Chapter 2 - Choices in a World of Scarcity (05)
If the United States, at the point where it is currently producing, must give up the production of 500 bicycles (B) to produce 20 additional tractors (T) with the same resources, the opportunity cost of producing 100 bicycles is _________ tractors(s).
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Match each term in the left hand column with the correct term/description on the right A) Standardized test scores of high school and college students drop B) The unemployment rate falls from 9% to 6% of the labor force C) Defense spending is reduced to allow government to spend more on health care D) A new technology improves the efficiency of extracting copper from ore
A) leftward shift of the PPC B) from a point inside the curve move closer to PPC C) a movement along the line from Point B to Point C (Point C is greater quantity health care D) rightward shift of PPC
Self-interest can include more than a concern for oneself. To the extent that the happiness of others contributes significantly to the our own happiness, actions taken in our own self-interest may have benefits for
C close friends and family
Self-interest is not necessarily selfish, some say. In fact, self-interest likely includes an individual's consideration for
C close friends and family
Identify the positive statement among the following statements.
College tuition is higher for out-of-state students than it is for in-state students
When a country specializes in the production of a good that is relatively cheaper for it to produce than other goods, it is because of:
Comparative Advantage
Which of the following three statements is normative?
Congress gives too many tax breaks to corporations.
Which of the following statements reflects marginal decision-making?
If we double the order to a dozen doughnuts, we will pay only 20 percent more
Which of the following is a positive statement?
Legally requiring dogs to have rabies shots will reduce the number of rabid dogs.
Which point on the graph below represents an inefficient use of society's resources?
Point F
The __________ model lays out the ________available to the economy.
Production possibilities; alternatives
Which of the following three statements is normative?
Retired professionals should work less and get out more
Which of the following statements is positive?
Social security benefits are not taxed.
Suppose that in a time of crisis everyone pitches in and works much harder than usual. How is this represented by a production possibilities frontier?
The entire PPF shifts out.
Identify the normative statement(s) among the following statement(s).
The federal government spends too much.
Which of the following statements is normative?
There should be unemployment benefits for farmers who lose their farms.
An inward shift in the U.S. economy's production possibility frontier could represent U.S.:
Workers moving to Canada
The production of Tires and Radios Country Labor Input Tires Radios X 10 40 20 Y 10 30 10 Using the table above, Assuming constant costs in the neighborhood of their current levels of production, the exhibit shows the number of tires each country would have to forgo in order to produce the additional radios indicated. Further assume that the only input is labor and that it remains fully employed. Assume that there is unrestricted trade and complete specialization. According to comparative advantage, country:
Y would export radios. (incorrect)
The production of Tires and Radios Country Labor Input Tires Radios X 10 40 20 Y 10 30 10 Use the table above that shows the number of tires each country would have to forgo in order to produce the additional radios indicated. Further assume that they only input is labor and that it remains fully employed. Assume that there is unrestricted trade and complete specialization. According to comparative advantage, country:
Y would export tires
Which of the following is a normative statement?
You should wear a helmet when cycling.
Where would you plot unemployment on a production possibilities frontier?
a point inside the PPF
Where would you plot full employment on a production possibilities frontier?
a point on the PPF
An increase in capital goods and a decrease in consumer goods will:
all of the other choices are correct -eventually lead to a shift to the right of the production possibilities curve -lead to more rapid economic growth -increase in a nation's capacity to produce
Suppose that the government of New York state promises to decrease taxes to a firm if it decides to stay in New York instead of moving to Delaware. This policy on the part of the state of New York constitutes _________, to make the _______of the firm that remains in New York
an incentive; marginal benefit exceed the marginal cost
A positive statement is
can be shown to be correct or incorrect
Making an economically rational decision requires
considering the prospective benefits and costs to oneself
If an economy is producing at a point on its production possibilities frontier, it is:
efficient in production but not necessarily in allocation
Assuming there are only two types of outputs in a country: consumer goods and nuclear missiles. All else being constant, as the nation produces more missiles
every additional missile will reduce consumer goods production by more and more
If all factors of production that are available for use under current market conditions are being utilized, the the economy has
full employment
Which of the following describes Jonathan having a comparative advantage in producing apples?
giving up less production of other goods when producing an apple
Greater investment in capital goods today leads to:
greater growth in the production possibilities frontier (PPF) in the future.
The slope of a budget constraint line is influenced by
how much one item costs compared to the cost of the other item
Which of the following statements is true?
if a nation can produce more of a good than another nation can, it has a comparative advantage in the production of that good (incorrect)
Production possibilities curves:
illustrate the production choices available to an economy
All points inside the production possibility frontier represent:
inefficient production points
A town on the Gulf Coast is battered by a massive hurricane that destroys most of its productive resources. The community's production possibilities frontier (PPF) would show an:
inward shift of the PPF.
