Exam 2: The Economic Problem

The production possibilities frontier is the boundary between those combination of goods and services that can be

The fact of increasing opportunity costs means that a production possibilities frontier will

-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 Y is

"If Mexico is currently operating at a point inside its production possibilities frontier, then there are unemployed resources in Mexico." Is this statement true or false? Briefly explain your answer.

-Refer to the production possibilities frontier in the figure above. Production point ________ represents an ________ production point.

Markets are best defined as

Two social institutions that are essential for trade to be organized are ________.

BAE, a British defense company, has the contract to produce Tornado aircraft for the Royal Air Force. The BBC produces high-quality mystery shows for the British government. Both produce at the lowest possible cost. On a PPF with aircraft and mystery shows on the axes,

A president of the United States promises to produce more defense goods without any decreases in the production of other goods. This promise can be valid

-Consider the PPF for office buildings and housing shown in the figure above. Which point in the diagram shows that resources to produce office buildings and housing are being misallocated, unused, or both?

-As output moves from point a to point b to point c along the PPF in the above figure, the opportunity cost of one more unit of good X

Betty and Ann live on a desert island. With a day's labor, Ann can produce 8 fish or 4 coconuts; Betty can produce 6 fish or 2 coconuts. Ann's opportunity cost of producing 1 coconut is ________ and she should specialize in the production of ________.

-Two countries, Alpha and Beta, have identical production possibilities frontiers illustrated above. If Alpha produces at point a and Beta produces at point b, then ________.

The principle of increasing opportunity cost leads to

At one point along a PPF, 10 pizzas and 7 sandwiches can be produced. At another point along the same PPF, 9 pizzas and 10 sandwiches can be produced. The opportunity cost of a pizza between these points is ________ per pizza.

A country has a comparative advantage in the production of a good if its opportunity cost is lower compared to another country.

-In the figure above, if Mac and Izzie both completely specialized and traded with one another, their joint output would be

An efficient allocation of resources occurs when we

-The table above presents the production possibilities of Farmer Brown. Use these data to calculate Farmer Brown's opportunity cost of additional beef as Farmer Brown moves from point A to B to C to D. Also use the data to calculate Farmer Brown's opportunity cost of additional wheat as Farmer Brown moves from point D to C to B to A. Based on these costs, does Farmer Brown use resources that are more productive in one activity than the other? Explain your answer.

-Omar and John can fix computers or write computer programs. The table above shows the number of computers they can fix and the lines of code they can write in a day. a) Who, if anyone, has the absolute advantage? b) Who has the comparative advantage in fixing computers? Why? c) Who has the comparative advantage in writing programs? Why?