Table 2-1 Production Possibilities for Toyland

question 353

Multiple Choice

Table 2-1
Production Possibilities for Toyland

-Refer to Table 2-1.Which of the following statements is correct?

• A) The opportunity cost of an additional 100 dolls is constant at 50 fire trucks.
• B) The opportunity cost of an additional 100 dolls is constant at 100 fire trucks.
• C) Toyland's production possibilities frontier is a straight,downward-sloping line.
• D) The opportunity cost of an additional 100 dolls increases as more dolls are produced.

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Definitions:

Supply-Side Market Failure

Situations where the production or supply of a good or service leads to insufficient or excessive production, often due to externalities or lack of competition.

Demand-Side Market Failure

Demand-side market failure occurs when demand curves do not reflect consumers' full willingness to pay for a good or service, often due to externalities or public goods.

Government Failure

Occurs when government intervention in the economy creates inefficiency, leading to an allocation of resources that worsens rather than improves outcomes.

Consumer Surplus

The difference between the maximum amount consumers are willing to pay for a good or service and the actual price they pay, measuring the benefit consumers receive from purchasing at a lower price.