Econ 102 Chapter 2

20. The most anyone is willing to pay for another purseis $30. Currently the price of a purse is $40, and the cost of producing another purse is $50. The marginal benefit of a purse is

$30

19. Marginal cost curves slope

upward because of increasing opportunity cost.

25. The figure above shows the production possibilities frontiers for four nations that have identical production possibilities frontiers in the present. The one that will grow most rapidly in the future is most likely to be producing at

C, otherwise known as the one not right in the middle but down to the right a bit, add up the two sides who makes the most combined of two goods

12. Which way does Marginal Cost and Marginal Benefit go?

MC slopes up, MB slopes down

22. Which of the following is TRUE regarding marginal benefit?

NEITHER "MBC shows the benefit firms receive by producing another unit of a good" OR "MB increase as more of a good is consumed"

47. A system of property rights

encourages economic growth by creating incentives to invest in capital and to be innovative.

18. If the marginal benefit of consuming another unit of a good is positive, then to reach the allocatively efficient level of output more of the good should be produced and consumed

if the marginal benefit of the good is greater than its marginal cost.

9. As residents of developing countries increase their chocolate consumption, the increased production of cocoa results in

increased opportunity cost of cocoa production.

28. In the above figure, in order for this country to move from production possibilities frontier PPF1 to PPF2, it might

increasethe skills and productivity ofits workforce. (its a ppf that stays on its vertical maximum while moving out the horizontal maximum)

26. Economic growth

leads to less consumption in the present and increased consumption in the future.

39. In the figure above, suppose that Mac and Izzie trade and reach point c. Then (point C is a point diagonal above the equilibrium)

neither Mac nor Izzie produce outside their production possibilities frontiers. (because they are trading not producing outside their frontiers)

17. Allocative efficiency occurs when it is

not possible to produce more of one good w/out giving up the production of some good that is valued more highly

42. Suppose that a typical German factory can produce 20 cameras or 1 computer in an hour, and that a typical American factory can produce 10 cameras or one computer in an hour. If Germany produces one less computer and switches resources to cameras, and the United States produces one more computer and takes resources out of cameras, then the net change in camera production in both countries taken together is

plus 10 cameras.

5. The above table shows production combinations on a country's production possibilities frontier. A movement from ________ involves the greatest opportunity cost of increasing the production of good Y.

point B to point A (Point X Y: A - 0 - 40, B - 3 - 36, C - 6 - 28, D - 9 - 16, E - 12 - 0)

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

resources are being inefficiently utilized.

10. The slope of a production possibilities frontier that displays increasing opportunity cost is

steeper near the horizontal intercept than near the vertical intercept.