Exam 2: The Economic Problem

The United States uses tax funds to build and repair the interstate highway system and to provide health care services via Medicare. Suppose Medicare services are on the horizontal axis and highway miles are on the vertical axis of a PPF. If the government decides to reduce funding to Medicare, this change would be shown as

The opportunity cost of economic growth is

China's State Council has encouraged more spending to "improve transportation links and other infrastructure...." It will also "step up its spending on vocational training and other educational programs for adults." www.nytimes.com, Keith Bradsher, October 19, 2008 Suppose that capital goods are on the vertical axis while consumption goods are on the horizontal axis of China's PPF. As a result of enacting the policies, we would expect I. an expansion of China's production possibilities. II. capital accumulation. III. an increase in human capital.

Agnes can produce either 1 unit of X or 1 unit of Y in an hour, while Brenda can produce either 2 units of X or 4 units of Y in an hour. The opportunity cost of producing a unit of Y is

-In the production possibilities frontier depicted in the figure above, what is the opportunity cost of increasing the production of bananas from two million pounds to three million pounds?

A factor market is a market in which

The social arrangements that govern the ownership, use, and disposal of property are referred to as

Allocative efficiency occurs when

-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?

Agnes can produce either 1 unit of X or 1 unit of Y in an hour, while Brenda can produce either 2 units of X or 4 units of Y in an hour. There can be gains from exchange

The production possibilities frontier represents

The state of Georgia offers free college tuition to high school students with a "B" 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. These changes

-In the figure above, moving from production at point d to production at point a requires

Suppose that in an hour Joe can prepare 10 sandwiches or 5 pizzas. The opportunity cost of Joe producing one sandwich is

Production points inside the production possibilities frontier

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 ________.

-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.

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

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

-Refer to the production possibilities frontier in the figure above. Which of the following movements requires the largest opportunity cost, in terms of good Y forgone, per extra unit of good X?