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Exam 2: Thinking Like an Economist

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Question 201

True/False

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For economists,conducting experiments is often difficult and sometimes impossible.

A) True
B) False

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Question 202

Multiple Choice

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The slope of a fairly flat upward-sloping line will be a

A) small positive number.
B) large positive number.
C) small negative number.
D) large negative number.

E) B) and C)
F) All of the above

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Question 203

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In the circular-flow diagram,

Figure 2-15 Relationship between Price and Cups of Coffee -Refer to Figure 2-15.A movement from point A to point B is called

Economists may disagree about the validity of alternative positive theories about how the world works.

In the circular-flow diagram,payments for labor,land,and capital flow from firms to households through the markets for the factors of production.

Economists believe that production possibilities frontiers

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

The decision of which assumptions to make is

Figure 2-15 Relationship between Price and Cups of Coffee -Refer to Figure 2-15.A movement from point A to point Z is called

A survey of professional economists revealed that more than three-fourths of them agreed with fourteen economic propositions.Which of the following is not one of those propositions?

Figure 2-2 -Refer to Figure 2-2.Boxes C and D of this circular-flow diagram represent

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.

The Congressional Budget Office,which is staffed by economists,provides Congress with independent evaluations of policy proposals.

The use of the coordinate system allows

The prairie dog has always been considered a problem for American cattle ranchers.They dig holes that cattle and horses can step in,and they eat grass necessary for cattle.Recently,ranchers have discovered that there is a demand for prairie dogs as pets.In some areas,prairie dogs can sell for as high as $150 each.Cattlemen are now fencing off prairie dog towns on their land so these towns will not be disturbed by their cattle. Draw a rancher's production possibilities frontier showing increasing opportunity cost of cattle production in terms of prairie dog production.Using a separate graph for each situation,show what would happen to the initial production possibilities frontier in each of the following situations: a. The outcome is efficient,with ranchers choosing to produce equal numbers of cattle and prairie dogs. b. As a protest against the government introducing the gray wolf back into the wild in their state,ranchers decide to withhold 25 percent of the available grassland for grazing. c. The price of prairie dogs increases to $200 each,so ranchers decide to allot additional land for prairie dogs. d. The government grants new leases to ranchers,giving them 10,000 new acres of grassland each for grazing. e. A drought destroys most of the available grass for grazing of cattle,but not for prairie dogs since they also eat plant roots.

An economy's production of two goods is efficient if

In the circular-flow diagram,which of the following is not a factor of production?

President Truman once said the wanted to find a one-armed economist because when he asked his economists for advice,they always answered,"On the one hand,...On the other hand,..." Truman's observation that economists' advice is not always straightforward

Figure 2-14 -Refer to Figure 2-14.The movement from point B to point C could have been caused by