Question 1

Suppose that, during an afternoon at Hambre's favorite ski resort, Hambre could either make additional runs down the slopes or produce and sip hot chocolate by the fire in the lodge. Draw a production possibilities frontier PPF) that describes his production trade-offs between runs skied by riding the chairlift to the top and skiing down the slope) versus cups of hot chocolate produced and sipped. Hambre's production of each of these goods is subject to constant marginal opportunity costs in production, so be sure that, in the graph, the opportunity cost of one activity in terms of the other is the same at any point on the PPF.
Now suppose that a new superfast ski lift reduces the time it takes to get to the top of the mountain. Show, on the same graph, how this changes the PPF.

Accepted Answer

The answer of Suppose that, during an afternoon at Hambre's...

Question 2

The figure depicts a shift in a society's production possibilities frontier PPF) for the manufacture of trains and planes: train-manufacturing capacity expands while plane-manufacturing capacity shrinks. Refer to this figure to answer the next  questions.
 
-Which point represents an output that was efficient before the shift but is inefficient afterward?
A) point A
B) point B
C) point C
D) point D
E) point E

Accepted Answer

The answer of The figure depicts a shift in a...

Question 3

Consider the following scenario to answer the next questions: Kukla makes tables, with an opportunity cost of 3 rugs per every 4 tables. Zola makes rugs, with an opportunity cost of 2 tables per every 3 rugs.
-Ollie proposes that Kukla give Zola 2 tables in exchange for 1 rug. What are Kukla's and Zola's reactions?
A) Kukla likes the proposal, but Zola does not.
B) Zola likes the proposal, but Kukla does not.
C) Kukla and Zola both like the proposal.
D) Neither Kukla nor Zola likes the proposal.
E) Ollie's proposal is not feasible.

Accepted Answer

To determine whether the proposal is beneficial for Kukla and Zola, we need to compare the opportunity cost of producing tables and rugs for each of them.

For Kukla, the opportunity cost of producing 2 tables is 3 rugs (according to the scenario). Therefore, 1 table has an opportunity cost of 3/2 rugs.

For Zola, the opportunity cost of producing 1 rug is 2/3 tables (according to the scenario).

If Kukla gives 2 tables to Zola, the opportunity cost for Kukla would be 3 rugs, which is the equivalent of 6/2 tables. Zola would receive 1 rug, which is equivalent to the opportunity cost of 2/3 tables.

Therefore, Kukla would be losing 2/2 tables in exchange for 2/3 tables (the opportunity cost of 1 rug for Zola), which is not beneficial for Kukla. However, Zola would be gaining 2/2 tables in exchange for 1 rug (the opportunity cost of 2 tables for Kukla), which is beneficial for Zola.

Therefore, Zola would like the proposal, but Kukla would not.

Question 4

When an economy shifts away from production of consumer goods and toward production of capital goods, for the average worker this trade-off means
A) a higher standard of living.
B) longer work hours.
C) a lower savings rate as a percentage of income).
D) more leisure time.
E) more disposable income.

Accepted Answer

When an economy shifts towards production of capital goods, it requires more investment and longer production times, leading to longer work hours for the average worker. This is often followed by a period of economic growth which can lead to a higher standard of living, however, this is not necessarily immediate and depends on various factors. The shift towards production of capital goods may also lead to a higher savings rate as a percentage of income as people invest more in long-term projects. There is no indication that this shift would lead to more disposable income or leisure time for the average worker.

Question 5

Draw a production possibilities frontier PPF) that shows a pizza shop's production trade-offs
between producing pizzas and stromboli. Suppose the pizza shop upgrades to a larger, more automated oven. On the same graph, show how the PPF changes. The oven is used to bake both pizzas and stromboli.)

Accepted Answer

The answer of Draw a production possibilities frontier PPF) that...

Question 6

Explain how scarcity is the root cause of the trade-offs and opportunity cost illustrated in the production possibilities frontier PPF).

