Question 1

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.

Accepted Answer

The answer of Using the outline below, draw a circular-flow...

Question 2

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 ought to be abolished.
c.If the price of a product in a market decreases, then, other things equal, quantity demanded will increase.
d.A little bit of inflation is worse for society than a little bit of unemployment.
e.There is a tradeoff between inflation and unemployment in the short run.
f. If consumer income increases, then, other things equal, the demand for automobiles will increase.g. The U.S. income distribution is not fair.
h. U.S. workers deserve more liberal unemployment benefits.
i. If interest rates increase, then investment will decrease.j. If welfare benefits were reduced, then the country would be better off.

Accepted Answer

The answer of Which of the following statements are positive...

Question 3

Draw a production possibilities frontier showing increasing opportunity cost of hammers in terms of horseshoes.
a.On the graph, identify the area of feasible outcomes and the area of infeasible outcomes.
b.On the graph, label a point that is efficient and a point that is inefficient.
c.On the graph, illustrate the effect of the discovery of a new vein of iron ore, a resource needed to make both horseshoes and hammers, on this economy.
d.On a second graph, illustrate the effect of a new computerized assembly line in the production of hammers on this economy.

Accepted Answer

The answer of Draw a production possibilities frontier showing increasing...

Question 4

Identify each of the following topics as being part of microeconomics or macroeconomics:
a.the impact of a change in consumer income on the purchase of luxury automobiles
b.the effect of a change in the price of Coke on the purchase of Pepsi
c.the impact of a war in the Middle East on the rate of inflation in the United States
d.factors influencing the rate of economic growth
e.factors influencing the demand for tractors
f. the impact of tax policy on national saving
g. the effect of pollution taxes on the U.S. copper industry
h. the degree of competition in the cable television industry
i. the effect of a balanced-budget amendment on economic stability
j. the impact of deregulation on the savings and loan industry

Accepted Answer

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Question 5

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.

Accepted Answer

The answer of The prairie dog has always been considered...

Quiz 2: Thinking Like an Economist

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.