Exam 2: The Economic Problem

-The figure above shows a nation's production possibilities frontier for apples and oranges. a)What combination of goods is represented by point A? b)What combination of goods is represented by point B? c)Which point represents an unattainable combination of goods?

A situation in which some resources are NOT fully utilized is represented in a production possibilities frontier diagram by

Allocative efficiency occurs when it is

A tradeoff is illustrated by

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

In the above figure, at point b what is the opportunity cost of producing 2 more audio tapes?

Marginal cost is the ________ one more unit of a good and ________ of the good increases.

The marginal benefit of a good or service

-Molly just graduated from high school. The figure shows her possibilities frontier. If Molly goes to college, she will move from point M to point K. In terms of consumption goods, Molly's opportunity cost of going to college is

A point outside a production possibilities frontier indicates

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

The term "market" refers to

In March a factory used new technology to produce its output. Then in August a fire destroys half the factory. The new technology shifted the factory's PPF ________ and the fire shifted it ________.

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

"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.

If a country operates on its PPF, it achieves production efficiency.

-The figure above illustrates Mary's production possibilities frontier. If Mary wants to move from point b to point c, she must

-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.

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

Tom takes 20 minutes to cook an egg and 5 minutes to make a sandwich. Jerry takes 15 minutes to cook an egg and 3 minutes to make a sandwich. If Tom and Jerry trade