Exam 2: The Economic Problem

Suppose that when NBC produces 1 new drama series in a season it gives up the chance to produce 3 new reality shows. This means that

A circular flow diagram shows the flows from the goods and resources markets.

-In the figure above

Employees at Bank of America are good at providing banking services and workers at Ben & Jerry's are good at making ice cream. If some bankers are moved to making ice cream, we get a small increase in the amount of ice cream produced and a large decrease in the amount of banking services provided. If the PPF has banking services on the vertical axis and ice cream on the horizontal axis, the effect of the change reflects

Economic growth is shown on the production possibilities frontier as

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

Production points inside the production possibilities frontier

A point inside a production possibilities frontier

-As output moves from point a to point b to point c along the PPF in the above figure, the opportunity cost of one more unit of good X

Mary takes 4 minutes to make a sandwich and 6 minutes to mix a cocktail. Her sister Ash takes 4 minutes to make a sandwich and 4 minutes to mix a cocktail. Calculate each sister's opportunity cost. Which of the two sisters has an absolute advantage in making sandwiches? In mixing cocktails? Which of the two has a comparative advantage in making sandwiches? In mixing cocktails?

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 slope of a production possibilities frontier that displays increasing opportunity cost is

As a person consumes more of a good, the

Production possibilities -In the above table, the opportunity cost of the 2nd pizza is

A computer software program is most strongly an example of

Suppose that a typical German factory can produce 20 cameras or 1 computer in an hour, and that a typical American factory can produce 10 cameras or one computer in an hour. The opportunity cost of 20 cameras in terms of computers in the United States is

-The data in the above table demonstrates that gains from trade can be captured if

Which of the following describes comparative advantage?

One point on a PPF shows production levels at 50 tons of coffee and 100 tons of bananas. Remaining on the PPF, an increase of banana production to 140 tons shows coffee production at 30 tons. Still remaining on the PPF, coffee production at 10 tons allows banana production at 160 tons. The opportunity cost of a ton of bananas is

-The above table shows the number of pencils or pens that could be produced by Don and Bob in an hour. This schedule shows that