Discussion #1

Discussion #1 - 1. If someone produced too much of a good,...

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1. If someone produced too much of a good, this would suggest that: A. rational choice cannot be applied to many economic decisions. B. the good was produced to the point where its marginal cost exceeded its marginal benefit. C. certain goods and services such as education and health care are inherently desirable and should be produced regardless of costs and benefits. D. the good was produced to the point where its marginal benefit exceeded its marginal cost. #1 B Marginal benefit refers to what consumers are willing to give up in order to get one more unit of a good, while marginal cost refers to the value of what is given up in order to produce that additional unit. Additional units of a good should be produced as long as marginal benefit exceeds marginal cost. Here, the marginal cost exceeded its marginal benefit. ------------------------------------------------------------------------------------------------------------------------------------ 2. Refer to the budget line shown in the diagram above. If the consumer's money income is $20, the: A. prices of C and D cannot be determined. B. price of C is $2 and the price of D is $4. C. consumer can obtain a combination of 5 units of both C and D. D. price of C is $4 and the price of D is $2. #2 D D: 10 x $2 = 20 C: 5 x $4 = 20 ------------------------------------------------------------------------------------------------------------------------------------
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Answer the next question(s) on the basis of the data given in the following production possibilities table: 3. Refer to the above table. A total output of 3 units of capital goods and 4 units of consumer goods: A. is irrelevant because the economy is capable of producing a larger total output. B. will result in the maximum rate of growth available to this economy. C. would involve an inefficient use of the economy's scarce resources. D. is unobtainable in this economy.
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This note was uploaded on 04/22/2010 for the course ECO 112 taught by Professor Smith during the Spring '10 term at Bowling Green.

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Discussion #1 - 1. If someone produced too much of a good,...

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