econ 1a ch2

This production possibility table shows marginal opportunity costs that are: Butter Guns 20 pounds 0 18 pounds 5 15 pounds 8 9 pounds 10 0 pounds 11 A. increasing. B. decreasing. C. constant. D. zero.

A Based on the information in the table, we can see that initially, we sacrifice a few pounds of butter to get four guns. But as we continue, we have to trade ever larger quantities of butter for fewer and fewer additional guns. As such, the marginal opportunity costs are increasing.

If an economy moves from a point inside its PPC to a point along its PPC, then it is using its resources: A. less efficiently. B. more efficiently. C. at exactly the same amount of efficiency as before. D. none of the solutions presented is correct.

B As we have learned in Ch. 2, if an economy is inside its PPC, it is, by definition, using its resources inefficiently. Additionally, any point along the PPC is by definition productive efficiency. Therefore, if an economy moves from a point inside its PPC to point along its PPC, it is using its resources more efficiently than before.

Suppose that in Columbia, one unit of labor can produce 4 tons of papayas or 2 tons of bananas, while in Brazil one unit of labor can produce either 2 tons of papayas or 4 tons of bananas. If each country has 2 units of labor, which of the following consumption combinations can be attained only with specialization and trade? A. Brazil consumes 8 tons of bananas and no papayas. B. Columbia consumes 8 tons of papayas and no bananas. C. Columbia consumes 4 tons of papayas and 4 tons of bananas. D. Brazil consumes 2 tons of papayas and 4 tons of bananas.

C The consumption combination of 4 tons each for both papayas and bananas for Columbia can only be reached through trade, as it requires 3 units of labor to produce. But only 2 units are available. Columbia could reach this consumption combination/bundle by producing 8 tons of papayas and then trading 4 tons to Brazil for 4 tons of bananas. Note that all of the other consumption combinations provided/given can be produced without trade

With the resources available to you, you can make the combinations of plates and cups shown below: Plates Cups 60 0 50 15 40 30 30 45 20 60 10 75 0 90 Given this information, the opportunity cost of producing 90 cups instead of 15 cups is: A. 10 Plates. B. 30 Plates. C. 40 Plates. D. 50 Plates.

D Producing an extra 75 cups (going from 15 to 90) means not producing 50 plates (going from 50 plates to zero plates).

If a country does not have a comparative advantage in the production of a good, then its resources are not better suited to the production of that good than the resources of other countries. true false

true Having a comparative advantage in production means the country can produce a good at a lower opportunity cost (and hence a lower cost) compared to other countries. It also means that the resources it possesses are well-suited for producing that good. If, on the other hand, its resources are ill-suited for producing that good, then it is likely it does not possess a comparative advantage in the production of that good.