Exam 2: The Economic Problem

Specialization and trade allow countries to consume beyond their PPFs.

Over the past several decades, the United States has devoted a greater fraction of its resources to consumption than Hong Kong, which is why the U.S. economy grew faster than Hong Kong's economy.

-Employees at Bank of America are good at providing banking services and workers at Ben & Jerry's are good at making ice cream. The figure above shows the marginal cost and marginal benefit curves for ice cream. If 3 million gallons of ice cream are produced, marginal cost ________ marginal benefit and ________ produced.

-In the figure above, what can be said about point B?

A person has a comparative advantage in producing a particular good if that person

Economic growth

Explain why the production possibilities frontier bows outward.

Homer and Teddy are stranded on a desert island. To feed themselves each day they can either catch fish or pick fruit. In a day, Teddy could pick 60 pieces of fruit or catch 20 fish. Homer could pick 100 pieces of fruit or catch 150 fish. Which of the following statements is CORRECT?

Jane produces only corn, measured in tons, and cloth, measured in bolts. For her, the opportunity cost of one more ton of corn is

Which of the following is TRUE regarding markets? I) Economists define a market as a geographic location where trade occurs. II) A market enables buyers and sellers to get information about each other and to buy and sell from each other. III) Markets coordinate decisions through prices.

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 is TRUE?

The production possibilities frontier is the boundary between

Explain how the production possibilities frontier illustrates scarcity.

Individuals A and B both produce good X. A has a comparative advantage in the production of good X if A

-Refer to the production possibilities frontier in the figure above. If the country moves from point a to point c, the opportunity cost of the move is

In markets, people's decisions are coordinated by

-In the above figure, if 4000 bicycles are produced per month,

"Allocative efficiency in the production of cherries means that consumers can eat all of the cherries they desire." Is this statement true or false?

Country A Country B -In the table above, country A is producing 4 units of X and 8 units of Y and country B is producing 4 units of X and 6 units of Y. The opportunity cost of producing more of

Sam's production possibilities frontier has good A on the horizontal axis and good B on the vertical axis. If Sam is producing at a point inside his frontier, then he