Macro Practice 1

The production of 14 units of consumer goods and 1 unit of capital goods per period would result in

some unused or inefficiently used resources

a production possibility frontier that is a straight line sloping down from left to right suggests that

the opportunity costs of the products are constant

opportunity cost it

the value of the best alternative forgone in making any choice

Macroeconomics deals with

the working of the entire economy or large sectors of it

if countries engage in international trade

they will be consuming outside their production possibility frontiers

Margo spends $10,000 on one year's college tuition. the opportunity cost of spending one year in college for Margo is

whatever she would have purchased with the $10,000 plus whatever she would have earned had she not been in college

Look at the figure consumer and capital goods. the movement from curve 1 to curve 2 indicates

economic growth

an economy is efficient if one person can be made better off by reallocating resources without making anyone else worse off

false

if the opportunity cost of manufacturing machinery is lower in the US than in britain and the opportunity cost of manufacturing sweaters is higher in the US than in britain, then the US will

import sweaters form britain and export machinery to britain

a key theme fundamental to all of economics is that

people have unlimited wants but limited means to satisfy them

the economy is producing two types of goods, capital goods and consumer goods. there are different combinations of production. if an economy is producing at X, the opportunity cost to it of producing at Y is _____ units of consumer goods per period.

6

the economy with the lowest opportunity cost of producing a particular good is said to have

a comparative advantage

an economy that has the lowest opportunity cost of producing a particular good is said to have

a comparative advantage in production of that good

in terms of the production possibility frontier, inefficient use of available resources is shown by

production at a point inside the production possibility frontier

this table shows the maximum amounts of coffee and salmon, both measured in pounds, that brazil and alaska can produce if they just produce one good. brazil has an absolute advantage in producing

coffee only

suppose Oklahoma decides to produce only two goods, oil and football helmets. if Oklahoma is producing on its production possibility frontier, as oil production increases, the production of football helmets will

decrease

suppose Poland is producing on its production possibilities frontier, and it decides to increase the production of steel and decrease the production of vodka. the bowed-out production possibility frontier suggests that there will be an _______ opportunity cost of producing more steel

increasing

Microeconomics deals with

individual decision makers in the economy

the market for corn in kansas is considered competitive. this means there are _____ buyers and _____ sellers of corn in kansas

many;many

a simplified representation that is used to study a real situation is called

model

trade can be beneficial to an economy because

more goods and services can be obtained at lower opportunity cost

look at the figure comparative advantage. eastland has an absolute advantage in producing

oranges only

the concept of comparative advantage is based upon

relative opportunity costs

whenever a choice is made

the cost of that choice is opportunity cost

to achieve the gains from trade, each nation should specialize in the production of a good or service if

the country can make the product while forgoing fewer alternative products than any other country