Exam 2: The Economic Problem

"If the United States has an absolute advantage in the production of wheat, it should specialize in wheat and export wheat." True or false? Explain.

-Refer to the table above, which gives five points on a nation's PPF. The opportunity cost of increasing the production of X from 8 to 12 units is a total of

-In the above figure, once on PPF₂, a country would grow slowest by producing at point

Explain the difference between marginal cost and marginal benefit.

Suppose that the government is trying to decide between allocating its resources to build more dams or to build more freeways. In terms of forgone dams, as more freeways are constructed, the marginal benefit of additional freeways and the marginal cost of additional freeways )

-The above table shows production combinations on a country's production possibilities frontier. A movement from involves the greatest opportunity cost of increasing the production of good Y.

The United States has an absolute advantage in producing sugar over all of the other sugar producing countries. Does this fact mean that we should not import any sugar from the other countries?

Why does the marginal benefit curve have a negative slope?

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

Are all points inside the production possibilities frontier unattainable?

The existence of the tradeoff along the PPF means that the PPF is

If an economy is operating at a point inside the production possibilities frontier, then

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

The opportunity cost of more capital goods today is

Moving along a PPF, marginal cost is

Homer and Teddy are stranded on a desert island. To feed themselves each day they can either catch fish or pick fruit. In a day, Teddy could pick 60 pieces of fruit or catch 20 fish. Homer could pick 100 pieces of fruit or catch 150 fish. Which of the following statements is correct?

As an economy's capital stock increases, the economy

Blue Violet's Sweet Pansy's -Two countries, Blue Violet and Sweet Pansy, produce only two goods: teapots and coffeepots. The table above gives their production possibilities. With specialization and trade, Sweet Pansy produces and Blue Violet produces .

An economy is producing efficiently if it is producing on its PPF.

Resource use is allocatively efficient when marginal benefit is