Econ Final Study Guide Chapter 2

A farmer is deciding whether or not to add fertilizer to his or her crops. If farmer adds 1 pound of fertilizer per acre, the value of the resulting crops rises from $80 to $100 per acre. According to marginal analysis,the farmer should add fertilizer if it costs less than:

$20 per pound

If society leaves some of its resources unemployed, then it will be operating at a point:

beneath its a production possibilities curve

Compare two economies A and B that start out with identical production possibilities curves. Economy A chooses an efficient point with 6 consumption goods and 3 capital good, while economy B also chooses an efficient point, but with 4 consumption goods and 5 capital goods. In the future we can predict:

economy b will grow faster than economy a

The law of increasing costs indicates that the opportunity cost of producing a good:

increases as more of the good is produced

Using production possibilities curve, an economy that produces an output combination less than the maximum possible is depicted by a point located:

inside the curve

The process of accumulating capital is called:

investment

A point inside a production possibilities curve reflects:

less than full use of resources and technology

Opportunity cost:

represents the best alternatives sacrificed for a chosen alternative

Bill has $10 to spend on a Superman, Batman, or an X-men T-shirt. Bill buys the superman T-shirt and the Batman shirt was a close second choice. What is the opportunity cost?

the batman t-shirt

In economics, the term marginal refers to:

the change or difference from a current situation