Explain how it is possible for one of two people in a two-good economy to have an absolute advantage in producing both goods, but trade can still benefit both people. What will be an ideal response? ANSWER One person, when she spends all of her time producing one good or the other, can produce […]
Date: September 9th, 2020
The production of cigarettes is highly automated; however, a worker is required to monitor each machine. Machines and workers do not interact with one another. Given this information, there are most likely A) economies of scale. B) economies of scope. C) constant returns to scale. D) increasing returns to scale. ANSWER C
Date: September 9th, 2020
Can consumption efficiency be achieved even if the efficient product mix is not achieved? What will be an ideal response? ANSWER Efficiency in consumption implies that all consumers have the same MRS. This can be achieved with any product mix. Thus, consumers can be as well off as possible for any given product mix. […]
Date: September 9th, 2020
If a production function is represented as q = LaKb, the long-run average cost curve will be horizontal as long as A) a + b = 0. B) a + b = 1. C) q > 0. D) L = K. ANSWER B
Date: September 9th, 2020
Suppose an economy with two goods (candy and desk) and two identical agents that is in a competitive equilibrium. The marginal cost of a piece of candy is given by MCc = 4Qc and the marginal cost of a desk is MCd = 2 + Qd. The current production level of candy (Qc) is 4 […]
Date: September 9th, 2020
Suppose that productivity-enhancing technological progress affected more the production of chairs than the production of tables. This can be depicted using a production possibilities frontier in which A) only the chair axis intercept increases. B) only the table axis intercept decreases. C) both intercepts increase; however, the chair intercept increases by more. D) both intercepts […]
Date: September 9th, 2020
Economic growth can be obtained A) by government legislation. B) by a change in the level of inputs or an improvement in technology. C) only through a change in the level of inputs, hence the desire for conquest throughout the history of the world. D) only through a change in technology, which explains the explosive […]
Date: September 9th, 2020
In a perfectly competitive equilibrium with production and trade, which of the following results occur(s)? A) Pareto-efficiency is obtained. B) The First Welfare Theorem is satisfied. C) There is efficiency in production. D) All of the above. ANSWER D
Date: September 9th, 2020
A firm can minimize cost by A) picking the bundle of inputs where the lowest isocost line touches the isoquant. B) picking the bundle of inputs where the isoquant is tangent to the isocost line. C) picking the bundle of inputs where the last dollar spent on one input gives as much extra output as […]
Date: September 9th, 2020
Competition results in the efficient product mix because A) producers are setting MRT equal to minus the price ratio while consumers are setting MRS equal to minus the price ratio ensuring that MRT will equal MRS. B) consumers are on the contract curve. C) the slope of the production possibility frontier will equal the slope […]
Date: September 9th, 2020
