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.