Deck 2: The Economic Problem

Question 1

If Harold can increase production of good X without decreasing production of any other good, then Harold

A)is producing inside his production possibilities frontier.
B)is producing on his production possibilities frontier.
C)prefers good X to any other good.
D)is producing outside his production possibilities frontier.
E)has a linear production possibilities frontier.

Answer 1

is producing inside his production possibilities frontier.

Question 2

A tradeoff exists when

A)the PPF shifts outward.
B)we move from a point inside the PPF to a point on the PPF.
C)we move along the PPF.
D)the PPF shifts inward.
E)we move from a point on the PPF to a point within the PPF.

Answer 2

we move along the PPF.

Question 3

Which of the following quotations best illustrates a tradeoff?

A)"If the firm reorganized its production process, it could produce more widgets and more gadgets."
B)"The firm has been able to lower costs due to its extensive experience in building widgets."
C)"The firm should sell more gadgets, even if it means hiring more workers."
D)"If the firm invests more in capital equipment, it can expand sales next year."
E)"The more and more gadgets the firm produces, the bigger the fall in widget production."

Answer 3

"The more and more gadgets the firm produces, the bigger the fall in widget production."

Question 4

Opportunity cost of an action is

A)the highest- valued alternative forgone.
B)the best choice that can be made.
C)the absolute cost.
D)the comparative cost.
E)the money cost.

Question 5

Use the figure below to answer the following questions.
Figure 2.1.1
Refer to the production possibilities frontier in Figure 2.1.1.Which one of the following statements is true about point A?

A)It is unattainable.
B)It is preferred to point B.
C)Although no more of good Y can be produced, more of good X can be produced.
D)Although no more of good X can be produced, more of good Y can be produced.
E)Resources are either unused or misallocated or both.

Question 6

Which one of the following concepts is illustrated by a production possibilities frontier?

A)property rights
B)investment
C)profit
D)consumption
E)tradeoff

Question 7

Figure 2.1.1
Complete the following sentence.In Figure 2.1.1,

A)some resources must be unused at point C.
B)movement from A to B would require a technological advance.
C)point B is a point of production efficiency.
D)the concept of decreasing opportunity cost is illustrated.
E)movement from C to B would require a technological improvement.

Question 8

If Harold must decrease production of some other good to increase production of good X, then Harold

A)has a linear production possibilities frontier.
B)is producing outside his production possibilities frontier.
C)is producing inside his production possibilities frontier.
D)is producing on his production possibilities frontier.
E)prefers good X to any other good.

Question 9

The production possibilities frontier

A)is the boundary between what we want to consume and what we want to produce.
B)shows how production increases as prices rise.
C)is the boundary between attainable and unattainable levels of production.
D)shows prices at which production is possible and impossible.
E)illustrates why there need not be any scarcity in the world.

Question 10

A point inside a production possibilities frontier

A)is unattainable.
B)indicates a point of production efficiency.
C)is preferred to a point on the production possibilities frontier.
D)indicates some wasted or misallocated resources.
E)illustrates the idea of opportunity cost.

Question 11

Ted chooses to study for his economics exam instead of going to the concert.The concert he will miss is Ted's _______ of studying for the exam.

A)opportunity cost
B)discretionary cost
C)comparative cost
D)monetary cost
E)absolute cost

Question 12

A situation in which resources are either wasted or misallocated or both is illustrated by

A)a point above or to the right of the production possibilities frontier.
B)a point inside the production possibilities frontier.
C)any point on either the horizontal or the vertical axis.
D)a point on or inside the production possibilities frontier.
E)a point outside the production possibilities frontier.

Question 13

Which one of the following concepts is not illustrated by a production possibilities frontier?

A)the tradeoff between producing one good versus another
B)attainable and unattainable points
C)opportunity cost
D)marginal benefit
E)scarcity

Question 14

Figure 2.1.1
Refer to the production possibilities frontier in Figure 2.1.1.Which one of the following is true about point C?