Accepted Answer

The answer of Explain how scarcity is the root cause...

Question 7

What assumptions do economists make when developing a production possibilities frontier PPF)?

Accepted Answer

The answer of What assumptions do economists make when developing...

Question 8

Why has India's economy grown faster than the United States' in recent years?
A) India production has focused more on consumer goods.
B) India has lowered its population growth rate.
C) India has attained a higher standard of living than the United States.
D) India's production has focused more on capital goods.
E) India has placed more focus on its citizens' immediate needs.

Accepted Answer

India's growth has been driven by a shift towards more investment in capital goods, such as machinery and equipment, which has led to increased productivity and output. This has been a key factor in India's faster economic growth compared to the United States.

Question 9

The figure depicts a shift in a society's production possibilities frontier PPF) for the manufacture of trains and planes: train-manufacturing capacity expands while plane-manufacturing capacity shrinks. Refer to this figure to answer the next  questions.
 
-Which point represents an efficient level of output both before and after the shift?
A) point A
B) point B
C) point C
D) point D
E) point E

Accepted Answer

Point C represents an efficient level of output both before and after the shift because it is on the original PPF as well as the new PPF. This means that the society can produce the same amount of trains and planes as before, while also increasing their train production. Points A, B, D, and E are not efficient because they either represent a point inside the PPF (inefficient) or a point outside the PPF (unattainable).

Question 10

What does it mean when society is operating inside the production possibilities frontier PPF)?

Accepted Answer

The answer of What does it mean when society is...

Question 11

Draw a production possibilities frontier PPF) for good A and good B. Suppose that these goods are subject to increasing relative costs in production, and be sure that your graph reflects this fact.
Now suppose that a new and innovative technology enhances the production of good A but not good
B. Illustrate how this new innovation changes the production possibilities frontier PPF).

Accepted Answer

The answer of Draw a production possibilities frontier PPF) for...

Question 12

How will a reduction in the national unemployment rate affect a nation's production possibilities frontier PPF)?

Accepted Answer

The answer of How will a reduction in the national...

Question 13

Comment on the role of models in economics. What are the strengths and weaknesses of using them to explore the world around us?

Accepted Answer

The answer of Comment on the role of models in...

Question 14

Suppose that during Coco's afternoon shift working at the library, she could either reshelve books or process interlibrary loan ILL) requests. Draw a production possibilities frontier PPF) that describes Coco's production trade-offs. Her production of each of these goods is subject to increasing relative costs in production, so be sure that the graph reflects this fact.
Now suppose that a new online request system increases Coco's efficiency at processing ILL requests but does not affect her reshelving ability. Show, on the same graph, how this new innovation changes the PPF.

Accepted Answer

The answer of Suppose that during Coco's afternoon shift working...

Question 15

A poker player wins some cash. Which use of the money would most naturally be considered an investment?
A) buying a round of drinks for everyone at a bar
B) using the money to play more poker
C) paying off debts owed to bookies
D) shopping for groceries
E) buying a book of tips for poker players

Accepted Answer

Buying a book of tips for poker players could be considered an investment because it has the potential to improve the individual's poker playing skills and increase their chances of winning more money in the future.

Question 16

How can a person who is "better" or more efficient in that he or she has an absolute advantage in the production of various goods on the PPF) at producing several things be made even better off by specialization and trade?

Accepted Answer

The answer of How can a person who is "better"...

Question 17

Consider the following scenario to answer the next questions: Kukla makes tables, with an opportunity cost of 3 rugs per every 4 tables. Zola makes rugs, with an opportunity cost of 2 tables per every 3 rugs.
-Ollie proposes that Kukla give Zola 1 table in exchange for 2 rugs. What are Kukla's and Zola's reactions?
A) Kukla likes the proposal, but Zola does not.
B) Zola likes the proposal, but Kukla does not.
C) Kukla and Zola both like the proposal.
D) Neither Kukla nor Zola likes the proposal.
E) Ollie's proposal is not feasible.

