates unemployment among young and unskilled workers. b. The minimum wage rates should be increased. c. If the price of a product in a market decreases, other things equal, quantity supplied will increase. d. A little bit of inflation is worse for society than a little bit of unemployment. e. The price of bonds is inversely related to the interest rate. f. If consumer income increases, other things equal, the demand for automobiles will increase. g. The Canadian income distribution is not equitable. h. Canadian workers deserve more liberal unemployment benefits. i. If the money supply increases, interest rates will fall. j. Students who study more are better students.

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

Figure 2-10 -Refer to Figure 2-10. What is the slope of the curve between point A and point B?

A circular-flow diagram is a visual model of how an economy is organized.