A)It is attainable and inefficient.
B)It is unattainable.
C)It is attainable only if the opportunity cost of producing X increases.
D)It is attainable only if the opportunity cost of producing X decreases.
E)It is efficient and attainable.

Question 15

A medical clinic employs 10 workers.Each worker can produce a maximum of either 2 units of medical services or 5 units of administrative services a day.The production possibilities frontier of this firm shows

A)infinite opportunity cost.
B)constant opportunity cost.
C)increasing opportunity cost.
D)zero opportunity cost.
E)decreasing opportunity cost.

Question 16

If Sam is producing at a point on his production possibilities frontier, then he

A)is unaffected by costs and technology.
B)is not subject to scarcity.
C)can produce more of both goods.
D)cannot produce any more of either good.
E)can increase the production of one good only by decreasing the production of the other.

Question 17

Production efficiency is achieved when

A)the production possibilities frontier shifts outward at a constant pace.
B)resources are not equally productive in all activities.
C)all resources are equally productive in all activities.
D)there are no tradeoffs.
E)we produce goods and services at the lowest possible cost.

Question 18

If Sam is producing at a point inside his production possibilities frontier, then he

A)must be doing the best he can with limited resources.
B)has a high opportunity cost of moving from this point.
C)is fully using all his resources and allocating his resources to their best use.
D)can increase production of both goods with zero opportunity cost.
E)is unaffected by costs and technology.

Question 19

A production possibilities frontier is negatively sloped because

A)the quantity of a good purchased decreases as its price falls.
B)there is too little capital in the economy.
C)opportunity cost of production increases as more of a good is produced.
D)some resources are misallocated.
E)opportunity cost of production decreases as more of a good is produced.

Question 20

On a graph of a production possibilities frontier, opportunity cost is represented by

A)the slope of the production possibilities frontier.
B)the x- axis intercept.
C)a point on the horizontal axis.
D)a ray through the origin.
E)a point on the vertical axis.

Question 21

Use the figure below to answer the following questions.
Figure 2.1.2
Refer to the production possibilities frontier in Figure 2.1.2.Suppose that 50 units of Y are produced.Then

A)resources are not being fully utilized.
B)9 units of X can be produced if all resources are used and assigned to the task for which they are the best match.
C)7 units of X are being produced.
D)6 units of X can be produced if all resources are used and assigned to the task for which they are the best match.
E)6 units of X are being produced.

Question 22

Figure 2.1.2
Consider the production possibilities frontier in Figure 2.1.2.Which of the following statements is false?

A)Points inside the production possibilities frontier indicate wasted or misallocated resources.
B)The opportunity cost of producing X increases as production of X increases.
C)The opportunity cost of producing Y increases as production of Y increases.
D)Resources are not equally useful in the production of X and Y.
E)Production at point A shifts the production possibilities frontier outward.

Question 23

Use the figure below to answer the following questions.
Figure 2.1.2
Refer to the production possibilities frontier in Figure 2.1.2.At point C, what is the opportunity cost of increasing the production of Y from 20 to 50 units?

A)2 units of X
B)30 units of Y
C)20 units of Y
D)6 units of X
E)8 units of X

Question 24

If opportunity costs are increasing, then the production possibilities frontier is

A)a vertical line.
B)bowed outward with a negative slope.
C)a negatively sloped straight line.
D)a positively sloped straight line.
E)bowed outward with a positive slope.

Question 25

A medical clinic employs 10 workers.Each worker can produce a maximum of either 2 units of medical services or 5 units of administrative services a day.One day, the clinic decides to produce 16 units of medical services and 5 units of administrative services.This output level is

A)unattainable.
B)inefficient.
C)efficient.
D)on the clinic's PPF.
E)attainable and efficient.

Question 26

Use the figure below to answer the following questions.
Figure 2.1.3
Figure 2.1.3 illustrates Mary's production possibilities frontier.If Mary wants to move from point B to point C, Mary must

A)give up some of good X to obtain more of good Y.
B)increase capital.
C)improve technology.
D)pay more for her factors of production.
E)give up some of good Y to obtain more of good X.

