Suppose That You Own Two Farms on Which to Grow

question 5

Multiple Choice

Suppose that you own two farms on which to grow corn. In order to lower the cost of production, you determine to increase production on Farm 1 and reduce it on Farm 2. This implies that the marginal cost of production on Farm 1 is:

• A) greater than the marginal cost of production on Farm 2.
• B) less than the marginal cost of production on Farm 2.
• C) equal to the marginal cost of production on Farm 2.
• D) The difference of the marginal costs between the two farms cannot be determined.

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Definitions:

Economic Growth

The increase in the inflation-adjusted market value of the goods and services produced by an economy over time. It is conventionally measured as the percent rate of increase in real gross domestic product, or real GDP.

Production Possibility Frontier

A graphical illustration showing the maximum attainable combinations of two products that can be produced with available resources and technology, highlighting the trade-offs and opportunity costs.

Consumer Tastes

Consumer Tastes denote the preferences and desires that influence the buying behavior of consumers, often affected by cultural, social, and personal factors.

Capital Goods

Long-lasting goods that are used in the production of other goods or services, such as machinery, equipment, and buildings.