Exam 2: The Economic Problem

-In the above figure, curve b shows the

ʺAllocative efficiency in the production of cherries means that consumers can eat all of the cherries they desire.ʺ Is this statement true or false?

Consider a PPF for tapes and soda. If the opportunity cost of a tape increases as the quantity of tapes produced increases and also the opportunity cost of a soda increases as the quantity of soda produced increases, then the PPF between the two goods will be

Any point on a production possibilities frontier PPF) itself is

-Refer to the production possibilities frontier in the figure above. More of good X must be given up per unit of good Y gained when moving from point b to point a than when moving from point c to point b. This fact

Which of the following statements regarding the production possibilities frontier is true?

-In the figure above, the marginal cost of producing a computer

ʺThe United States is more productive in most activities than are most of other countries because it has an absolute advantage in the production of most goods and services. Therefore we should restrict international trade as it only benefits other countries at the expense of the United States.ʺ Comment on this statement.

-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?

On the vertical axis, the production possibilities frontier shows___________ ; on the horizontal axis, the production possibilities frontier shows__________ .

In goods markets___________ and in factor markets_________ .

At the current point of production on a nationʹs production possibilities frontier, the marginal benefit of a slice of pizza is 500 tacos per slice of pizza while the marginal cost of producing a slice of pizza is 750 tacos per slice of pizza. To be allocatively efficient, what should be done? Quantity (millions of bushes of apples) Marginal benefit (oranges per bushel) Marginal Cost (oranges per bushel) 5 10 1 10 8 3 15 6 6 20 4 9 25 2 12

The production possibilities frontier is

Which graph shows the impact of scientists developing a more powerful fertilizer?

The marginal benefit from a good is the amount a person is willing to pay for

A tradeoff is

-In order to achieve the maximum gains from trade, people should specialize according to

The opportunity cost of more capital goods today is

Marginal cost

A point inside a production possibilities frontier