Exhibit 2-14 Production possibilities curve
In Exhibit 2-14, which of the following explains this economy's movement from point E to point F?
A. The rate of unemployment in this economy would have increased.
B. Consumption goods production has increased, but capital goods production has decreased.
C. The economy has decreased unemployment, but some degree of unemployment still exists
D. The economy has achieved full employment.
Answer: D
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A shadow price is a
a. price the producer will accept, rather than the price the producer tries to get b. price used by a planner to make a non-profitable project appear profitable c. disequilibrium price d. price that would exist in the absence of all market distortions e. none of the above
Intense market competition is ________ for producers, since it_______
a. Bad; erode consumer surplus b. Bad, erode producer profits c. Good, increase the price level in the market d. Good; decrease the price level in the market
Economic theory indicates that the economy is better off not to produce proved reserves of a mineral "too quickly." By this, we mean that we
a. prefer some bad luck in exploration efforts, rather than too much good luck in finding the resources. b. do not want the resource to be too abundantly available since this would reduce its price and GDP. c. want to use other nations' resources first, even if doing so is more costly. d. do not want to use additional resources for exploration if the present discounted value of the benefits is smaller than the cost.
A busy coffee shop hires an additional barista, enabling them to serve customers nearly twice as fast. The shop responds by hiring two more baristas. After this second round of hiring, the cost of serving each customer increases. What might explain this rise?
a. Diminishing returns of labor have set in. b. The company is experiencing economies of scale. c. Fixed costs are being spread over larger output. d. Total revenues have surpassed accounting costs.