Exam 2: The Economic Problem

Abe can catch 10 pounds of fish an hour or pick 10 pounds of fruit. Zeb can catch 30 pounds of fish an hour or pick 20 pounds of fruit. The opportunity cost of fish is ________ for Abe than for Zeb, and the opportunity cost of fruit is ________ for Abe than for Zeb.

When economists state that the opportunity cost of a product increases as more of it is produced, what do they mean? What is the opportunity cost?

-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.

A system of property rights

According to the principle of comparative advantage, if a rich country trades with a poor country, then

At one point along a PPF, 10 pizzas and 7 sandwiches can be produced. At another point along the same PPF, 9 pizzas and 10 sandwiches can be produced. The opportunity cost of a pizza between these points is ________ per pizza.

-In the figure above, the allocatively efficient output of computers is

-According to the diagram in the figure above, what is the marginal cost of producing the 3 millionth gallon of gasoline per month?

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

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 ________.

The production possibilities frontier bows outward because

Suppose Joe can prepare 20 sandwiches or 10 pizzas in an hour and Beth can produce 36 sandwiches or 27 pizzas. The concept of comparative advantage concludes that

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?

-In the figure above, both Joe and Jill initially produce at point A. If Joe and Jill realize that they each possess a comparative advantage, which outcome can we expect?

-In the figure above, an economy would grow fastest if it produces at point

Comparative advantage is

If the marginal benefit from another computer exceeds the marginal cost of the computer, then to use resources allocatively efficiently

Draw a production possibilities frontier between beans and peas. Label the unattainable points, the attainable points with fully employed resources, and the attainable points with unemployed resources.

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

Betty and Ann live on a desert island. With a day's labor, Ann can produce 8 fish or 4 coconuts; Betty can produce 6 fish or 2 coconuts. Ann's opportunity cost of producing 1 coconut is ________ and she should specialize in the production of ________.