PPF, Opportunity Costs, Absolute & Comparative Advantage-Pt 1

Refer to Figure 2-2. If Mendonca chooses to produce 160 pounds of vegetables, how much meat can it produce to maximize production?

0 pounds of meat

Refer to Figure 2-2. If Mendonca chooses to produce 120 pounds of meat, how much vegetables can it produce to maximize production?

0 pounds of vegetables

Pierre can produce either a combination of 20 bow ties and 30 neckties or a combination of 35 bow ties and 15 neckties. If he now produces 35 bow ties and 15 neckties, what is the opportunity cost of producing an additional 15 neckties?

15 bow ties

Bella can produce either a combination of 60 silk roses and 80 silk leaves or a combination of 70 silk roses and 55 silk leaves. If she now produces 60 silk roses and 80 silk leaves, what is the opportunity cost of producing an additional 10 silk roses?

25 silk leaves

Figure 2-2 above shows the production possibilities frontier for Mendonca, an agrarian nation that produces two goods, meat and vegetables. Refer to Figure 2-2. What is the opportunity cost of one pound of vegetables?

3/4 pound of meat

Refer to Figure 2-2. What is the opportunity cost of one pound of meat?

3/4 pound of vegetables

Output/worker in FRANCE Output/worker in ITALY ----------------------------------------------------------------------- CHEESE 6 4 WINE 3 1 ----------------------------------------------------------------------- In the hypothetical example above, Italy's opportunity cost of producing wine is

4 units of cheese

Refer to Figure 2-2. Suppose Mendonca is currently producing 60 pounds of vegetables per period. How much meat is it also producing, assuming that resources are fully utilized?

75 pounds of meat

Refer to Figure 2-3. Sergio Vignetto raises cattle and llamas on his land. His land is equally suitable for raising either animal. Which of the graphs in Figure 2-3 represent his production possibilities frontier?

Graph A (The linear one)

Refer to Figure 2-3. Sergio Vignetto raises cattle and llamas on his land. A portion of his land is more suitable for raising cattle, and the other portion is better suited for raising llamas. Which of the graphs in Figure 2-3 represent his production possibilities frontier that displays increasing opportunity costs?

Graph C (the bowed out one)

________ marginal opportunity cost implies that the more resources already devoted to any activity, the payoff from allocating yet more resources to that activity increases by progressively smaller amounts.

Increasing

If opportunity costs are constant, the production possibilities frontier would be graphed as

a negatively sloped straight line.

Increasing opportunity cost is represented by a ________ production possibilities frontier.

bowed out

Output/worker in FRANCE Output/worker in ITALY ----------------------------------------------------------------------- CHEESE 6 4 WINE 3 1 ----------------------------------------------------------------------- In the hypothetical example above, international trade would induce France to import

cheese

The production possibilities frontier model shows that

if all resources are fully and efficiently utilized, more of one good can be produced only by producing less of another good.

A production possibilities frontier with a bowed-outward shape indicates

increasing opportunity costs as more and more of one good is produced.

Refer to Figure 2-1. [Roadsters vs. SUVs, A is inside curve, B is on curve, C is outside curve]. Point A is

inefficient in that not all resources are being used.

In a production possibilities frontier, a point ________ the frontier is productively inefficient.

inside

If the production possibilities frontier is ________, then opportunity costs are constant as more of one good is produced.

linear

The slope of a production possibilities frontier

measures the opportunity cost of producing one more unit of a good.

Output/worker in FRANCE Output/worker in ITALY ----------------------------------------------------------------------- CHEESE 6 4 WINE 3 1 ----------------------------------------------------------------------- In the hypothetical example as above, Italy has an absolute advantage in

neither good, but a comparative advantage in cheese.

Refer to Figure 2-1. [Roadsters vs. SUVs, A is inside curve, B is on curve, C is outside curve]. Point B is

technically efficient.

The attainable production points on a production possibilities frontier are

the points along and inside the production possibility frontier.

Refer to Figure 2-2. The linear production possibilities frontier in the figure indicates that

the trade-off between meat and vegetables is constant.

Without an increase in the supply of the factors of production, how can a nation achieve economic growth?

through technological advancement which enables more output with the same quantity of resources

The points outside the production possibilities frontier are

unattainable

Refer to Figure 2-1. [Roadsters vs. SUVs, A is inside curve, B is on curve, C is outside curve]. Point C is

unattainable with current resources.

Output/worker in FRANCE Output/worker in ITALY ----------------------------------------------------------------------- CHEESE 6 4 WINE 3 1 ----------------------------------------------------------------------- In the hypothetical example shown in the above, France has a comparative advantage in

wine