Exam 2: The Economic Problem

China's State Council has encouraged more spending to "improve transportation links and other infrastructure... ." It will also "step up its spending on vocational training and other educational programs for adults." HYPERLINK "http://www.nytimes.com/" www.nytimes.com, Keith Bradsher, October 19, 2008 Suppose that capital goods are on the vertical axis while consumption goods are on the horizontal axis of China's PPF. As a result of enacting the policies, we would expect i. an expansion of China's production possibilities. ii. capital accumulation. iii. an increase in human capital

Draw and describe a marginal cost curve for slices of pizza where the opportunity cost of producing a slice of pizza is measured as tacos forgone.

" -The Hobbits of the Shire are trying to decide how much bread and how much wine to produce. They ask you to be their economic consultant and give you the information in the first table above about different combinations of wine and bread that they can produce if they are fully employed and doing their best. The Hobbits also give you the information in the second table above about their willingness to pay for wine depending on how much wine they already have. To help the Hobbits solve their problem: a) Draw the Shire's production possibilities frontier. Put wine on the horizontal axis. b) What is the opportunity cost of the first two thousand bottles of wine? What is the marginal cost of the 3000t of wine? What is the marginal cost of the 3,000th loaf of bread? c) Draw the marginal cost of wine curve. What happens to the marginal cost if production of wine increases? W d) Draw the marginal benefit from wine curve on the same figure on which you put the marginal cost curve. D the relationship between the quantity of wine produced and the marginal benefit from wine. e) What combination of bread and wine will you recommend the Hobbits to produce? Why? Explain to the Ho why they would be worse off by producing a different combination of bread and wine.

What economic concepts are represented in the production possibilities model?

-If the United States can increase its production of automobiles without decreasing its production of any other good, the United States must have been producing at a point

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 .

An increase in the nation's capital stock will

-In the figure above, an economy would grow fastest if it produces at point

A choice is made. The value of the highest- valued alternative given up is the _ of the choice made.

A country that must decrease production of one good in order to increase the production of another

Suppose that a typical German factory can produce 20 cameras or 1 computer in an hour, and that a typical American factory can produce 10 cameras or one computer in an hour. Germany wishes to purchase computers from the United States in exchange for cameras. What is the maximum number of cameras per computer that Germany would be willing to pay the United States?

The social arrangements that govern the ownership, use, and disposal of property are referred to as

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

Betty and Ann live on a desert island. With a day's labor, Ann can produce 6 fish or 4 coconuts; Betty can produce 3 fish or 1 coconut. Betty's opportunity cost of producing 1 fish is _, and she should specialize in the production of .

-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 .

In goods markets

-Joe's hot dog stand can produce hot dogs and hamburgers. The table gives Joe's production possibilities. The opportunity cost of _.

Suppose that you have a choice between video games and movies. If the marginal benefit of a video game, in terms of movies forgone, exceeds the marginal cost, then your resources would be used most efficiently by

Intellectual property

One of the opportunity costs of economic growth is