Exam 2: The Economic Problem

Which of the following is TRUE regarding markets? I) Economists define a market as a geographic location where trade occurs. II) A market enables buyers and sellers to get information about each other and to buy and sell from each other. III) Markets coordinate decisions through prices.

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

Points outside the production possibilities frontier illustrate production points that cannot be attained.

-Two countries, Alpha and Beta, have identical production possibilities frontiers illustrated above. If Alpha produces at point a and Beta produces at point b, then

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's opportunity cost of changing oil is ________ than Fred's and her opportunity cost for changing tires is ________ than Fred's.

At the current point of production on a nation's 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?

A production point beyond the production possibilities frontier represents what?

As we move along a bowed-out production possibility frontier, producing more tacos and less pizza, the opportunity cost of a pizza

Some time ago the government of China required many highly skilled technicians and scientists to engage in unskilled agricultural labor in order to develop "proper social attitudes." This policy probably caused China to produce

-In the figure above, the marginal cost of the fifth computer is

-In the above figure, which point represents an attainable but inefficient production point?

If Hong Kong continues to devote more resources to accumulating capital than the United States, Hong Kong will continue to grow more rapidly than the United States.

Specialization and trade allow countries to consume beyond their PPFs.

Consider a production possibilities frontier with corn on the vertical axis and cars on the horizontal. Unusually good weather for growing corn shifts

"If an economy is producing at a point on its PPF, it has achieved allocative efficiency." True or false? Explain.

Each point on the production possibilities frontier achieves allocative efficiency.

The tradeoff between current consumption and the production of capital goods also reflects a tradeoff between

-The table above represents the marginal cost and marginal benefit associated with pizza (in terms of movies). What quantity of pizza should be produced if resources are to be used efficiently?

Economic growth is shown on the production possibilities frontier as

Why does the marginal benefit curve have a negative slope?