Chapter 2

Question 1

What are the two economic models for micro economics

Answer 1

1. Circular flow diagram

2. Production possibilities frontier

Question 2

Why do we have assumptions in the models

Answer 2

Makes it easier to understand

Different assumptions to answer different questions

Question 3

What does the production possibilities frontier show

Answer 3

Just very combinations of outputs

Because resources are scarce, we cannot have every possibility

Question 4

What is an efficient economy

Answer 4

it is getting all I can from it scarce resources

Question 5

What is an in efficient economy

Answer 5

More of one good can be produced without needing to reduce the other

Question 6

Describe what it means to be bowed out

Answer 6

You give up more on the y axis to do you have more on the X axis

Question 7

What does it mean to have a linear slope

Answer 7

Slow between any two points on the curve and you get the same results

• negative relationship

Question 8

So you have guns on the Y axes and butter on the X axes most of the economies resources are used to make butter what with this equal

Answer 8

A steep front tier a small increase in butter for each increase

Question 9

So you have guns on the Y axes and butter on the X axes most resources used her to make guns what does this equal

Answer 9

Flat frontier

Workers and machines best suited to make butter are being used to make guns

Each unit of butter given up yields a large increase in production of guns

Question 10

What is the definition of micro economics

Answer 10

Study of how households and firms make decisions and how they interact in the markets

Question 11

Get some examples of micro economics

Answer 11

1. Effects of rent control in Toronto
2. Impact of foreign competition on Canadian auto industry
3. Effects of compulsory schools attendance on workers earnings

Question 12

What is the definition of macro economics

Answer 12

The study of economic wide phenomenon including

• inflation
• unemployment
• economic growth

Question 13

Get some examples of macroeconomics

Answer 13

1. Effects of borrowing by federal government
2. Changes overtime in economies rate of unemployment
3. Alternative policies to rise growth in national living standards

Question 14

What is a positive analysis

Answer 14

Clean set attempt to describe the world as it is

Question 15

What is a normative analysis

Answer 15

Cleans that attempts to prescribe how the world should be

- based on beliefs

Question 16

Why do economist disagree

Answer 16

1. May disagree on the validity of alternative positive theories about how the world works
2. May have different values

Question 17

Describe the scientific method

Answer 17

Devise a theory

Collect data

Verify or refute the theory