NAME 8 A farmer is deciding whether or not to add fertilizer

NAME: 8. A farmer is deciding whether or not to add fertilizer to his or her crops. If the farmer adds l pound of fertilizer per acre, the value of the resulting crops rises from $80 to $100 per acre. According to marginal analysis, the farmer should add fertilizer if it costs less than: a. $12.50 per pound b. $20 per pound. c. $80 per pound. d. $100 per pound. 9. An efficient economy: a. uses available resources fully. b. uses the best division of labor. c. produces an output combination at some point along the production possibility d. all of the above. Exhibit 4 Production possibilities curve 400 Cars 300 (millions per year) 200 100 0 100 200 300 400 Grain (millions of tons per year) In Exhibit 4, movement between which of the following points represents an increase in economic efficiency? a. A to C b. C to D. c. D to B. d. A to B 10. e. A to D 11. Using a production possibilities curve, an economy that produces an output combination less than the maximum possible is depicted by a point located: a. at the top coner of the curve. b. near the middle of the curve. c. at the bottom corner of the curve d. outside the curve. e. inside the curve.

Solution

1) Solution: $20 per pound

Working: $100 - $80 = $20 is the marginal cost

2) Solution: all of the above

Explanation: An efficient economy uses the available resources fully with the best division of labor and produces a combination of output at certain point along the production possibility curve

3) Solution: C to D

Explanation: The goods and resources that can be produced by an economy plotted on the production possibilities curve are considered as technically efficient, while the goods and resources that are lying beneath the curve signifies inefficiency

4) Solution: Inside the curve

Explanation: The goods and resources that are lying beneath the curve signifies inefficiency