MicroEcons_Chap 2

The production possibilities frontier is the boundary between

• those combinations of goods and services that can be produced and those that can be consumed.

• those resources that are limited and those that are unlimited.

• those combinations of goods and services that can be produced and those that cannot.

• those wants that are limited and those that are unlimited.

Which of the following is NOT true concerning a society's production possibilities frontier (PPF)?

• It reveals the maximum amount of any two goods that can be produced from a given quantity of resources.

• Tradeoffs occur when moving along a PPF.

• Production efficiency occurs when production is on the frontier itself.

• Consumers will receive equal benefits from the two goods illustrated in the PPF.

Harry produces 2 balloon rides and 4 boat rides an hour. Harry could produce more balloon rides but to do so he must produce fewer boat rides. Harry is ________ his production possibilities frontier.

• producing inside

• producing on

• producing outside

• producing either inside or on

The principle of increasing opportunity cost leads to

• a production possibilities frontier (PPF) that is bowed inward from the origin.

• a production possibilities frontier (PPF) that is bowed outward from the origin.

• an inward shift of the production possibilities frontier (PPF).

• an outward shift of the production possibilities frontier (PPF).

A PPF bows outward because

• not all resources are equally productive in all activities.

• consumers prefer about equal amounts of the different goods.

• entrepreneurial talent is more abundant than human capital.

• resources are used inefficiently.

Claire and Dag are farmers who produce beef and corn. In a year, Claire can produce 16 tons of beef or 40 bushels of corn, while Dag can produce 5 tons of beef or 25 bushels of corn. The opportunity cost of producing a ton of beef is

• 10 bushels of corn for Dag and 8 bushels of corn for Claire.

• 5 bushels of corn for Dag and 2.5 bushels of corn for Claire.

• 20 bushels of corn for Dag and 50 bushels of corn for Claire.

• 36.5 days for Dag and 45.6 days for Claire.

Marginal cost is the ________ one more unit of a good and ________ of the good increases.

• opportunity cost of producing; increases as production

• opportunity cost of producing; decreases as production

• price that must be paid to consume; increases as consumption

• price that must be paid to consume; decreases as consumption

When the opportunity cost of producing more of a good is increasing, the marginal cost of producing more of the good is

• decreasing.

• constant.

• increasing.

• More information is needed to answer the question.

We measure the marginal ________ of a good by what a ________ for another unit of the good.

• benefit; person must pay

• cost; person is willing to pay

• benefit; person is willing to pay

• cost; person's preferences are

As a person consumes more of a good, the

• marginal benefit increases.

• marginal benefit decreases.

• marginal benefit increases or decreases depending whether or not the economy is on the PPF.

• price of the good falls.