Economics Module 2

Question 1

*Looking at Table 2.1, what is the marginal benefit of increasing the hours spent studying economics from 3 hours to 4 hours?

Answer 1

15

Question 2

*Which of the following are examples of diminishing marginal returns? Select all that apply.

Answer 2

Chopping fewer bundles of wood each hour because you are tired

With each additional hour that a hiker walks they cover fewer and fewer miles in that hour.

Question 3

*If a production process follows diminishing marginal returns, and an individual produces 10 units in the first hour, how many units they will produce in the second hour? Select all that apply.

Answer 3

8 units

9 units

Question 4

*A firm produces pencils or pens. Three workers can produce a total of 10 pens per hour, four workers produce a total of 14 pens per hour, and 5 workers can produce a total of 16 pens per hour. Likewise, three workers can produce a total of 10 pencils per hour, four workers produce a total of 14 pencils per hour, and five workers can produce a total of 16 pencils per hour. The firm has a total of eight workers. Three workers are producing pens and five workers are producing pencils. What is the marginal cost of increasing the production of pens from 10 pens per hour to 14 pens per hour?

Answer 4

2 pencils per hour

Question 5

*A firm produces pencils or pens. Three workers can produce a total of 10 pens per hour, four workers produce a total of 14 pens per hour, and five workers can produce a total of 16 pens per hour. Likewise, three workers can produce a total of 10 pencils per hour, four workers produce a total of 14 pens per hour, and five workers can produce a total of 16 pens per hour. The firm has a total of eight workers. Four workers are producing pens and four workers are producing pencils. What is the marginal cost of increasing the production of pens from 14 pens per hour to 16 pens per hour?

Answer 5

4 pencils per hour

Question 6

*A company could produce t-shirts for a $500 profit, long-sleeved shirts for a $350 profit, hoodies for a $200 profit, or socks for a $50 profit. If they can only produce one of these four options, what is the opportunity cost of producing t-shirts?

Answer 6

$350

Question 7

*Is it possible to have allocative efficiency without technical efficiency?

Answer 7

Yes

Question 8

*Refer to Figure 2.3. Point B is _______.

Answer 8

not a possible level of production given current levels of technology and resources

Question 9

*Which of the following best describes the relationship between diminishing marginal returns and marginal cost?

Answer 9

If marginal returns are diminishing while output increases, marginal cost must be increasing.

Question 10

*Which of the following options best describes the cost of moving production from point C to point B on the production possibilities frontier pictured below? [ 70 tennis racquets and 70 tennis balls (Point C), 50 tennis racquets and 85 tennis balls (Point B) ]

Answer 10

The opportunity cost is the number of tennis rackets given up

Question 11

*In the production possibilities frontier below, point D represents which of the following? ​

Answer 11

An unobtainable level of production

Question 12

*If the opportunity cost of an action was greater than the benefits of that action, we would describe the effects on the economy as _______.

Answer 12

allocatively inefficient and economically inefficient

Question 13

*As resources are moved from the production of one good to another, we would normally expect the cost of producing one more unit of the new good to _______.

Answer 13

increase

Question 14

When a restaurant prices pizza at $10 per slice they sell 100 slices in a night. If they sell pizza for $5 per slice, they sell 300 slices in a night. What is the slope of this demand curve for pizza?

Answer 14

-1/40

Question 15

A study finds that at a price of $10, 100 t-shirts are sold. At a price of $5, 300 t-shirts are sold. How many t-shirts can you assume are sold at $7? Why?

Answer 15

220

Question 16

What does it mean if the graph of demand for Priuses (Demand Curve A, Figure A2.6) becomes steeper (Demand Curve B)?

Answer 16

A change in price has less of an impact on the quantity of Priuses purchased

Question 17

Assume that the relationship between GDP and the employment rate has a positive slope. If an employment rate of 100 million is associated with a GDP level of $20 trillion and an employment rate of 110 million is associated with a GDP level of $21 trillion, what can you assume is the GDP level for an employment rate of 120 million?

Answer 17

$22

Question 18

What is the meaning of point “A” in Figure A2.8? of point “B”?

Answer 18

Point A represents 6 right shoes and 2 left shoes, Point B represents 4 right shoes and 8 left shoes

Question 19

Consider two demand curves, demand curve A has a slope of -3 and demand curve B has a slope of -2. Remember that demand curves are drawn so that price is on the y-axis and quantity of goods is on the x-axis. Which of the following must be true?

Answer 19

As price is decreased, quantity demanded increases more for demand curve B than demand curve A

Question 20

Given the curve in Figure M2.1, if you are already spending 4 hours studying biology and you increase it to 5 hours, what is the opportunity cost?

