Exam 2: The Economic Problem

If a country operates on its PPF, it achieves production efficiency.

The rights of an owner to use and exchange property are

In one week Alice can produce 5 pairs of shoes or 4 bookshelves while Roger can produce 10 pairs of shoes or 6 bookshelves. Alice has ________ advantage in producing ________.

In one day, Sue can change the oil on 20 cars or change the tires on 20 cars. In one day, Fred can change the oil on 20 cars or change the tires on 10 cars. Sue and Fred can gain from trade if Sue changes the ________ and Fred changes the ________.

-In the figure above, if 4 million computers are produced per year then the ________ should be produced to achieve the allocatively efficient use of resources

-Refer to the production possibilities frontier in the figure above. Suppose a country is producing at point a. A movement to point ________ means that the country ________.

-Refer to the production possibilities frontier in the figure above. Which production point is unattainable?

-Two nations can produce computers and software in the amounts given in the table above. Does either nation have an absolute advantage in producing the products? Which nation has a comparative advantage in computers? Which nation has a comparative advantage in software? Explain your answers.

Scarcity is represented on a production possibilities frontier figure by

A country possesses a comparative advantage in the production of a good if

Marginal benefit is the benefit ________ one more unit of the good and ________ of the good increases.

The United States uses tax funds to build and repair the interstate highway system and to provide health care services via Medicare. Suppose Medicare services are on the horizontal axis and highway miles are on the vertical axis of a PPF. If the government decides to reduce funding to Medicare, this change would be shown as

Marginal cost curves slope

-As we increase the production of computers, we find that we must give up larger and larger amounts of DVD players per computer.

-An economy produces at point a on the PPF shown in the above figure. A drought reduces the amount of wheat produced and the economy produces at point b. The opportunity cost of a unit of wheat ________.

Increasing opportunity cost implies that

When economists state that the opportunity cost of a product increases as more of it is produced, what do they mean? What is the opportunity cost?

-In the production possibilities frontier depicted in the figure above, what is the opportunity cost of increasing the production of bananas from two million pounds to three million pounds?

Each point on the production possibilities frontier achieves allocative efficiency.

A person has a comparative advantage in an activity if that person can