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3. Assume a desert island economy in which labor is the only scarce resource and labor can be used to gather food (coconuts) or to build huts. There are six equally productive individuals on the island. Each inhabitant can gather 25 coconuts in one day or build one hut in one day.

a. Does this production possibilities schedule exhibit constant or increasing opportunity costs? _______________

b. Suppose the workers on the island are currently making two huts along with their work collecting coconuts. Compute the opportunity cost of building one (1) more (i.e. an additional) hut in one day. ___________

c. If half the workers build huts and half the workers gather coconuts, what would be the production of the island? Number of coconuts_________ Number of huts __________

d. Assume that in one day, two huts were built and 75 coconuts were gathered. What does this situation depict? (I.e. what might cause this result to occur on the island?)

e. What would have to occur on the island for three huts to be produced along with 100 coconuts? I.e. what would be true about the resource use?

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Ritu Kharb
Ritu KharbLv5
28 Sep 2019
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Related questions

A bowed out PPF reflects which of the following ideas?

i.increasing opportunity cost

ii. resources are not equally productive in all activities

iii. prices of goods increase over time

   

I only
   

I and iii
   

ii and iii
   

I and ii

1 point

QUESTION 2

With no international trade, a country ________ consume at a point outside of its PPF; with international trade, a country ________ consume at a point outside of its PPF.

   

can; cannot
   

cannot; can
   

cannot; cannot
   

can; can

1 point

QUESTION 3

If the production possibilities frontier between two goods is a straight line, then the

   

the line does not qualify as a production possibilities frontier because the unattainable production points are too close to the inefficient production points.
   

opportunity cost is not a ratio.
   

increasing opportunity costs.
   

resources are equally productive in both goods.

1 point

QUESTION 4

As an economy produces more of one of the goods on a bowed out production possibilities frontier, what happens to the opportunity cost of producing the good?

   

It might increase, decrease, or remain constant depending on how much people value the additional units of the good.
   

It decreases.
   

It increases.
   

It remains constant.

1 point

QUESTION 5

"Comparative advantage" is defined as a situation in which one person can produce

   

more of a good than another person.
   

a good for a lower dollar cost than another person.
   

a good for a lower opportunity cost than another person.
   

more of all goods than another person.

1 point

QUESTION 6

When a production possibilities frontier is bowed outward, as more of one good is produced, its opportunity cost

   

increases.
   

decreases.
   

might increase, decrease, or remain constant depending on how much people value the additional units of the good.
   

remains constant.

1 point

QUESTION 7

A bowed out production possibility frontier shows that the

   

opportunity cost relationship is linear.
   

the opportunity cost of a good is constant as more of the good is produced.
   

the opportunity cost of a good increase as more of the good is produced.
   

the opportunity cost of a good decrease as more of the good is produced.

1 point

QUESTION 8

Which of the following statements is correct?

   

The production possibilities frontier shows that there are no limits to production.
   

Any point on or within the PPF is production efficient.
   

If capital is idle, the economy is producing at its full potential.
   

A tradeoff is a limit that forces an exchange or a substitution of one thing for something else.

1 point

QUESTION 9

A major earthquake occurs in the central part of the United States. What impact would this have on the nation's production possibilities frontier and why?

   

A tradeoff would occur to replace the resources and goods destroyed.
   

It would shift inward because some of the nation's resources, such as capital and labor, would be destroyed.
   

It would shift outward because unemployment would be reduced.
   

Nothing would happen because the nation would still have the same capabilities.

1 point

QUESTION 10

When a nation is producing on its production possibilities frontier, if more resources are used to produce one good, then the production of other goods

   

must increase.
   

must decrease.
   

must remain the same.
   

must change but they might increase or decrease.

1 point

QUESTION 11

Moving along a country's PPF, a reasonable opportunity costs increase is that

   

unemployment increases as a country produce more and more of one good.
   

unemployment decreases as a country produces more and more of one good.
   

some resources are better suited for producing one good rather than the other.
   

technology declines as a country produce more and more of one good.

1 point

QUESTION 12

A reason the production possibilities frontier exists is

   

scarcity of resources and unlimited technology.
   

unemployment.
   

scarcity of resources.
   

unlimited resources and technology.

1 point

QUESTION 13

Moving from one point to another on a production possibilities frontier implies

   

increasing the production of one good and decreasing the production of another.
   

increasing the production of both goods.
   

decreasing the production of both goods.
   

holding the production levels of both goods constant.

1 point

QUESTION 14

Specialization and trade make a country better off because with trade the country can consume at a point

   

outside its production possibilities frontier.
   

on its trading partner's production possibilities frontier.
   

inside its production possibilities frontier.
   

on its production possibilities frontier.

1 point

QUESTION 15

The production possibilities frontier is the

   

the boundary between the combinations of goods and services that can be produced and the combinations that cannot be produced when technology is changing.
   

the minimum output that can be produced when resources are used inefficiently.
   

the boundary between the combinations of goods and services that can be produced and the combinations that cannot be produced, given the available factors of production and the state of technology.
   

maximum output that can be produced at an opportunity cost of zero.