If a production possibility frontier is a straight line, it tells us that the opportunity cost of producing one more unit of good X:
is a constant amount of good Y.
The theory of rational behavior
is an assumption that economists make to have a useful model for how decisions are made
A profit-maximizing decision must be made about whether to keep a bed & breakfast operating. Until the place sells, the mortgage of $3000/month must be paid, since it is a sunk cost. If the restaurant operates, costs rise by $4000 per month, but revenue will be only $6000 per month. Until the building can be sold,
it is best to keep the bed and breakfast operating because it is profitable (incorrect)
To make an economically rational decision, marginal cost should be compared to
marginal benefit
If an economy is producing a level of output that is on its production possibility frontier, the economy has:
no idle resources and is using resources efficiently.
Economists use the concept of ceteris paribus to examine a change in ____________ in a model, while assuming that all other variables remain constant.
one variable
If the production possibility frontier is a straight line:
opportunity costs are constant.
An increase in the labor force would be reflected in a society's production possibilities frontier (PPF) by an:
outward shift of the PPF.
Economic growth can be depicted on a production possibilities frontier (PPF) as an:
outward shift of the PPF.
The graph below illustrates the effect on the production possibilities frontier if the population grows, making more workers available. This new production possibilities frontier reflects the ability of society to
produce both more wings and more pizza.
The production possibilities model is illustrates an inverse relationship between two goods or services because
production of different types will compete for limited resources
The production possibilities model shows an inverse relationship between the amount of one thing and the amount of something else that can be produced because
production of different types will compete for limited resources
If a city government spends a good deal of money on crime prevention and also on infrastructure maintenance, then spending even more money on crime prevention should result in
relatively small gains in crime prevention
In order to satisfy as many wants as possible, it is necessary to achieve ALLOCATIVE efficiency,
since otherwise output may go to where it is less valued
An Uber driver faces costs for driving that include sunk costs like insurance that contribute to the average cost per mile of $.50. Yet when a rider offers to pay less than that for a ride, the driver agrees because
sunk costs like auto insurance (in this case) do not decrease as driving increases.
It is said that the rational consumer will act according to his or her self-interest, and that self-interest can include a concern for one's family and friends, but not often society as a whole. Which of the following illustrates this type of decision?
the boat rental was worth the additional fish catch, regardless how little fish we left behind the rental of recreational vehicles for use in national parks is responsive to the price charged, but not to concerns of noise population
Marginal benefit is
the change in the total benefit that one or more unit of something will provide the additional benefit that one or more unit of something will provide
Marginal cost is
the cost of obtaining or producing one or more unit of something
Suppose that there are only two types of output in a country: nuclear missiles and consumer goods. All else being constant, as the nation produces more missiles,
the greater the opportunity cost will be for satisfying consumer wants
The agricultural extension agent told the farmer that one more crop-dusting will likely add a ton of additional wheat to the harvest. The rational farmer then calculated the selling price of a ton of wheat, since he would decide to crop-dust again if and only if
the marginal benefit is greater than the marginal cost of an additional crop-dusting
The musician was known for multiple encore performances, but had limited stamina and a rational mind. Even she would eventually call it a night when, by her judgement
the marginal cost is greater than the marginal benefit of an additional encore
Budget constraints impose scarcity and are based upon
the prices of items purchased
Scarcity is imposed on individual households in the form of income and
the prices of the goods we may purchase
Because of ________ if a city government decides to spend money on beautifying its downtown and attracting tourism to its city when no money has been devoted to those efforts before, then gains in tourism may be significant.
the production possibility frontier
Which of the following will NOT produce an outward shift of the production possibilities curve?
the reduction of unemployment
The slope of a budget constraint line is influenced by
the relative price of two goods competing to satisfy wants
A rock star intentionally sets her ticket prices below what would be necessary to sell out her shows. How might this be justified by a manager whose goal is to maximize long-term profit?
the revenue sacrificed is worth the boost it gives her image as lines form for tickets
When there is no comparative advantage between countries
there are no gains from specialization and trade
Normative statements are based upon
value judgements
The house that Jeanne inherited from her mother can rent for $1500/month, but Jeanne decides to allow her brother to stay there for only $500 per month. This decision carried with it a
zero monetary cost but a $1000 per month opportunity cost
The house that Jeanne inherited from her mother can rent for $2000/month, but Jeanne decides to allow her brother to stay there for only half of that. This decision carried with it a
zero monetary cost but a $1000 per month opportunity cost