Question 27

Use the figure below to answer the following questions.
Figure 2.1.2
Refer to the production possibilities frontier in Figure 2.1.2.At point A, the opportunity cost of producing 3 more units of X is

A)zero units of Y.
B)30 units of Y.
C)20 units of Y.
D)10 units of Y.
E)3 units of X.

Question 28

Use the figure below to answer the following questions.
Figure 2.1.2
Refer to the production possibilities frontier in Figure 2.1.2.At point C, the opportunity cost of producing one more unit of X is

A)8 units of X.
B)20 units of X.
C)20 units of Y.
D)1 unit of X.
E)1 unit of Y.

Question 29

If additional units of any good can be produced at a constant opportunity cost, the production possibilities frontier is

A)positively sloped and linear.
B)bowed inward and negatively sloped.
C)linear and negatively sloped.
D)bowed outward and negatively sloped.
E)horizontal.

Question 30

The fact that resources are not equally productive in all activities

A)implies that gains from specialization and trade are unlikely.
B)implies a linear production possibilities frontier.
C)follows from the law of demand.
D)implies that an economy should not produce certain goods.
E)implies that a production possibilities frontier will be bowed outward.

Question 31

A medical clinic employs 10 workers.Each worker can produce a maximum of either 2 units of medical services or 5 units of administrative services a day.The opportunity cost of one more unit of medical services is

A)5 units of administrative services.
B)0.4 units of administrative services.
C)1 unit of medical services.
D)2 units of administrative services.
E)2.5 units of administrative services.

Question 32

The bowed- out concave) shape of a production possibilities frontier illustrates

A)the equal usefulness of resources in all activities.
B)increasing opportunity cost.
C)capital accumulation.
D)decreasing opportunity cost.
E)technological change.

Question 33

Use the figure below to answer the following questions.
Figure 2.1.3
Figure 2.1.3 illustrates Mary's production possibilities frontier.If Mary wants to move from point D to point C, Mary must

A)improve technology.
B)give up some of good Y to obtain more of good X.
C)hire more workers.
D)give up some of good X to obtain more of good Y.
E)increase capital.

Question 34

A medical clinic employs 10 workers.Each worker can produce a maximum of either 2 units of medical services or 5 units of administrative services a day.One day, the clinic decides to produce 10 units of medical services and 30 units of administrative services.This output level is

A)unattainable.
B)on the clinic's PPF.
C)efficient.
D)inefficient.
E)attainable if each worker specializes in one service.

Question 35

Use the table below to answer the following questions.
Table 2.1.1
The following table gives points on the production possibilities frontier for goods X and Y.
Refer to Table 2.1.1.What is true at point C?

A)If 8 units of X are produced, then at most 28 units of Y can be produced.
B)If 8 units of X are produced, then at least 28 units of Y can be produced.
C)If 8 units of X are produced, then only 36 units of Y can be produced.
D)If 28 units of Y are produced, then more than 8 units of X can be produced.
E)Some resources are unemployed.

Question 36

Use the figure below to answer the following questions.
Figure 2.1.3
Refer to the production possibilities frontier in Figure 2.1.3.The opportunity cost of moving from C to B will be

A)less than moving from D to C but greater than moving from B to A.
B)greater than moving from D to C but less than moving from B to A.
C)the same as moving from D to C or moving from B to A.
D)greater than moving either from D to C or from B to A.
E)less than moving from E to D.

Question 37

Use the figure below to answer the following questions.
Figure 2.1.2
Refer to the production possibilities frontier in Figure 2.1.2.If 6 units of X are produced, then

A)50 units of Y must be produced, regardless of resource utilization.
B)50 units of Y can be produced if all resources are used and assigned to the task for which they are the best match.
C)60 units of Y can be produced with some resources not fully used.
D)40 units of Y cannot be produced unless production of X is increased.
E)40 units of Y cannot be produced unless production of X is decreased.

