ECON 2100 Chapter 1 Production Possibilities Part 1

Economic resource categories are 1) Land, labor, capital, and entrepreneurial ability 2) Money, labor, capital, and entrepreneurial ability 3) Land, labor, money, and entrepreneurial ability 4) Land, money, capital, and entrepreneurial ability

1) Land, labor, capital, and entrepreneurial ability

Which of the following would entail the greatest opportunity cost? 1) allocating a square block in the heart of New York City for a surface parking lot 2) allocating a square block at the edge of a typical suburb for a surface parking lot 3) neither 1 nor 2

1) allocating a square block in the heart of New York City for a surface parking lot

At point C, what is the opportunity cost of 8 more million Nails? 1) 8 million Twinkies 2) 6 million Twinkies 3) 3 million Twinkies 4) 0 million Twinkies

3) 3 million Twinkies

What is an opportunity cost? 1) the retail price of a good or service in dollars 2) the wholesale price of a good or service in dollars 3) the amount of other products that must be forgone or sacrificed to produce a unit of product 4) the satisfaction or pleasure a consumer obtains from the consumption of a good or service

3) the amount of other products that must be forgone or sacrificed to produce a unit of product

Graph the production possibility curve using the above information. Label points A,B,C,D,E. Submit the graph to the Assignments Tool. It must be on graph paper. At point C, what is the opportunity cost of 3 more million Twinkies? 1) 16 million Nails 2) 28 million Nails 3) 8 millions Nails 4) 12 million Nails

4) 12 million Nails

The entrepreneur 1) combines the other resources to produce a product 2) makes major decisions 3) innovates and bears risk 4) all of the above

4) all of the above

The marginal principle states that "we should increase the level of an activity as long as: a) its total cost exceeds its total benefit." b) its total benefit exceieds its total cost." c) its marginal benefit exceeds its marginal cost." d) its marginal cost exceeds its marginal benefit."

c) its marginal benefit exceeds its marginal cost."

As we increase the number of Twinkies produced from 0 to 3 million, we must sacrifice 4 million nails. As we increase the number of Twinkies produced from 3 to 6 million we must sacrifice 8 million nails. This is due to the Law of Increasing Opportunity Cost. What causes this phenomenon? a) The substitution effect b) Many resources are better at producing one type of good than another. As society produces more and more Twinkies, resources are transferred from Nail production to Twinkies Production. The worst Nail producing resources are changed to producing Twinkies first. The resources that are the best at producing Nails are changed over to Twinkies last. c) Economies of scale d) Many resources are better at producing one type of good than another. As society produces more and more Twinkies, resources are transferred from Nail production to Twinkies Production. The best Nail producing resources are changed to producing Twinkies first. The resources that are the worst at producing Nails are changed over to Twinkies last.

b) Many resources are better at producing one type of good than another. As society produces more and more Twinkies, resources are transferred from Nail production to Twinkies Production. The worst Nail producing resources are changed to producing Twinkies first. The resources that are the best at producing Nails are changed over to Twinkies last.

The opportunity cost of something is a) the cost of the labor used to produce it b) what you sacrifice to get it c) the price charged for it d) the search cost required to find it

b) what you sacrifice to get it