Define marginal cost and calculate Brazil's marginal cost of producing a ton of food when the quantity produced is 2.5 tons per day
What will be an ideal response?
The marginal cost of a good is the opportunity cost of producing one more unit of the good. When the quantity of food produced is 2.5 tons, the marginal cost of a ton of food is the opportunity cost of increasing the production of food from 2 tons per day to 3 tons per day. The production of ethanol falls from 54 barrels per day to 40 barrels per day, a decrease of 14 barrels per day. The opportunity cost of increasing food production is the decrease in ethanol product, so the opportunity cost of producing a ton of food when 2.5 tons of food per day are produced is 14 barrels of ethanol per day.
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When the price of milk rises, there is no change in the amount of dog food purchased. This is an example of:
A. indifference trade-off between the two goods. B. the interaction between two correlated goods. C. two items that are uncorrelated. D. the value people place on dogs versus milk.
The size of the national debt relative to GDP will not be reduced by
a. paying off some of the debt. b. lowering the federal deficit. c. having the GDP grow faster than the debt. d. having creditors forgive part of the debt.
If resources are combined efficiently in production, then the society
A) is experiencing economic growth. B) is producing at a point outside the production possibility frontier. C) is producing at the most-desirable point on the production possibility frontier. D) is producing at a point on the production possibility frontier but not necessarily at themost-desirable point.
As a result of an increase in the money supply, some banks may end up with excess reserves. What is the likely result?
A. Banks will spend the excess reserves by paying their employees more. B. Banks will raise interest rates. C. Banks will make more loans, thereby contributing to a decrease in aggregate demand. D. Banks will make more loans, thereby contributing to an increase in aggregate demand.