Suppose that you are given a $100 budget at work that can be spent only on two items: sta
Suppose that you are given a $100 budget at work that can be spent only on two items: staplers and pens. If staplers cost $10 each and pens cost $2.50 each, then the opportunity cost of purchasing one stapler is:
a. 10 pens.
b. 5 pens.
c. zero pens.
d. 4 pens.
5. For each of the following situations involving marginal cost (MC) and marginal benefit (MB), indicate whether it would be best to produce more, fewer, or the current number of units.
a. 3,000 units at which MC = $10 and MB = $13.
b. 11 units at which MC = $4 and MB = $3.
c. 43,277 units at which MC = $99 and MB = $99.
d. 82 units at which MC
e. 5 units at which MB
6. Explain how (if at all) each of the following events affects the location of a country’s production possibilities curve:
a. The quality of education increases.
b. The number of unemployed workers increases.
c. A new technique improves the efficiency of extracting copper from ore.
d. A devastating earthquake destroys numerous production facilities.
a. Assuming better education translates into better work skills, then productivity should rise and this would shift the curve outward.
b. Should not affect location of curve. Production moves inward, away from the curve.
c. The curve should shift outward as more production is possible with existing resources
d. The curve should shift inward with the destruction of resources (capital).
7. What are the two major ways in which an economy can grow and push out its production possibilities curve?
a. Better weather and nicer cars.
b. Higher taxes and lower spending.
c. Increases in resource supplies and advances in technology.
d. Decreases in scarcity and advances in auditing.