Question 38

Use the figure below to answer the following questions.
Figure 2.1.2
Refer to the production possibilities frontier in Figure 2.1.2.At point A, the opportunity cost of increasing production of Y to 80 units is

A)3 units of X.
B)10 units of Y.
C)80 units of Y.
D)1 unit of X.
E)2 units of X.

Question 39

The existence of increasing opportunity cost

A)explains why some societies produce inside their production possibilities frontier.
B)explains why specialization is frequently useful.
C)follows from the existence of property rights.
D)explains why resources are scarce.
E)explains the bowed- out shape of the production possibilities frontier.

Question 40

As we increase production of X, we must give up production of larger and larger amounts of Y to produce each additional unit of X.Select the best statement.

A)As a result, we should not specialize in the production of X.
B)We must be producing inside the production possibilities frontier.
C)The production possibilities frontier for X and Y is a straight line.
D)This illustrates increasing opportunity cost.
E)Good Y will be more highly regarded by consumers than good X.

Question 41

Use the figure below to answer the following question.
Figure 2.1.5
The graph in Figure 2.1.5 shows Sunland's PPF for food and sunscreen.Sunland faces _______ opportunity cost of food and _______ opportunity of sunscreen.

A)a decreasing; a decreasing
B)a constant; a constant
C)an increasing; an increasing
D)a decreasing; an increasing
E)an increasing; a decreasing

Question 42

Use the table below to answer the following questions.
Table 2.1.1
The following table gives points on the production possibilities frontier for goods X and Y.
The data in Table 2.1.1 illustrate that

A)the opportunity cost of producing an additional unit of Y increases as the production of Y increases.
B)the producer has a comparative advantage in the production of Y.
C)the producer has a comparative advantage in the production of X.
D)the opportunity cost of producing an additional unit of Y decreases as the production of Y increases.
E)the opportunity cost of producing an additional unit of Y is constant as the production of X increases.

Question 43

Use the figure below to answer the following questions.
Figure 2.1.6
Figure 2.1.6 shows the production possibilities frontier for a firm that produces pet food.This PPF _______ illustrate scarcity because _______.

A)does; as more is produced, consumers must pay a higher price
B)does not; the PPF is downward sloping
C)does not; the firm can produce any quantity it wants if it is willing to charge a high enough price
D)does not; scarcity does not occur in the market for pet food
E)does; the firm cannot produce points outside the frontier, and as the firm moves along the PPF, it cannot produce more dog biscuits without producing less cat food

Question 44

The production possibilities frontier is

A)downward sloping and illustrates the marginal benefit from increasing production of the good measured on the x- axis.
B)upward sloping and illustrates a tradeoff in production of the good measured on the x- axis and the good measured on the y- axis.
C)downward sloping and illustrates a tradeoff in production of the good measured on the x- axis and the good measured on the y- axis.
D)downward sloping and a movement along the PPF illustrates a free lunch.
E)upward sloping and a movement along the PPF illustrates a free lunch.

Question 45

Use the table below to answer the following questions.
Table 2.1.1
The following table gives points on the production possibilities frontier for goods X and Y.
From the data in Table 2.1.1, the production of 7 units of X and 28 units of Y is

A)unattainable.
B)attainable but leaves some resources wasted or misallocated or both.
C)on the PPF between points C and D.
D)outside the PPF.
E)on the PPF between points B and C.

Question 46

Use the table below to answer the following questions.
Table 2.1.1
The following table gives points on the production possibilities frontier for goods X and Y.
Refer to Table 2.1.1.As the production of X increases,

A)the production of Y increases.
B)the amount of X produced increases at an increasing rate.
C)unemployment increases.
D)the opportunity cost of each additional unit of X produced increases.
E)the opportunity cost of each additional unit of X produced decreases.

