Question 1

In the movie Cast Away,Tom Hanks plays a FedEx efficiency expert stranded on a deserted island.While on the island,he divides his time between catching fish,gathering coconuts,painting,and building a raft.Suppose that these were Mr.Hanks' only activities.Did he face an opportunity cost from pursuing any of these activities? Why or why not?

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Question 2

What economic concepts are represented in the production possibilities model?

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Question 3

What does it mean when a "free lunch" is available? Relate your answer to the production possibilities frontier.

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Question 4

What does the vertical intercept of a production possibilities frontier represent?

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Question 5

Explain why a movement from a point inside a production possibilities frontier to the production possibilities frontier is described as a free lunch and a movement along a production possibilities frontier is described as a tradeoff.

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Question 6

Are all points inside the production possibilities frontier unattainable?

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Question 7

Why is the production possibilities frontier bowed out?

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Question 8

Before the first Gulf War,Kuwait had the capacity to produce a certain amount of oil from its oil wells.After the war,it found that capacity greatly diminished because the oil wells were on fire.Draw Kuwait's PPF before and after the war,assuming that the only two goods produced are oil and food.Further assume that setting the oil wells on fire did not affect Kuwait's ability to produce food.Explain why the PPF before the war is different from the PPF after the war.

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Question 9

"If Mexico is currently operating at a point inside its production possibilities frontier,then there are unemployed or misallocated resources in Mexico." Is this statement true or false? Briefly explain your answer.

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Question 10

Describe the differences between tradeoffs and free lunches in terms of a PPF.

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Question 11

"If Mexico is currently operating at a point beyond its production possibilities frontier,then there are unemployed or misallocated resources in Mexico." Is this statement true or false? Briefly explain your answer.

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Question 12

A production point beyond the production possibilities frontier represents what?

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Question 13

Draw a production possibilities frontier between beans and peas.Label the unattainable points,the attainable points with fully employed resources,and the attainable points with unemployed resources.

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Question 14

When economists state that the opportunity cost of a product increases as more of it is produced,what do they mean? For instance,what is the opportunity cost? And,where in a PPF diagram does this statement apply and where does it not apply?

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Question 15

Moving on a bowed out PPF,what happens to the opportunity cost of its production as a nation specializes more in one product?

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Question 16

Why does the production possibilities frontier have a bowed out shape rather than being a straight line?

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Question 17

-The table above gives the production possibilities frontier for two countries,Anaconda and Bear.The opportunity cost of moving from ________ is greater for ________.

Accepted Answer

The opportunity cost is greater for Bear when moving from point D to point E, as it involves a larger sacrifice of one good to produce more of another compared to Anaconda.

Question 18

-The figure above shows a nation's production possibilities frontier for apples and oranges.
a.What combination of goods is represented by point A?
b.What combination of goods is represented by point B?
c.Which point represents an unattainable combination of goods?
d.The movement from point C to point D results in a free lunch.What is the free lunch?

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-The figure above shows a nation's production...

Question 19

On a production possibilities frontier diagram,where are production points that have tradeoffs? Where are production points with a free lunch?

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Question 20

How can a combination of goods be unattainable?

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Quiz 3: The Economic Problem