Exam 2: The Economic Problem

The quantity of shoes produced is measured along the horizontal axis of a PPF and the quantity of shirts is measured along the vertical axis. As you move down toward the right along the PPF, the marginal cost of

In one day, Sue can change the oil on 20 cars or change the tires on 20 cars. In one day, Fred can change the oil on 20 cars or change the tires on 10 cars. Sue and Fred can gain from trade if Sue changes the ________ and Fred changes the ________.

If Sam is producing at a point on his production possibilities frontier, then he

When we choose a particular option, we must give up alternative options. The highest-valued alternative forgone is the ________ of the option chosen.

-Two nations can produce computers and software in the amounts given in the table above. Does either nation have an absolute advantage in producing the products? Which nation has a comparative advantage in computers? Which nation has a comparative advantage in software? Explain your answers.

Both Mergatroid and the Geebocks produce only gizmos and widgets. It is possible for Mergatroid to have

Why does it make sense for economies to specialize according to comparative advantage and trade?

Marginal cost

-In the above figure, once on PPF₂, a country would grow slowest by producing at point

-In the figure above, the marginal cost of producing a computer

If a society is operating at a point inside its production possibilities frontier, then this society's

Marginal benefit is the benefit

The state of Georgia offers free college tuition to high school students with a "B" average. In 2007, the state raised the requirement so that fewer students qualified for the scholarship. At the same time, Georgia increased state spending on health care. Suppose that college education is on the vertical axis and health care is on the horizontal axis of a PPF. Georgia's change in spending would be shown as

The idea of comparative advantage implies that people or countries

-The above table shows production points on Sweet-Tooth Land's production possibilities frontier. Which of the following is an example of a point that is inefficient?

President Obama has proposed a goal that everyone complete at least one year of formal education or training beyond high school. This policy would

One of the opportunity costs of economic growth is

Suppose a scientific breakthrough made free solar power available in unlimited quantities in the United States. The effect of this invention would be to move the

-In the figure above, suppose that Mac and Izzie specialize and trade to reach point c. Mac sends Izzie

-The country whose production possibilities frontier is illustrated above is currently at position A on the production possibilities frontier. If it wishes to move to position B, it will