Question 47

Use the table below to answer the following question.
Table 2.1.4
Consider the following production possibilities for a student for the typical week:
Refer to Table 2.1.4.Complete the following sentence.The production possibilities frontier in the table shows

A)under- utilization of resources.
B)decreasing opportunity cost.
C)constant opportunity cost.
D)learning- by- doing.
E)increasing opportunity cost.

Question 48

Table 2.1.1
The following table gives points on the production possibilities frontier for goods X and Y.
From the data in Table 2.1.1, the production of 10 units of X and 28 units of Y is

A)inside the PPF.
B)attainable but inefficient.
C)on the production possibilities frontier between points C and D.
D)attainable but leaves some resources misallocated.
E)unattainable.

Question 49

Table 2.1.2
Refer to Table 2.1.2.In moving from combination B to combination C, the opportunity cost of producing one additional snowshoe is

A)1/6 kilogram of butter.
B)2 kilograms of butter.
C)3 kilograms of butter.
D)1/2 kilogram of butter.
E)6 kilograms of butter.

Question 50

The slope of the production possibilities frontier curve measures

A)absolute advantage.
B)preferences for the goods measured on both axes.
C)marginal benefit from the good measured on the y- axis.
D)opportunity cost of producing the good measured on the x- axis.
E)comparative advantage.

Question 51

Table 2.1.1
The following table gives points on the production possibilities frontier for goods X and Y.
The production possibilities frontier corresponding to the data in Table 2.1.1 is

A)negatively sloped and linear.
B)positively sloped and bowed outward.
C)negatively sloped and bowed outward.
D)negatively sloped and bowed inward.
E)positively sloped and linear.

Question 52

Use the figure below to answer the following questions.
Figure 2.1.6
Figure 2.1.6 shows the production possibilities frontier for a firm that produces pet food.Point A is and point B is _______ .

A)attainable; unattainable.
B)attainable; attainable.
C)inefficient; efficient
D)unattainable; attainable.
E)unattainable; unattainable.

Question 53

Use the table below to answer the following questions.
Table 2.1.1
The following table gives points on the production possibilities frontier for goods X and Y.
The economy illustrated by the data in Table 2.1.1 exhibits

A)constant opportunity cost in the production of X.
B)increasing opportunity cost.
C)constant opportunity cost in the production of Y.
D)initially increasing, then decreasing opportunity cost.
E)decreasing opportunity cost.

Question 54

Use the table below to answer the following questions.
Table 2.1.1
The following table gives points on the production possibilities frontier for goods X and Y.
Refer to Table 2.1.1.The opportunity cost of increasing the production of Y from 16 to 36 units is

A)8 units of X.
B)4 units of X.
C)16 units of X.
D)12 units of X.
E)20 units of Y.

Question 55

Table 2.1.2
Refer to Table 2.1.2.According to this production possibilities frontier,

A)a combination of 0 kilograms of butter and 4 snowshoes is attainable.
B)the opportunity cost of producing snowshoes increases as more snowshoes are produced.
C)resources are equally useful in all activities.
D)the opportunity cost of producing snowshoes decreases as more snowshoes are produced.
E)a combination of 6 kilograms of butter and 1 snowshoe is inefficient.

Question 56

Use the table below to answer the following question.
Table 2.1.3
Refer to Table 2.1.3.In moving from combination C to combination B, the opportunity cost of producing one additional hockey stick is

A)1/6 maple leaves.
B)1/2 maple leaves.
C)2 maple leaves.
D)3 maple leaves.
E)6 maple leaves.

Question 57

When producing at a point of production efficiency,

A)the quantity of goods produced can be either on or inside the production possibilities frontier.
B)a tradeoff occurs.
C)the opportunity cost of producing goods other than those measured on the axes of the production possibilities frontier is zero.
D)resources are either wasted or misallocated.
E)all wants are satisfied.

