Exam 2: Production Possibilities, Opportunity Cost, and Economic Growth

Investment is an economic term for the act of increasing the stock of money available for business loans.

A point outside the production possibilities curve represents a combination of goods that is:

Exhibit 2-8  Production possibilities curve data As shown in Exhibit 2-8, a total output of 0 units of capital goods and 10 units of consumer goods is:

The law of increasing costs indicates that the opportunity cost of producing a good:

A production possibilities curve is drawn based on the assumptions that resources are fixed and fully employed and technology advances at the rate of growth of the economy overall.

While waiting in line to buy one cheeseburger for $1.50 and a medium drink for $1.00, Sally notices that she could get a value meal that contains both the cheeseburger and medium drink and also a medium order of fries for $2.75. She thinks to herself, "Is it worth the extra 25 cents to get the medium fries?" To an economist, Sally's decision is an example of:

People in poor countries may have difficulties achieving economic growth because:

The opportunity cost of watching television is:

The various combinations of goods and services that can be produced, when an economy uses its available resources and technology efficiently, is called:

Technological innovations will cause:

Unemployment or underemployment of labor might explain why an economy would be operating inside its production possibilities curve (PPC).

Exhibit 2-3  Production possibilities curve data According to the data given in Exhibit 2-3, the production of 1 unit of capital goods and 14 units of consumer goods:

Assuming an economy is already experiencing full employment, then it must produce more consumer goods and fewer capital goods if it wishes to experience greater rates of economic growth over time.

Just before class, Jim tells Stuart, "Stuart, you shouldn't skip class today because you have paid tuition to enroll in the class." Stuart ignores Jim's advice, and instead makes the decision of whether to attend based on the importance to his grade that he feels he'd be missing that day in class relative to his value of the extra time he could have to finish the video game he is playing. To an economist, Stuart is:

Which of the following is true about the production possibilities curve when a technological progress occurs? The curve:

A local restaurant offers an "all you can eat" Sunday brunch for $12. Susan eats four servings, but leaves half of a fifth helping uneaten. Why?

Exhibit 2-15  Production possibilities curve In Exhibit 2-15, what can we conclude about point Q?

Other things being equal, a decreased supply of natural resources would be represented on a production possibilities curve by a(n):

All points on the production possibilities curve represent efficient levels of production.

Exhibit 2-9  Production possibilities curve If the economy represented in Exhibit 2-9 is operating at Point W: