Why is the shape of the production possibilities frontier (PPF) often curved instead of straight?

Because the production possibilities frontier is based on the productive capabilites, and of a nation
overall, rather than the productive capacity of an individual.

Typically, some resources are better suited for producing one good than another, which means that
there are diminishing returns when moving such resources away from producing what they are best
suited for.

To take a potential sunk cost into account, the PPF is curved to distribute the burden of the sunk cost
based on allocative effieciency.

The productive efficiency of an economy decreases as it moves from left to right along the PPF.

Christine and Paul are deciding how to split their time between writing music and lyrics for their new
album. Their PPFs for 72 h of work are shown. Christine and Paul have to write music for 8 songs and
lyrics for 12 songs (4 songs already have music). When they are done, they can go to a private island and
relax from all their hard work. It is possible that they will use more than 72 h.

Once they start writing lyrics and music, assuming their hired help packs for them and their plane is
waiting outside their door, in how many hours can they board the plane to their relaxing island
getaway?

Christine will write music for songs

Paul will write music for songs

Christine will write lyrics for songs

Paul will write lyrics for songs

The accompanying graph contains the production possibilities frontier (PPF) for Rubberland. Rubberland
only makes two products, rubber band balls and rubber hoses, and on a given day can produce
according to the PPF in the graph. Point A on the PPF represents the combination of the two goods
Rubberland currently produces.

When a new method of rubber processing is discovered, the productivity of all Rubberland's inputs
increases. Please shift the PPF to show this change.

Assume that Rubberland does not make more rubber band balls than they originally made at point A but
still maximize their productive capabilities. Move point A to their new production point.

How many more rubber hoses do they now produce per day than before?

__ more hoses per day

Identify each statement as true or false.

. When two countries choose to partake in international trade, it is a mutually beneficial activity for both
countries.

. Wealthier countries always benefit more from international trade than poorer countries

Countries trade for goods in which they do not have a comparative advantage, and therefore, would
never trade with nations that have similar resource endowments.

Through specialization and trade, it is possible for a country to consume a combination of goods that is
beyond

its original production possibilities frontier.

A farmer produces both beans and corn on her farm. If she must give up 16 bushels of corn to be able
to get 6 bushels of beans, then her opportunity cost of 1 bushel of beans is

0.38 bushels of corn.

16.00 bushels of corn.

 2.67 bushels of corn.

2.99 bushels of corn.

Suppose that Paulie and Vinny each can produce ice cream or t-shirts. The table shows the quantity of
each good that Paulie and Vinny each can produce in 1 hour, respectively, if they devote all of their
time and effort into making the good. Round all answers to two decimal places.

What is Paulie's opportunity cost of producing a cup of ice cream?

Paulie's opportunity cost: ____ t-shirts

What is Vinny's opportunity cost of producing a t-shirt?

Vinny's opportunity cost: ___ cups of ice cream

Paulie has a comparative advantage in ___ and Vinny has a comparative advantage ____

According to the graph of the production possibilities frontier, what is the opportunity cost of the fourth
widget?

about 3 gizmos

about 5 widgets

about 4 widgets

about 0.5 gizmos

What best explains the shape of the production possibility frontier in the graph?

This economy has the capacity to produce different combinations of widgets and gizmos.

Some resources used to produce one of the goods are not as productive when they are used to produce
the other good.

The production of widgets and gizmos require the same resources to produce.

Producers can move from one point to another on the production possibilities frontier in response to

consumers' demands.

Select the correct definition of the term "comparative advantage."

the ability to produce less of a good or service than another over a specified time period

the ability to produce a good or service at a higher opportunity cost than another

the ability to produce a good or service at a lower opportunity cost than another

a nation offering more favorable trade policy with its allies than with other countries

the ability to produce more of a good or service than another over a specified time period

The figures illustrate the production possibilities available to Kate and Sarah with eight hours of labor in
their bakery. Answer the questions according to these figures.

Kate has a comparative advantage in

both goods.

cake.

neither good.

bread.

Sarah has a comparative advantage in

both goods.

bread.
cake.

neither good.
Kate has an absolute advantage in

cake.

bread.

neither good.

both goods.

Sarah has an absolute advantage in

both goods.

neither good.

cake.

bread.

Vincent and Jean are two cooks who work in a village. Each of them can either bake cakes or make
pizzas. Every ingredient is readily available to them, and the only scarce resource is the cooks' time.

Vincent can bake 10 cakes or make 5 pizzas in an hour. Jean can bake 12 cakes or make 8 pizzas in
an hour. Please answer the four questions.

. Which cook has the absolute advantage in baking cakes?

Vincent
Neither

Jean

Which cook has the absolute advantage in making pizzas?

Neither

Jean

Vincent

Which cook has the comparative advantage in baking cakes?

Neither

Vincent

Jean

Which cook has the comparative advantage in making pizzas?

Jean

Neither

Vincent
Assume Ireland and Chad can both produce grain and dates, and that the only limited resource is the
farming labor force, meaning that land, water, and all other resources are plentiful in both countries.

Each farmer in Ireland can produce 10 t of grain or 5 t of dates in a season. Each farmer in Chad can also
produce 10 t of grain or 25 t of dates. Please answer the four questions.

Which country has the absolute advantage in producing dates?

Neither

Ireland

Chad

Which country has the absolute advantage in producing grain?

Ireland

Chad

Neither

Which country has the comparative advantage in producing dates?

Neither

Ireland
Chad

Which country has the comparative advantage in producing grain?

Neither

Ireland

Chad

Kate and Sarah own a bakery together. The two figures illustrate the production possibilities available to
them if they work at their bakery for 8 h a day. Answer the question using these figures.

If Kate and Sarah both specialize in the good in which they have a comparative advantage, the

total production of bread will be 4 loaves, and the total production of cake will be 9 units.

total production of bread will be 16 loaves, and the total production of cake will be 17 units.

total production of bread will be 12 loaves, and the total production of cake will be 8 units.

total production of bread will be 8 loaves, and the total production of cake will be 8.5 units.
Classify the statements as true or false.

a. The process of specialization and trade has positive net benefits and is, therefore, beneficial to
everyone.
b. A nation will not have a comparative advantage in a product if it does not also have an absolute
advantage in the production of that good.
c. It can be mutually beneficial for two nations to specialize in goods for which they have a
comparative advantage and then trade with one another
d. Countries specialize in the production of goods for which they have a comparative advantage.
e. Absolute advantage is the source of the potential gains from specialization and trade.

The table presents information about the productivity of digital cameras and personal computers in the
United States and Japan. The data are presented in units of output per hour of work. Use this
information to answer the question.

Japan has a(n) ___________________ advantage in producing ______________________ .

absolute, personal computers

comparative, digital cameras and personal computers

absolute, digital cameras

comparative, digital cameras

An economic transaction in which one party trades a good or service for another good or services is
called

barter.

comparative advantage.

absolute advantage.

a production possibility.

Determine if the items represent an example of positive economics or normative economics.

The richest 1 % of Americans should pay more taxes than the rest of the 99 %.

positive economics

normative economics

A decrease in the supply of coconut will increase the price of German chocolate cake, a good which
requires coconut shavings as a key ingredient.
normative economics

positive economics

As minimum wage increases, the prices of all goods and services also tends to increase.

positive economics

normative economics

Social welfare spending in Sweden occupies too large a portion of the national budget.

normative economics

positive economics

In a competitive market, all of the choices along the production possibility frontier display
________________ efficiency, while the specific choice on the frontier that society picks is the one with
_______________ efficiency.

productive; allocative

allocative; productive

allocative; allocative

productive; productive
The demand schedule for chicken feet, a dim sum delicacy served at some Chinese restaurants, is shown
in the table. Although some people find the texture strange, others have developed a taste for it.

How many more chicken feet were demanded in 2018 , at a price of $3.00 a pound, than in 2008 ?

million pounds

Based on the demand schedule, you conclude

the demand curve shifted to the right.

there was movement along the demand curve to the right.

there was movement along the demand curve to the left.

the demand curve shifted to the left.

According to the law of demand,

an increase in income increases demand.

an increase in price decreases demand.

a decrease in price increases quantity demanded.

a decrease in price increases demand.

The demand curve

is a graphical representation of the relationship between price and quantity supplied.

depicts the relationship between production costs and output.

determines equilibrium price in a market.

is a graphical representation of the relationship between price and quantity demanded.

Andrew, a college student, loves drinking coffee late at night to study for exams. Having no income, he is
used to buying cheap, bad-tasting coffee, such as Beanlightened, that he needs to grind and brew
himself. The coffee tastes putrid but, with enough cream and sugar, Andrew is able to tolerate it.
Occasionally, he does go out to Starbucks when he has spare money.

After graduation, Andrew gets a job working at a database firm as a programmer. His income is now a
healthy $75,000 a year, and he decides he has had enough bad-tasting coffee. He ends up buying coffee
daily from Starbucks, even though it costs significantly more than Beanlightened.

Andrew's demand for Starbucks coffee changed as a result of

a change in technology.
a change in the number of consumers.

a change in a related good or service.

a change in income.

a change in expectations.

Beanlightened coffee is for Andrew a(n)

In economic terms, Starbucks coffee is for Andrew a(n)

For each example listed, decide if the good is a normal good or an inferior good. Make sure you answer
from the perspective of the individual or individuals doing the buying or consuming.

Billy's mom increases his weekly allowance by $

. As a result, Billy increases the number of apps he downloads on his smartphone. Smartphone apps are

. Susan gets a

15
 percent performance bonus at work. She can finally stop eating so many frozen pizzas and eat
something more tasty. Frozen pizzas are

Mike is an appliance salesman. Refrigerator sales in his store have fallen and so has his commission.
Mike decides to switch from name brand cereal to generic cereal. Generic cereal is