1 point

QUESTION 16

The opportunity cost of economic growth is ________ and the benefit of economic growth is ________.

   

decreased current consumption; decreased future consumption
   

decreased current consumption; increased future consumption
   

increased current consumption; increased future consumption
   

increased current consumption; decreased future consumption

1 point

QUESTION 17

In terms of a nation's production possibilities frontier, what impact does international trade have?

   

International trade shifts the nation's production possibilities frontier outward.
   

International trade shifts the production possibilities frontier outward for the goods that are exported and inward for the goods that are imported.
   

International trade shifts the nation's production possibilities frontier inward.
   

International trade allows the nation to consume at a point outside its production possibilities frontier.

1 point

QUESTION 18

The production possibilities frontier illustrates the

   

goods and services that people want.
   

limits to people's wants.
   

resources the economy possesses, but not it is the level of technology.
   

maximum combinations of goods and services that can be produced.

1 point

QUESTION 19

As we move along the production possibilities frontier,

   

the possibilities of tradeoffs diminish.
   

the production of one good increases as the production of the other good decreases.
   

more of both goods can be produced.
   

a tradeoff is not possible because nations need all goods.

1 point

QUESTION 20

What is the opportunity cost of economic growth?

   

Eliminate scarcity
   

Land.
   

Capital goods.
   

Consumption of goods.

1 point

QUESTION 21

Which of the following statements is correct?

i.As the economy grows, the opportunity costs of economic growth decrease.

ii. Economic growth has no opportunity cost.

iii. The opportunity cost of economic growth is current consumption forgone.

   

ii only
   

iii only
   

I only
   

I and iii

1 point

QUESTION 22

Does economic growth depend upon which of the following?

i. Increasing the quantity of labor.

ii. Lowering the prices of goods and services.

iii. Advancing technology.

   

ii only.
   

I only.
   

I and iii.
   

iii only.

1 point

QUESTION 23

When drawing a production possibilities frontier, which of the following is held constant?

   

the amount of money in the economy
   

the prices of goods and services
   

the quantity of the goods and services that are produced
   

the available factors of production and the state of technology

1 point

QUESTION 24

To increase its economic growth, a nation should

   

encourage spending on goods and services.
   

increase in current consumption.
   

encourage education because that increases the quality of labor.
   

limit the number of people in college because they produce nothing.

1 point

QUESTION 25

The opportunity cost of one more slice of pizza in terms of sodas is the

   

some pizza slices we have to give up to get one extra soda.
   

the total number of sodas that we have divided by the total number of pizza slices that we have.
   

the total number of pizza slices that we have divided by the total number of sodas that we have.
   

the number of sodas we have to give up to get one extra pizza slice.

Q 1: Below is a production possibilities table for consumer goods and capital goods : Production Alternatives Capital Goods Consumer Goods A 0 70 B 3 65 C 6 55 D 9 40 E 12 20 F 15 0 a. Show these data graphically. Upon what specific assumptions is this production possibilities curve based? b. If the economy is at point C, what is the cost of one more unit of capital good? Of one more unit of consumer good? Explain how the production possibilities curve reflects the law of increasing opportunity costs. c. If the economy characterized by this production possibilities table and curve were producing 7 units of capital goods and 45 units of consumer goods, what could you conclude about its use of its available resources? d. What would production at a point outside the production possibilities curve indicate? What must occur before the economy can attain such a level of production? e. Assume consumer good are bread and cookies here. What happens to this frontier if disease kills half of the economy’s hens and cows? Q 2(a): How does self-interest help achieve society’s economic goals? Why is there such a wide variety of desired goods and services in a market system? In what way are entrepreneurs and businesses at the helm of the economy but commanded by consumers? b. Why is private property, and the protection of property rights, so critical to the success of the market system? c. How the market system decides what to produce, how to produce it, and who obtains it. Q 3: How will each of the following changes in demand and/or supply affect equilibrium price and equilibrium quantity in a competitive market; that is, do price and quantity rise, fall, or remain unchanged, or are the answers indeterminate because they depend on the magnitudes of the shifts? Use supply and demand diagrams to verify your answers. i. Supply decreases and demand is constant. ii. Demand increases and supply increases. iii. Supply increases and demand decreases. b. Explain why the price in competitive markets settles down at the equilibrium intersection of supply and demand. Explain what happens if the market price starts out too high or too low. c. Consider the following events: Scientists reveal that consumption of oranges decreases the risk of Corona Virus and, at the same time, farmers use a new fertilizer that makes orange trees more productive. Illustrate and explain what effect these changes have on the equilibrium price and quantity of oranges.

When an owner of a productive resource deploys that resource where he gets the highest price for it, he is not only deploying that resources where it will create greatest value of final output but is also maximizing his own welfare. The greed of the owner and the efficient allocation of productive resources are congruent in a capitalist economy.

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