Answer 20

A loss of 5 points in economics for every 1 point earned in biology.

Question 21

Given the production possibility frontier in Figure M2.2, if you are already spending 4 hours studying economics and you increase it to 5 hours, what is the opportunity cost?

Answer 21

A loss of 2 points in your biology score for every 1 point gained in economics

Question 22

You would expect to see diminishing marginal returns given a linear production possibility frontier as in Figure M2.2. True or False?

Answer 22

False.

Question 23

You would expect to see increasing marginal cost (increasing opportunity cost) given a linear production possibility frontier as in Figure M2.2. True or False?

Answer 23

false

Question 24

(EOC) If the economy is producing at a point inside the production possibilities frontier, which of the following must be true?

Answer 24

More of both goods can be produced

Question 25

(EOC) Which points represent a production level that could be economically efficient? Select all that apply.

Answer 25

B and C

Question 26

(EOC) Consider the following production possibilities frontier. If the economy is currently at point A and producing missiles or automobiles are the only choices, which of the following statements is true? ​

Answer 26

The opportunity cost of producing 50 additional automobiles is zero missiles

Question 27

(EOC) Which of the following is true of an economic model?

Answer 27

It makes simplifying assumptions to provide a simpler version of a complex problem so that it may be studied and understood

Question 28

(EOC) Which point represents the optimal mix of producing butter and shoes?

Answer 28

one cannot tell

Question 29

(EOC) Which of the following graphs shows the correct change in the production possibilities frontier curve if a new technology is invented that increases the productivity of watch manufacturing?

Answer 29

Option B

watch line shifts rightward

Question 30

(EOC) A company produces reuseable water bottles. Their technology allows one worker to produce 10 water bottles in an hour. Hiring a second worker would allow them to produce 16 total water bottles in an hour and three workers can produce 18 total water bottles. What is the marginal benefit of hiring the second worker?

Answer 30

6

Question 31

(EOC) A company produces flashlights. If the company hires one worker that worker will produce 10 flashlights in an hour, if they hire a second worker they will produce 16 flashlights in an hour, and if they hire a third worker, they will produce 18 flashlights in total. What is the marginal benefit of hiring the third worker?

Answer 31

2

Question 32

(EOC) The following table provides the different output levels that workers could produce. For example, if three workers are making handbags and two workers are making phones, 45 handbags and 30 phones will be made. A company has 6 workers. If 3 workers are making handbags and 3 workers are making phones, what is the marginal benefit in phones if one worker is taken from handbag production and placed into phone production?

Answer 32

8

Question 33

(EOC) Referring to EOC 2.14, if another worker making handbags switches to making phones (i.e. decreasing the number of workers in handbags production from 2 to 1), by how much will production of handbags fall?

Answer 33

15

Question 34

(EOC) What is the marginal benefit of taking another worker from the handbag production process to phone production in addition to what was done in EOC 2.14? (i.e. increasing the number of workers in phone production from 4 to 5.)

Answer 34

5

Question 35

(EOC) What is the marginal benefit of the last worker in the handbag production process with the change put forth in EOC 2.16?

Answer 35

20

Question 36

(EOC) Looking at the production of handbags and phones once again, if a firm has 6 workers with three workers producing handbags and three workers producing phones, what is the marginal cost of producing one additional phone if a worker changes from handbag production to phone production?

Answer 36

1.25 handbags

Question 37

(EOC) What is the per phone marginal cost of increasing phone production from 50 to 55 phones if there are 6 workers in the company?

Answer 37

3 handbags

Question 38

(EOC) Over the past year, major American automotive companies have switched some of their production from smaller, more fuel efficient cars to trucks and SUVs. Pick the possible responses as to why they switched production. (One or more options may apply)

Answer 38

The price of trucks and SUVs increased, so marginal cost of continuing to produce smaller cars was too great.

Question 39

(EOC) A pizza parlor can make 100 pizzas in an evening. They make 40 pepperoni pizzas and 60 extra cheese pizzas. They are producing each pizza at the lowest possible cost. 100 people order pizza, but 50 people would like a pepperoni pizza and 50 would like an extra cheese pizza. This pizza parlor is what?

Answer 39

Technically efficient, but not allocatively efficient nor economically efficient

Question 40

(EOC) A pizza parlor can make 100 pizzas in an evening. They make 35 pepperoni pizzas and 35 extra cheese pizzas. 100 people order pizza, but 50 people would like a pepperoni pizza and 50 would like an extra cheese pizza. This pizza parlor is what?

