Question

1. We measure the marginal ________ of a good by what a ________ for another unit of the good.

   		cost; person is willing to pay
   		cost; person's preferences are
   		benefit; person must pay
   		benefit; person is willing to pay

2. Each point on the production possibilities frontier achieves allocative efficiency.

   True

   False

3. If a country must decrease current consumption to increase the amount of capital goods it produces today, then it

   		must be producing outside the production possibilities frontier and will continue to do so in the future.
   		must be using resources inefficiently today, but will be more efficient in the future.
   		must be producing along the production possibilities frontier today and will see a shift outward of the frontier in the future if produces more capital goods.
   		must not have private ownership of property and will have to follow planning authorities decisions today and in the future.

4. One of the opportunity costs of economic growth is

   		the gain in future consumption.
   		reduced current consumption.
   		technological change.
   		capital accumulation.

Answer 1

1. benefit; person is willing to pay
(Marginal benefit is measures by what a person is willing to pay)

2. False
(Each point represents productive efficiency)

3. must be producing along the production possibilities frontier today and will see a shift outward of the frontier in the future if produces more capital goods.
(if more capital goods are produced then production will be shifted to outward of the frontier)

4. reduced current consumption.
(current consumption have to be reduced for economic growth)