Exam 2: The Economic Problem

Scarcity is represented on a production possibilities frontier figure by

What is comparative advantage? Give an example.

The figure above shows a nationʹs production possibilities frontier for apples and oranges. a) What combination of goods is represented by point A? b) What combination of goods is represented by point B? c) Which point represents an unattainable combination of goods?

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

A nation can produce at a point outside its PPF

Which of the following is NOT true concerning a societyʹs production possibilities frontier PPF)?

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

A factor market is a market in which

Resource use is allocatively efficient if the

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

If a country must decrease current consumption to increase the amount of capital goods it produces today, then it must

-In the above figure, which point represents an unattainable production combination of the two goods?

The state of Georgia offers free college tuition to high school students with a ʺBʺ average. In 2007, the state raised the requirement so that fewer students qualified for the scholarship. At the same time, Georgia increased state spending on health care. Suppose that college education is on the vertical axis and health care is on the horizontal axis of a PPF. Georgiaʹs change in spending would be shown as

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 moving along the production possibilities frontier, opportunity cost is measured as the

The figure above shows Prakashʹs and Gailʹs production possibilities frontiers for writing books and magazine articles. a) What is Prakashʹs opportunity cost of a book? What is Gailʹs opportunity cost? Who has the comparative advantage in writing books? b) Who has the comparative advantage in writing magazine articles? c) According to their comparative advantages, who should write books and who should write magazine articles?

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

-In the figure above, the allocatively efficient output of computers is

As long as the marginal benefit from a good is greater than its marginal cost, an economy is operating efficiently.

-In the figure above, both Joe and Jill initially produce at point A. If Joe and Jill realize that they each possess a comparative advantage, which outcome can we expect?