Exam 2: The Economic Problem

-The figure above shows Freda's PPF. Freda currently produces 10 packets of fudge and no cookies. If Freda decides to produce 1 packet of cookies, her opportunity cost of the packet of cookies is ________ of fudge.

-The table above lists six points on the production possibilities frontier for grain and cars. From this information you can conclude that production is inefficient if this economy produces

A marginal cost curve

On the vertical axis, the production possibilities frontier shows ________; on the horizontal axis, the production possibilities frontier shows ________.

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

-The table above represents different points along a production possibilities curve. What is the marginal cost of moving from 2 bushels to 3 bushels of beans?

Opportunity cost is represented on the production possibilities frontier by

"Allocative efficiency requires that the maximum number of people have access to all of the goods and services that our economy produces." Is this statement true or false? Explain your answer.

A point inside a production possibilities frontier

A PPF bows outward because

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

-Refer to the table above, which gives five points on a nation's PPF. The production of 7 units of X and 28 units of Y is

-The figure above represents the production possibilities frontier for a country. a)The nation is currently producing at point B and wants to move to point C. What is the opportunity cost of the move? b)The nation is currently producing at point B and wants to move to point A. What is the opportunity cost of the move?

Using the production possibilities frontier model, unemployment is described as producing at a point

A computer software program is most strongly an example of

-The above table shows production points on Sweet-Tooth Land's production possibilities frontier. Which of the following statements is TRUE?

Marginal benefit is the benefit

-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.

When moving along the production possibilities frontier, opportunity cost is measured as the

-Consider the PPF for office buildings and housing shown in the figure above. Which point in the diagram shows that resources to produce office buildings and housing are being misallocated, unused, or both?