Exam 2: The Economic Problem

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

The production possibilities frontier itself shows

-In the figure above, Joe is producing at point A. Joe's opportunity cost of producing one shirt is

Marginal benefit curves slope

The fact of increasing opportunity costs means that a production possibilities frontier will

Capital accumulation definitely

In an eight-hour day, Andy can produce either 24 loaves of bread or 8 pounds of butter. In an eight-hour day, Bob can produce either 8 loaves of bread or 8 pounds of butter. Andy has a comparative advantage in the production of

As we move along a bowed-out production possibility frontier, producing more tacos and less pizza, the opportunity cost of a pizza ________.

A country produces only pencils and erasers. Pencil production is allocatively efficient if the marginal ________ of a pencil equals the marginal ________ of ________.

-The Hobbits of the Shire are trying to decide how much bread and how much wine to produce. They ask you to be their economic consultant and give you the information in the first table above about different combinations of wine and bread that they can produce if they are fully employed and doing their best. The Hobbits also give you the information in the second table above about their willingness to pay for wine depending on how much wine they already have. To help the Hobbits solve their problem: a) Draw the Shire's production possibilities frontier. Put wine on the horizontal axis. b) What is the opportunity cost of the first two thousand bottles of wine? What is the marginal cost of the 3000th bottle of wine? What is the marginal cost of the 3,000th loaf of bread? c) Draw the marginal cost of wine curve. What happens to the marginal cost if production of wine increases? Why? d) Draw the marginal benefit from wine curve on the same figure on which you put the marginal cost curve. Describe the relationship between the quantity of wine produced and the marginal benefit from wine. e) What combination of bread and wine will you recommend the Hobbits to produce? Why? Explain to the Hobbits why they would be worse off by producing a different combination of bread and wine.

-The table above shows the amounts of cloth and cheese that China and Pakistan can produce in an hour. Which country has the comparative advantage in cloth and which country has the comparative advantage in cheese?

-Refer to the production possibilities frontier in the figure above. Production point ________ represents an ________ production point.

-In the figure above, if the quantity of yogurt produced increases from 2 gallons an hour to 3 gallons an hour, the opportunity cost of a gallon of yogurt in terms of ice cream is

When producing at a production efficient point, ________.

Using a production possibilities frontier, economic growth is illustrated by a

If the marginal benefit of consuming another unit of a good is positive, then to reach the allocatively efficient level of output more of the good should be produced and consumed

Economic growth is the result of all of the following except

-In the above figure, which point represents an attainable but inefficient production point?

"If Mexico is currently operating at a point inside its production possibilities frontier, then there are unemployed resources in Mexico." Is this statement true or false? Briefly explain your answer.

Missouri can produce 10,000 tons of pecans per year or 5,000 tons of pears per year. Washington can produce 12,000 tons of pecans per year or 48,000 tons of pears per year. Which of the following statements about opportunity cost is CORRECT?