Question 58

Use the table below to answer the following questions.
Table 2.1.1
The following table gives points on the production possibilities frontier for goods X and Y.
Refer to Table 2.1.1.The opportunity cost of increasing the production of X from 8 to 12 units is

A)12 units of Y.
B)16 units of Y.
C)4 units of Y.
D)8 units of Y.
E)4 units of X.

Question 59

Use the figure below to answer the following question.
Figure 2.1.4
Refer to the production possibilities frontier in Figure 2.1.4.Which point is unattainable?

A)A
B)B
C)C
D)D
E)E

Question 60

Jane produces only corn and cloth.If her preferences for corn and cloth change, then

A)her PPF does not change.
B)her PPF becomes flatter.
C)the world PPF shifts outward.
D)her PPF becomes straighter.
E)her PPF becomes steeper.

Question 61

Marginal cost

A)is greater then marginal benefit.
B)is the opportunity cost of producing one more unit of a good or service.
C)equals marginal benefit.
D)is less than marginal benefit.
E)is unrelated to the production possibilities frontier.

Question 62

Choose the correct statements.
1.Opportunity cost of a good is the increase in the quantity produced of one good divided by the decrease in the quantity produced of another good as we move along the PPF.
2.The opportunity cost of an action is the highest- valued alternative forgone.
3.Opportunity cost is a ratio.
4.There is no relationship between the opportunity cost of producing an additional good measured on the
X- axis and the opportunity cost of producing an additional good measured on the y- axis.

A)Statements 3 and 4 are correct.
B)Statements 2 and 3 are correct.
C)Statements 2 and 4 are correct.
D)Statements 1 and 3 are correct.
E)Statements 1 and 2 are correct.

Question 63

The principle of decreasing marginal benefit implies that the

A)additional benefit from obtaining one more unit of a good or service increases as more of that good or service is consumed.
B)total benefit from obtaining more of a good or service decreases as more is consumed.
C)additional benefit from producing one more unit of a good or service decreases as more of that good or service is produced.
D)total benefit from obtaining more of a good or service remains the same as more is consumed.
E)additional benefit from obtaining one more unit of a good or service decreases as more of that good or service is consumed.

Question 64

The marginal benefit curve from a good

A)is upward- sloping.
B)shows the most a consumer is willing to pay for one more unit of that good.
C)is bowed outward.
D)is vertical.
E)shows the benefit a firm receives from producing one more unit of that good.

Question 65

Use the figure below to answer the following questions.
Figure 2.2.1
In Figure 2.2.1, the curve labelled A is the _______ curve and the curve labelled B is the _______ curve.

A)marginal benefit; marginal cost
B)marginal benefit; trade
C)marginal cost; trade
D)production possibilities; trade
E)marginal cost; marginal benefit

Question 66

Use the figure below to answer the following questions.
Figure 2.2.1
In Figure 2.2.1, when 4,000 bicycles are produced each month,

A)fewer bicycles must be produced to reach the efficient level of output.
B)the marginal benefit from the 4,000th bicycle is greater than the marginal cost of the 4,000th bicycle.
C)the production of bicycles is efficient.
D)more bicycles must be produced to reach the efficient level of output.
E)the marginal benefit from the 4,000th bicycle equals the marginal cost of the 4th scooter.

Question 67

As consumption of a good increases,

A)the price of the good falls.
B)marginal benefit increases.
C)marginal benefit decreases.
D)marginal benefit increases or decreases depending on price.
E)marginal benefit equals price.

Question 68

Use the table below to answer the following question.
Table 2.2.1

Refer to Table 2.2.1.Marginal benefit from food crops

A)equals 70 barrels of ethanol.
B)equals the marginal cost of food crops.
C)cannot be calculated from the table.
D)remains constant as the quantity of food crops increases from 1 tonne a day to 2 tonnes a day.
E)increases as the quantity of food crops increases from 1 tonne a day to 2 tonnes a day.

Question 69

Marginal benefit from a good or service is the benefit received from consuming _______ .It is measured by the most that people are willing to pay for _______ .

