1.Consider the production possibilities frontier. The efficient points are the o

Question

1.Consider the production possibilities frontier. The efficient points are the ones that are either on or inside the frontier.

2.If Country A is absolutely better at producing everything than Country B, then there is no incentive for Country A to engage in trade with Country B.

3.The following table illustrates four points on a country’s production possibilities frontier. Based on the table, the country has decreasing opportunity cost of production:

Quantity of good X    Quantity of good Y

0                                              15

12                                            10

24                                            5

36                                            0

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Question 224 pts

In a given amount of time John can produce either 36 pounds of vegetables or 6 pounds of chicken. In the same amount of time George can produce either 20 pounds of vegetables or 5 pounds of chicken. In this simple economy if John and George decide to specialize and exchange with each other then we can expect one pound of chicken to trade for at least___ pounds of vegetables but not more than __ pounds of vegetables. Enter numerical values in each blank, rounded to two decimal places as necessary.

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Question 234 pts

The opportunity cost of an item is what you give up to get that item.

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Question 244 pts

When you pay $20 for a pizza we call this an implicit cost.

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Question 254 pts

The price of apples in a given week is an example of an economic variable.

True

Explanation / Answer

1. False

Efficient points are those which are on the PPF. Production of combination which lies inside PPF represents some resources are left ideal. So, points inside PPF are not efficient.

2. False

If a country is able to produce more of all the goods as compared to its competitor, then it has an absolute advantage in the production of goods but does not have comparative advantage in the production of all goods. So, trade will give benefit to both countries.

3. False

Opportunity cost is constant.

4. True

Opportunity cost is the value of next best alternative foregone.

5. False

When person pays $ 20 for a pizza then this is an explicit cost rather than implicit cost. Implicit costs are the opportunity cost.

Quantity of good X Quantity of good Y Opportunity Cost 0 15 - 12 10 15 - 10 = 5 24 5 10 - 5 = 5 36 0 5 - 0 = 5

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