Answer 40

Allocatively efficient, but not technically efficient nor economically efficient

Question 41

(EOC) The figure below shows two production possibilities curves that do what?

Answer 41

Reveal that firm B (curved graph) has an increasing marginal cost of production and firm A (linear graph) does not

Question 42

(EOC) If a country is operating on the production possibilities frontier curve, it must mean that which of the following is true?

Answer 42

The country is technically efficient.

Question 43

(EOC) When parents say, “My child is very intelligent, but he just doesn’t try. My child would rather play video games than study.” The child is _______.

Answer 43

allocatively efficient, but not technically efficient

Question 44

(EOC) Increasing marginal cost is a direct result of __________.

Answer 44

diminishing marginal returns

Question 45

(EOC) Tesla is building a car battery factory in Nevada to drastically increase their production capacity from where it is now. Since the factory has not opened, Tesla is __________.

Answer 45

increasing its production possibility frontier

Question 46

(EOC) As a larger number of students are assigned to groups to work on a project, which of the following is true?

Answer 46

The less each additional student will contribute to the project

Question 47

(EOC) A firm may produce chairs or tables. If the firm is using all of its resources to produce tables and a new technology makes it easier to produce chairs, but the firm continues to produce only tables, which of the following is true?

Answer 47

The firm is still technically efficient, but the marginal cost of tables increases

Question 48

(EOC) An economic model makes it easier to understand complex economic problems by doing which of the following?

Answer 48

Making simplifying assumptions

Question 49

(EOC) In order for a country to be economically efficient and operate at a point beyond the current production possibilities frontier curve, the country would have to do which of the following?

Answer 49

Improve technology in the future

Question 50

(EOC) If one worker produces 15 cones of ice cream in an hour, two workers produce 25 ice cream cones, and three workers produce 30 ice cream cones in an hour, what is the marginal product of the second worker?

Answer 50

10

Question 51

(EOC) A country is currently producing bricks and spatulas using all of their resources and satisfying the wants of their economy. If the country has a change in preferences and wants more spatulas, which of the following is true?

Answer 51

They are no longer economically efficient because they are not allocatively efficient

Question 52

Given the PPF curve, would you expect the pizza parlor to meet the new demand?

Answer 52

No, it is not possible with the current inputs.

Question 53

What are some plausible strategies for the pizza parlor to apply in order to meet the new demand? (select all that apply.)

Answer 53

Hire another worker.

Buy a new oven.

Remain open for longer.

Question 54

The option(s) selected in Problem 1.2 will meet the new demand because they:

Answer 54

increase inputs instead of reallocating them.

Question 55

Describe how you adjusted the above graph to represent the pizza parlor’s decision to stay open longer hours.

Answer 55

Slid the curve upwards along the pizza axis, no change to the breadsticks axis.

Question 56

What information do you need to find marginal cost?

Answer 56

Total number of pizzas made.

Number of employees.

Employee wages.

Total hours worked.

Question 57

After the Raptors won the NBA championships, consumers bought 8,000 pairs of running shoes and 30,000 pairs of basketball shoes. Would this be possible for the firm to produce with their current production capabilities?

Answer 57

no

Question 58

With regards to the firm’s PPF, how would you describe the combination of basketball and running shoes that the firm would need to produce in order to satisfy all shoe demands?

Answer 58

Unattainable.

Question 59

How could the shoe firm shift their PPF outward to produce more shoes?

Answer 59

All of the above would shift the PPF outward.

Question 60

If the actions outlined in Problem 2.3 were the only available options, what would the firm have to consider when deciding which to take?

Answer 60

The cost of each action.

Question 61

(slides) Which of the following would not simplify a model of how many hats people buy?

Answer 61

Assume that everyone has different tastes for hats.

Question 62

(slides) What would happen to the PPF if a student became much better at studying for Economics?

Answer 62

The PPF would stretch rightward such that Econ scores would be higher at each option.

Question 63

(slides) Which of these is an example of diminishing marginal return?

Answer 63

B and C

b. Peeling 15 carrots in ten minutes and 10 carrots in the next ten minutes.

c. Writing 10 pages in an hour and 5 pages in the second hour

Question 64

(slides) Jane makes 10 birdhouses in an hour, after working a second hour, she has a total of 15 birdhouses. What is the marginal product of her second hour building birdhouses?

Answer 64

5 birdhouses

Question 65

(slides) Mary spends all her money buying her mom, dad, and brother college coffee mugs for Christmas. Her dad does not drink coffee. Mary is…

Answer 65

Technically efficient but not allocatively efficient