A)one more unit of it; more of it
B)goods that you prefer; more of it
C)goods that you prefer; an additional unit of it
D)as much as is available; the total amount consumed
E)one more unit of it; an additional unit of it

Question 70

Use the figure below to answer the following questions.
Figure 2.2.1
In Figure 2.2.1, the curve labelled B shows

A)the number of scooters that people must forgo to obtain another bicycle.
B)that the benefit from producing more bicycles is greater than the benefit from producing more scooters.
C)the number of bicycles that people are willing to forgo to obtain another scooter.
D)that the benefit from producing more scooters is greater than the benefit from producing more bicycles.
E)the number of scooters that people are willing to forgo to obtain another bicycle.

Question 71

Consider a PPF that measures the production of quilts on the y- axis and the production of pillows on the x- axis.As the firm moves along this PPF, the production of

A)pillows and quilts are both decreasing.
B)pillows and quilts are both increasing.
C)all goods other than pillows and quilts is decreasing.
D)all goods other than pillows and quilts remains constant.
E)all goods other than pillows and quilts is increasing.

Question 72

The Government of Canada promises to produce more defence goods without any decrease in the production of other goods.This promise is valid

A)only if the PPF shifts rightward.
B)if Canada is producing at a point on its PPF.
C)only if technology advances or capital increases.
D)if Canada is producing at a point inside its PPF.
E)if Canada is producing at a point outside its PPF.

Question 73

When the market achieves allocative efficiency,

A)marginal benefit equals marginal cost.
B)marginal cost is at its minimum.
C)marginal cost minus marginal benefit is positive.
D)marginal benefit minus marginal cost is positive.
E)marginal benefit is at its maximum.

Question 74

The quantity of shoes produced is measured along the x- axis of a bowed- outward production possibilities frontier and the quantity of shirts produced is measured along the y- axis.As you move down towards the right along the production possibilities frontier, the marginal cost of

A)a pair of shoes increases.
B)a shirt remains constant.
C)a pair of shoes decreases.
D)a shirt equals the marginal benefit from a pair of shoes.
E)a pair of shoes and a shirt is equal at the midpoint between the x- axis and the y- axis.

Question 75

Which of the following is true regarding marginal benefit? I.The marginal benefit curve shows the benefit firms receive by producing another unit of a good.
II.Marginal benefit increases as more and more of a good is consumed.
III.Marginal benefit is the maximum amount a person is willing to pay to obtain one more unit of a good.

A)I only
B)I and II
C)I and III
D)III only
E)I, II, and III

Question 76

A marginal benefit curve measures

A)opportunity cost.
B)absolute advantage.
C)willingness to pay.
D)expenditure.
E)comparative advantage.

Question 77

The production possibilities frontier shows

A)the effect of advancing technology on production possibilities.
B)the maximum possible growth rate of output in an economy.
C)combinations of goods and services that do not fully use available resources.
D)the maximum quantity of resources available at any given time.
E)the maximum level of production that can be attained.

Question 78

Use the figure below to answer the following questions.
Figure 2.2.1
In Figure 2.2.1, when 2,000 bicycles are produced each month,

A)the marginal benefit from the 2,000th bicycle is greater than the marginal cost of the 2,000th bicycle.
B)the marginal benefit from the 2,000th bicycle equals the marginal cost of the second scooter.
C)fewer bicycles must be produced to reach the efficient level of output.
D)the production of bicycles is efficient.
E)the marginal benefit from the 2,000th bicycle equals the marginal cost of the 4th scooter.

Question 79

To describe preferences, economists use the concept of

A)opportunity cost.
B)marginal benefit.
C)scarcity.
D)price.
E)marginal cost.

Question 80

Allocative efficiency refers to a situation where

A)opportunity cost is zero for all goods.
B)marginal benefit is maximized.
C)opportunity costs are equal for all goods.
D)we cannot produce more of any one good without giving up some other good.
E)goods and services are produced at the lowest possible cost and in the quantities that provide the greatest possible benefit.