Question 1

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

Accepted Answer

When the opportunity cost of producing more of a good is increasing, it means that to produce each additional unit, the economy must give up more and more of other goods. This scenario directly translates to an increasing marginal cost, as the marginal cost reflects the additional cost of producing one more unit of a good.

Question 2

The quantity of shoes produced is measured along the horizontal axis of a PPF and the quantity of shirts is measured along the vertical axis. As you move down toward the right along the PPF, the marginal cost of

Accepted Answer

As you move down toward the right along the PPF, producing more shoes requires giving up increasingly more shirts, indicating that the marginal cost of shoes increases.

Question 3

The existence of the tradeoff along the PPF means that the PPF is

Accepted Answer

The existence of a tradeoff along the Production Possibility Frontier (PPF) indicates that as the production of one good increases, the production of another good decreases, hence the PPF is negatively sloped.

Question 4

-Production points inside the PPF are

Accepted Answer

Production points inside the Production Possibility Frontier (PPF) are considered inefficient because they do not fully utilize available resources, but they are attainable because the economy has the resources to achieve these points.

Question 5

Abe can catch 10 pounds of fish an hour or pick 10 pounds of fruit. Zeb can catch 30 pounds of fish an hour or pick 20 pounds of fruit. The opportunity cost of fish is ________ for Abe than for Zeb, and the opportunity cost of fruit is ________ for Abe than for Zeb.

Accepted Answer

Abe's opportunity cost of catching fish is 1 pound of fruit per pound of fish, while Zeb's is 2/3 pound of fruit per pound of fish. Thus, Abe's opportunity cost of fish is higher. Conversely, Abe's opportunity cost of picking fruit is 1 pound of fish per pound of fruit, while Zeb's is 1.5 pounds of fish per pound of fruit, making Abe's opportunity cost of fruit lower.

Question 6

-In the above figure, at point b what is the opportunity cost of producing 2 more audio tapes?

Accepted Answer

The opportunity cost of producing more audio tapes is the amount of video tapes that must be given up. If producing 2 more audio tapes costs 1 video tape, then the opportunity cost per audio tape is 1/2 video tape.

Question 7

Moving along a PPF, marginal cost is

Accepted Answer

Moving along a Production Possibility Frontier (PPF), the marginal cost of producing an additional unit of a good or service is represented by the opportunity cost of producing that unit. This is because, in order to produce one more unit of a good, resources must be reallocated from the production of another good, leading to a trade-off that is captured by the opportunity cost.

Question 8

-In the figure above, if the quantity of yogurt produced increases from 2 gallons an hour to 3 gallons an hour, the opportunity cost of a gallon of yogurt in terms of ice cream is

Accepted Answer

The opportunity cost of producing an additional gallon of yogurt (from 2 to 3 gallons) is the amount of ice cream forgone. In this scenario, the production of ice cream decreases from 4 gallons to 3 gallons, which means 1 gallon of ice cream is the opportunity cost of increasing yogurt production by 1 gallon.

Question 9

A marginal cost curve

Accepted Answer

The marginal cost curve is typically upward sloping because as more of a product is produced, the opportunity costs of producing another unit generally increase. This reflects the law of increasing costs.

Question 10

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

Accepted Answer

Marginal cost refers to the cost of producing one additional unit of a good. It typically increases as production increases due to the law of diminishing returns, which states that adding more of one factor of production, while holding all others constant, will at some point yield lower per-unit returns.

Question 11

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

Accepted Answer

The opportunity cost of producing a ton of beef for Dag is 5 bushels of corn (25 bushels/5 tons), and for Claire, it is 2.5 bushels of corn (40 bushels/16 tons).

Question 12

-In the above figure, point A is ________, and point B is ________.

Accepted Answer

Point A is attainable because it is within the feasible region. Point B is attainable because it is on the boundary of the feasible region.

Question 13

The bowed-outward shape of a PPF

Accepted Answer

The bowed-outward shape of a production possibilities frontier (PPF) is due to the principle of increasing opportunity costs, which states that as production of one good increases, the opportunity cost of producing an additional unit of that good increases, assuming the efficient use of resources. This shape reflects the reality that resources are not equally efficient in all uses, so reallocating resources to different productions involves increasing costs.

Question 14

A nation can produce at a point outside its PPF

Accepted Answer

A nation cannot produce outside its Production Possibility Frontier (PPF) as the PPF represents the maximum combination of goods or services that can be produced with existing resources and technology. Producing outside the PPF would require more resources or technology than currently available.

Question 15

Production efficiency means that

Accepted Answer

Production efficiency means that resources are being used in such a way that it is impossible to produce more of one good without reducing the production of another good, indicating that all resources are fully utilized.

Question 16

-In the above figure, at point a what is the opportunity cost of producing one more audio tape?

Accepted Answer

The opportunity cost of producing one more audio tape is the amount of video tapes that must be given up to produce that additional audio tape. At point a, the production possibilities frontier shows that 1 video tape must be given up to produce 1 additional audio tape.

Question 17

Marginal cost

Accepted Answer

Marginal cost typically increases as more of a good is produced due to the law of diminishing returns, which states that as production increases, the cost of producing an additional unit rises.

Question 18

Abe can catch 15 pounds of fish an hour or pick 30 pounds of fruit an hour. He works an 8-hour day, spending 5 hours picking fruit and 3 hours catching fish. Calculate Abe's opportunity cost of a pound of fruit.

Accepted Answer

Abe can catch 15 pounds of fish an hour or pick 30 pounds of fruit an hour. So, the opportunity cost of a pound of fruit is 15/30 = 0.5 pounds of fish.

Question 19

Moving along a bowed-out PPF between milk and cotton, as more milk is produced the marginal cost of an additional gallon of milk

Accepted Answer

The bowed-out shape of the production possibilities frontier (PPF) indicates increasing opportunity costs. As more milk is produced, resources less suited for milk production are used, raising the marginal cost of an additional gallon of milk.

Question 20

Marginal cost is the opportunity cost

Accepted Answer

Marginal cost refers to the cost associated with producing one additional unit of a good or service. It is a key concept in economics that helps businesses determine the most efficient level of production.

Quiz 2: The Economic Problem