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1117-Principles of Microeconomics-2425_S2

1117-Principles of Microeconomics-2425_S2

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If at a specific point in the Production Possibility Frontier (PPF), MRS=8 and MRT=8,

That point is the optimal choice, because MRS=MRT and it is on the PPF

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That point is strictly preferred to any other possible combination of two goods

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That point is the optimal choice, because utility is the highest possible given the PPF

Consider the following game, where the payoffs are given as (Payoff Kim ; Payoff Ron). Which of the following options is true?

If Ron chooses Steal, Kim will Invest

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If Kim chooses Invest, Ron will Invest

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If Kim chooses Invest, Ron will Steal

❌

If Ron chooses Invest, Kim will Keep

❌

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A point that belongs to the feasible set, but not to the production possibility frontier

implies that labor and capital are being used in the most efficient way

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reflects the fact that more technology needs to be developed to fully employ all resources

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indicate that resources are misallocated

✅

is more efficient than a point located in the production possibilities frontier

❌

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A Pareto Potential Improvement is:

None of the others

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The best possible outcome someone can achieve.

❌

A change to another outcome in which people who gain something have the possibility to compensate the losers so that someone gets better-off and nobody gets worse-off.

✅

A change in outcome that will lead everyone to a situation not socially desirable because nobody wants to deviate from that outcome.

❌

A change from one outcome to another in nobody loses and at least someone improves her welfare.

❌

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Consider the graph below, showing the Production Possibilities Curve of David´s time between playing tennis and grades in Principles of economics. The opportunity cost of one hour of tennis when David increases the number of hours per week from 4 to 6 is