Exam 2: The Economic Problem

-Agnes can produce either 1 unit of X or 1 unit of Y in an hour, while Brenda can produce either 2 units of X or 4 units of Y in an hour. The opportunity cost of producing a unit of X is

-Suppose a factory can be designed to produce either trucks or cars. The figure above shows the marginal cost and marginal benefit of producing trucks in terms of the forgone cars. a) What is the marginal benefit of the 25th truck? b) What is the marginal cost of the 25th truck? c) Should the 25th truck be produced? Why or why not. d) What is the marginal benefit of the 75th truck? e) What is the marginal cost of the 75th truck? f) Should the 75th truck be produced? Why or why not? g) What is the allocatively efficient quantity of trucks?

-In the figure above,

The marginal benefit from a good is the amount a person is willing to pay for

Property rights facilitate the development of trade.

What economic concepts are represented in the production possibilities model?

-Refer to the above figure. Mario is self-sufficient and so is Mia. Each produces 6 dishes of pasta and 4 pizzas. Mario and Mia decide to specialize and trade. After they have specialized and traded, compared to the initial situation, Mia's opportunity cost of pasta has ________ and Mario's opportunity cost of a pizza has ________.

An economy produces only food and shelter. There are two individuals in the economy: Bill and Mary. Mary's opportunity cost of producing 1 unit of shelter is 2 units of food. Bill's opportunity cost of producing 1 unit of shelter is 4 units of food.

If property rights are not clearly defined and enforced, then

A marginal cost curve

We are using resources efficiently if we can produce more of one good without producing less of some other good that we value more highly.

When producing goods and services along a PPF, tradeoffs exist because

-In the above figure, in order for this country to move from production possibilities frontier PPF₁ to PPF₂, it might

-According to the figure above, the opportunity cost of producing another computer is

Economic growth can be pictured in a production possibilities frontier diagram by

In markets, people's decisions are coordinated by

The fact that individual productive resources are NOT equally useful in all activities

-The above table shows production points on Sweet-Tooth Land's production possibilities frontier. Which of the following statements is TRUE?

Markets

Explain why the production possibilities frontier bows outward.