2.1: Production Possibilities and Opportunity Cost

Leisure Island has 50 hours of labor a day that it can use to produce entertainment and good food. The table shows the maximum quantity of each good that Leisure Island can produce with different quantities of labor. 1. Can Leisure Island produce 4 shows and 14 meals a​ week? A. ​Yes, it can produce these quantities B. ​No, it cannot produce these quantities. 2. If Leisure Island produces 4 shows and 9 meals a​ week, is production​ efficient? A. ​Yes, it is efficient B. ​No, it is not efficient 3. If Leisure Island produces 8 shows and 5 meals a​ week, do the people of Leisure Island face a​ tradeoff? A. ​Yes, it faces a tradeoff. B. ​No, it​ doesn't face a tradeoff. 4. Suppose that Leisure Island produces 4 shows and 12 meals a week. Calculate the opportunity cost of producing 2 additional shows a week? The opportunity cost of producing 2 additional shows per week is _______meals per week.

1. B. No, it cannot produce these quantities. 2. B. No, it is not efficient 3. A. Yes, it faces a tradeoff. 4. 3 Meals per week

The graph shows a production possibilities frontier. Production efficiency is achieved at points A​, B​, and C because to increase the production of x as we move from A to B to C​, ​ _______ . A. we are giving up the minimum amount of y possible to increase the production of x B. the production of y also increases C. the production of y decreases and the value of the y forgone is worth less than the additional x produced D. the production of y remains unchanged

A. we are giving up the minimum amount of y possible to increase the production of x

The production possibilities frontier is the boundary between the combinations of goods and services that​ _____, given the available factors of production and the state of technology. A. we want to produce but cannot consume B. can be produced and the combinations that cannot be produced C. can be produced and the prices paid for those D. we want to produce and what we want to consume

B. can be produced and the combinations that cannot be produced

Why does the PPF bow outward and what does that imply about the relationship between opportunity cost and the quantity​ produced? The PPF bows outward because as we move from point A to point B to point C​, the opportunity cost of producing a pair of blue jeans ______. A. decreases. Resources are not equally productive in all activities B. increases. Resources are not equally productive in all activities C. increases. And the opportunity cost of producing a golf club also increases D. does not change. Resources are equally productive in all activities

B. increases. Resources are not equally productive in all activities

This PPF​ ______ illustrate scarcity because​ ______. A. does​ not; the firm can produce any quantity it wants if it is willing to pay a high enough price B. ​does; because the firm can attain the points outside the frontier but not inside the frontier C. ​does; the firm cannot produce points outside the frontier and as the firm moves along the PPF​, it cannot produce more dog biscuits without producing less cat food D. does​ not; there is sufficient dog food and cat food produced to feed​ everyone's pet

C. ​does; the firm cannot produce points outside the frontier and as the firm moves along the PPF​, it cannot produce more dog biscuits without producing less cat food

Choose the correct statements. a. There is no relationship between the opportunity cost of producing an additional good measured on the x dash axis and the opportunity cost of producing an additional good measured on the y axis. b. Opportunity cost of a good is the increase in the quantity produced of one good divided by the decrease in the quantity produced of another good as we move along the PPF . c. The opportunity cost of producing more x, illustrated as a movement between two points on the PPF is equal to the inverse of the opportunity cost of producing more y, illustrated as a movement between the same two points in the opposite direction. d. Opportunity cost is a ratio. A. Statements a and c are correct. B. Statements a and b are correct. C. Statements b and d are correct. D. Statements c and d are correct.

D. Statements c and d are correct. A is totally wrong For B to be correct: It is the decrease in the quantity produced of one good divided by the increase in the quantity produced of another good as we move along the production possibilities frontier.

Be able to draw a ppf that shows a tradeoff

When we face a ​tradeoff, we must give up something to get something else. Any​ downward-sloping curve illustrates a tradeoff. The PPF slopes​ downward, so it illustrates a tradeoff- as the number of toy trains produced​ increases, the number of model cars produced decreases. The PPF is also bowed outward because the tradeoff changes as we move along​ it: the opportunity cost of producing a good increases as more of it is produced. The PPF might be linear if the opportunity cost of producing a good is constant as more of it is produced.

Which of the following is the opportunity cost of attending a ball​ game? A. The things you would have bought with what you spent on the ticket and bus fare getting to the game plus the things you would alternatively have done with your time. B. Only the things you would alternatively have done with your time if you had been working. C. Only the ticket price and bus fare. D. Only the things you would alternatively have done with your time.

A. The things you would have bought with what you spent on the ticket and bus fare getting to the game plus the things you would alternatively have done with your time.

Production efficiency is a situation in which the economy is getting all that it can from its resources and​ _____ produce more of one good or service without producing​ _____ of something else. A. ​cannot; less B. ​cannot; equal C. ​cannot; more D. ​can; less

A. ​cannot; less

The figure shows the production possibilities frontier for a firm that produces pet food. Point A is​ ______ and point B is​ ______. A. ​attainable; attainable B. ​attainable; unattainable C. ​unattainable; unattainable D. ​unattainable; attainable

B. ​attainable; unattainable