chapter 3: the economic problem
On a production possibilities frontier, 500 pounds of apples and 1,200 pounds of bananas can be produced while at another point on the same frontier, 300 pounds of apples and 1,300 pounds of bananas can be produced. Between these points, what is the opportunity cost of producing a pound of apples?
.5 a lb of bannas
Moving from row A to row B of the table involves a tradeoff because the economy gives up ______ to gain ______.
2 pounds of berries; 1 pound of fish
The figure shows the production possibility frontier for a country. What is the opportunity cost per ton of rice to move from point D to E?
3,000 bottles of wine
Ben also owns an ice cream parlor. In an hour, he can produce 11 milkshakes or 55 ice cream sundaes. Esther owns an ice cream parlor. In an hour, she can produce 25 milkshakes or 150 ice cream sundaes. Ben's opportunity cost of 1 milkshake is 5 ice cream sundaes. EstherEsther's opportunity cost of 1 milkshake is 6 ice cream sundaes.
Ben has a comparative advantage in milkshakes and Esther has an absolute advantage in both goods.
The figure shows the PPF for a country that produces computers and computer factories. Which of the following would most likely shift the PPF from PPF0 in one year to PPF1 in the next?
Decrease the production of computers from 11 million (at point B) to 9 million (at point C) and build 9 new computer factories.
Olivia and Helen can achieve gains from trade if _______.
Helen sells afghans to Olivia in exchange for some of the quilts that Olivia produces
The table shows the production possibilities frontier of a small Pacific island economy. Choose the correct statement.
This economy cannot produce 2 pounds of fish and 18 pounds of berries because this combination is outside its PPF.
The production possibilities frontier is a boundary that separates
attainable combinations of goods and services that can be produced from unattainable ones
If Jack has an absolute advantage in growing blueberries and cherries, he will _______.
be more productive than ruth
Suppose that the United States and Cuba decide to open up trade. If each country specializes in the good in which it has a comparative advantage, ______ will gain from that trade because ______.
both countries; consumption possibilities in both Cuba and the United States will lie outside their PPFs
The opportunity cost of a loaf of bread is ______ at point A than at point B. The opportunity cost of a cake is ______ at point B than at point A.
bread x axis Less than as going down cake y axis less than as going up
The table shows the production possibilities frontier of a small Pacific island economy. If the citizens of this economy produce 4 pounds of fish and 5 pounds of berries, they will enjoy a free lunch because they _______.
can produce more berries without facing tradeoff
The combination of 3 pounds of fish and 11 pounds of berries achieves production efficiency because the economy _______.
cannot produce 4 pounds of fish without producing fewer berries
If the number of graduates this year increases from 0 to 1,500, the economy experiences ______.
economic growth next year because the increase in human capital shifts the PPF outward next yea
if there is unemployment in an economy, then the
economy is producing at a point inside the production possibilities frontier.
An economy that uses new technology _______.
experiences an increase in its standard of living BUT does not overcome scarcity
Jack is producing at point J on PPFJ, and Stephen is producing at point S on PPFS. Jack's opportunity cost of producing a ton of apples is ______ Stephen's, No Stephen ______ gain from specialization and trade with Jack. Jack______ an absolute advantage in the production of apples and grapes.
higher than, can, has
Consider a production possibility frontier with books and tables. A combination of 1000 books and 500 tables is on the frontier. Which of the following are true? i) Production of 700 books and 400 tables is attainable but inefficient. ii) Production of 1000 books and 600 tables is unattainable. iii) Production of 500 books and 1000 tables is inside the frontier.
i, ii
The bowed out (concave) shape of the production possibilities curve implies that as production of one good
increases, society must forgo increasing amounts of another good.
attainable points are ______.
inside and on the PPF
The combination of 4 pounds of fish and 5 pounds of berries is inefficient because the economy ______.
is producing inside its PPF
Jack has a comparative advantage in growing blueberries if _______.
jack's opportunity cost of producing cherries is > ruth's opportunity cost of producing cherries
When a nation is producing on its production possibilities frontier, if more resources are used to produce one good, then the production of other goods
must decrease
The figure shows the production possibility frontier for a country. Suppose the country is producing at point A. What is the opportunity cost of increasing the production of rice to 12 tons?
nothing, it is a free lunch
When new and better ways of producing all goods and services are discovered or when the quantity of capital increases, _______.
our economy grows, but we still face scarcity and opportunity cost
We achieve production efficiency if we cannot _______ more of one good without producing ______ of some other good.
produce; less
If Toni has an absolute advantage in both sewing and ironing when compared to Tom, then
they might benefit from trading, but we need more information to determine in which task they should specialize
A nation's economy grows when it does all of the following except ______.
use all its resources to produce consumption goods
_____ specializes in making boards and produces _____. _____ specializes in making sails and produces _____.
whoever produces more of something
His opportunity cost of a pound of berries is ______ and his opportunity cost of a pound of fish is ______ because he ______.
zero; zero; is producing inside his PPF.
