Exam 2: The Economic Problem

The nationʹs production possibilities frontier is bowed outward. Suppose that the government decides to increase the production of armaments by $20 billion, and that as a result the output of consumer goods falls by $20 billion. If a further $20 billion increase beyond the initial $20 billion increase in armaments output is sought, we can expect that the output of consumer goods and services will fall further by

Markets

A production point beyond the production possibilities frontier represents what?

If the marginal benefit from another computer exceeds the marginal cost of the computer, then to use resources allocatively efficiently,

Point Production of grain (tons) Production of cars (cars) A 0 30 B 2 28 C 4 24 D 6 18 E 8 10 F 10 0 -The table above lists six points on the production possibilities frontier for grain and cars. What is the opportunity cost of producing the 26th car?

-As we increase the production of computers, we find that we must give up larger and larger amounts of DVD players per computer.

-In the above figure, which of the following is TRUE regarding the movements from point A to B And from point C to D? I. The movement from point A to B shows that the economy has chosen to produce 100 more jets. II. The movement from point C to D shows that the economy has chosen to produce 100 more jets. III. The movement from point A to B and from point C to D have the same opportunity cost.

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.

Technological progress makes the production possibilities frontier

If two countries specialize in the production of goods in which they have a comparative advantage, they can experience gains from trade.

-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 ____________.

Increasing opportunity cost occurs along a production possibilities frontier because

-The above figure illustrates Maryʹs production possibilities frontier. Which of the following movements show opportunity costs increasing?

Why does the marginal benefit curve have a negative slope?

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 1 computer in an hour. The opportunity cost of 20 cameras in terms of computers in Germany is

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. If Germany produces one less computer and switches resources to cameras, and the United States produces one more computer and takes resources out of cameras, then the net change in camera production in both countries taken together is

Missouri can produce 10,000 tons of pecans per year or 5,000 tons of pears per year. Washington can produce 12,000 tons of pecans per year or 48,000 tons of pears per year. Which of the following statements is true?

-In the figure above, point A is undesirable because

An increase in the production of capital goods

The figure above represents the production possibilities frontier for a country. a) The nation is currently producing at point B and wants to move to point C. What is the opportunity cost of the move? b) The nation is currently producing at point B and wants to move to point A. What is the opportunity cost of the move? Production point Beef (pounds) Wheat (bushels) A 0 and 9 B 2 and 7 C 4 and 4 D 6 and 0