Accepted Answer

Kukla's opportunity cost for 1 table is 0.75 rugs (3 rugs for 4 tables), so getting 2 rugs for 1 table is a good deal. Zola's opportunity cost for 2 rugs is 1.33 tables (2 tables for 3 rugs), so giving away 2 rugs for only 1 table is not beneficial.

Question 18

Consider the following scenario to answer the next questions: Kukla makes tables, with an opportunity cost of 3 rugs per every 4 tables. Zola makes rugs, with an opportunity cost of 2 tables per every 3 rugs.
-Ollie proposes that Kukla give Zola 2 tables in exchange for 2 rugs. What are Kukla's and Zola's reactions?
A) Kukla likes the proposal, but Zola does not.
B) Zola likes the proposal, but Kukla does not.
C) Kukla and Zola both like the proposal.
D) Neither Kukla nor Zola likes the proposal.
E) Ollie's proposal is not feasible.

Accepted Answer

The answer of Consider the following scenario to answer the...

Question 19

For what kind of society does a shift away from the production of capital goods and toward the production of consumer goods make sense?
A) a society with a scarcity of natural resources
B) a society with a high unemployment rate
C) a society with a low per-capita income
D) a society with a large per-capita stock of capital goods
E) a society with a large population

Accepted Answer

A shift towards the production of consumer goods is more sensible for a society with a large per-capita stock of capital goods because it indicates that the society already has a substantial amount of infrastructure and machinery (capital goods) to support the production of consumer goods. This shift can help in meeting the immediate needs and improving the quality of life of its citizens.

Question 20

The existing entries in the following table show the maximum quantities of milk shakes or fruit smoothies the college president and dining hall staffer could make during an afternoon shift, given a fixed amount of resources.
a. Fill in the remaining part of the table be sure to label the units) and answer the questions below.
 $$\begin{array} { l l l l l } 
\hline & \begin{array} { l } 
\text { Number of } \
\text { Milk Shakes } \
\text { per Shift }
\end{array} & \begin{array} { l } 
\text { Number of } \
\text { Smoothies } \
\text { per Shift }
\end{array} & \begin{array} { l } 
\text { Opportunity } \
\text { Cost of 1 } \
\text { Smoothie }
\end{array} & \begin{array} { l } 
\text { Opportunity } \
\text { Cost of 1 } \
\text { Milk Shake }
\end{array} \
\hline \text { President } & 50 & 25 & & \
\text { Dining Hall } & 90 & 30 & & \
\text { Staffer } & & & & \
\hline
\end{array}$$ 
b. Who has a comparative advantage in producing smoothies?
c. Who has an absolute advantage in producing milk shakes?

Accepted Answer

The answer of The existing entries in the following table...

Quiz 2: Model Building and Gains From Trade

When an economy shifts away from production of consumer goods and toward production of capital goods, for the average worker this trade-off means

Draw a production possibilities frontier PPF) that shows a pizza shop's production trade-offs between producing pizzas and stromboli. Suppose the pizza shop upgrades to a larger, more automated oven. On the same graph, show how the PPF changes. The oven is used to bake both pizzas and stromboli.)

Explain how scarcity is the root cause of the trade-offs and opportunity cost illustrated in the production possibilities frontier PPF).

What assumptions do economists make when developing a production possibilities frontier PPF)?

Why has India's economy grown faster than the United States' in recent years?

What does it mean when society is operating inside the production possibilities frontier PPF)?

How will a reduction in the national unemployment rate affect a nation's production possibilities frontier PPF)?

Comment on the role of models in economics. What are the strengths and weaknesses of using them to explore the world around us?

A poker player wins some cash. Which use of the money would most naturally be considered an investment?

How can a person who is "better" or more efficient in that he or she has an absolute advantage in the production of various goods on the PPF) at producing several things be made even better off by specialization and trade?

For what kind of society does a shift away from the production of capital goods and toward the production of consumer goods make sense?