Exam 2: The Economic Problem

On the vertical axis, the production possibilities frontier shows ________; on the horizontal axis, the production possibilities frontier shows ________.

-Employees at Bank of America are good at providing banking services and workers at Ben & Jerry's are good at making ice cream. The figure above shows the marginal cost and marginal benefit curves for ice cream. As Ben & Jerry's increases production from 1 to 2 million gallons of ice cream, the

Why is it likely that the United States has an absolute advantage in goods and yet it still ends up importing them from other countries?

In one week Alice can produce 5 pairs of shoes or 4 bookshelves while Roger can produce 10 pairs of shoes or 6 bookshelves. Alice should specialize in the production of

-The figure above shows Prakash's and Gail's production possibilities frontiers for writing books and magazine articles. a) What is Prakash's opportunity cost of a book? What is Gail's 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?

-Refer to the production possibilities frontier in the figure above. Which production point indicates that resources are NOT fully utilized or are misallocated?

An efficient allocation of resources occurs when we

-In the figure above, the point labeled C in the production possibilities frontier

-The above table shows production combinations on a country's production possibilities frontier. Which of the following is an example of a point that is unattainable?

Over the past several decades, the United States has devoted a greater fraction of its resources to consumption than Hong Kong, which is why the U.S. economy grew faster than Hong Kong's economy.

The PPF shifts if

"The 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." Comment on this statement.

-In the above figure, point A is ________, and point B is ________.

If a country operates on its PPF, it achieves production efficiency.

Because of the existence of comparative advantage, the total output of goods is higher when each producer

As long as technology increases, economic growth is free.

Marginal cost curves slope

-The table above represents different points along a production possibilities curve. What is the marginal cost of moving from 2 bushels to 3 bushels of beans?

Which of the following statements can used to describe efficiency? I. Efficiently using resources means that producers make the highest profits possible. II) Using resources efficiently means that we cannot produce more of one good without producing less of another good that has a higher value. III) Resource use is efficient when we produce goods and services that people value most highly.

A country has a comparative advantage in the production of a good if its opportunity cost is lower compared to another country.