2 Learning objectives: The production possibilities frontier (PPF) and use it to calculate opportunity cost PPF, Preference and Efficiency Explain how current production choices expand future production possibilities Explain how specialization and trade expand production possibilities Describe the economic institutions that coordinate decisions
3 Production Possibilities and Opportunity Cost The production possibilities frontier (PPF) is the boundary between those combinations of goods and services that can be produced and those that cannot. To illustrate the PPF, we focus on two goods at a time and hold the quantities of all other goods and services constant. That is, we look at a model economy in which everything remains the same (ceteris paribus) except the two goods we re considering.
4 Production Possibilities and Opportunity Cost Production Possibilities Frontier Figure 2.1 shows the PPF for two goods: cola and pizzas.
5 Production Possibilities and Opportunity Cost Any point on the frontier such as E and any point inside the PPF such as Z are attainable. Points outside the PPF are unattainable.
6 Production Possibilities and Opportunity Cost Production Efficiency We achieve production efficiency if we cannot produce more of one good without producing less of some other good. Points on the frontier are efficient.
7 Production Possibilities and Opportunity Cost Any point inside the frontier, such as Z, is inefficient. At such a point, it is possible to produce more of one good without producing less of the other good. At Z, some resources are either unemployed or misallocated.
8 Production Possibilities and Opportunity Cost Tradeoff Along the PPF Every choice along the PPF involves a tradeoff. On this PPF, we must give up some cola to get more pizzas or give up some pizzas to get more cola.
9 Production Possibilities and Opportunity Cost Opportunity Cost As we move down along the PPF, we produce more pizzas, but the quantity of cola we can produce decreases. The opportunity cost of a pizza is the cola forgone.
10 Production Possibilities and Opportunity Cost In moving from E to F: The quantity of pizzas increases by 1 million. The quantity of cola decreases by 5 million cans. The opportunity cost of the fifth 1 million pizzas is 5 million cans of cola. One of these pizzas costs 5 cans of cola.
11 Production Possibilities and Opportunity Cost In moving from F to E: The quantity of cola increases by 5 million cans. The quantity of pizzas decreases by 1 million. The opportunity cost of the first 5 million cans of cola is 1 million pizzas. One of these cans of cola costs 1/5 of a pizza.
12 Production Possibilities and Opportunity Cost Opportunity Cost Is a Ratio Increasing Opportunity Cost
13 The PPF and Marginal Cost The opportunity cost of producing one more pizza is the marginal cost of a pizza. As we move along the PPF, the opportunity cost of a pizza increases, so does the Marginal cost
14 Preferences and Marginal Benefit Preferences are a description of a person s likes and dislikes. The marginal benefit of a good or service is the benefit received from consuming one more unit of it. We measure marginal benefit by the amount that a person is willing to pay for an additional unit of a good or service.
15 Using Resources Efficiently It is a general principle that: The more we have of any good, the smaller is its marginal benefit and the less we are willing to pay for an additional unit of it. We call this general principle the principle of decreasing marginal benefit. The marginal benefit curve shows the relationship between the marginal benefit of a good and the quantity of that good consumed.
16 Using Resources Efficiently At point A, with 0.5 million pizzas available, people are willing to pay 5 cans of cola for a pizza..
17 Using Resources Efficiently At point E, with pizza 4.5 million pizzas available, people are willing to pay 1 can of cola for a pizza.
18 Using Resources Efficiently The line through the points shows the marginal benefit from a pizza.
19 Production Efficiency and Allocative Efficiency Production Efficiency: If we cannot produce more of any one good without giving up some other good, we have achieved production efficiency. Any point on PPF is a production efficient point Allocative Efficiency: When we cannot produce more of any one good without giving up some other good that we value more highly, we have achieved allocative efficiency. We are producing at the point on the PPF that we prefer above all other points.
20 Production Efficiency and Allocative Efficiency The point of allocative efficiency is the point on the PPF at which marginal benefit equals marginal cost. This point is determined by the quantity at which the marginal benefit curve intersects the marginal cost curve.
21 Production Efficiency and Allocative Efficiency If we produce fewer than 2.5 million pizzas, marginal benefit exceeds marginal cost. We get more value from our resources by producing more pizzas. On the PPF at point A, we are producing too few pizzas. We are better off moving along the PPF to produce more pizzas.
22 Production Efficiency and Allocative Efficiency If we produce more than 2.5 million pizzas, marginal cost exceeds marginal benefit. We get more value from our resources by producing fewer pizzas. On the PPF at point C, we are producing too many pizzas. We are better off moving along the PPF to produce fewer pizzas.
23 Economic Growth The expansion of production possibilities and increase in the standard of living is called economic growth. Two key factors influence economic growth: Technological change Capital accumulation Technological change is the development of new goods and of better ways of producing goods and services. Capital accumulation is the growth of capital resources, which includes human capital.
24 Economic Growth The Cost of Economic Growth To use resources in research and development and to produce new capital, we must decrease our production of consumption goods and services. So economic growth is not free. The opportunity cost of economic growth is less current consumption.
25 Economic Growth Figure 2.5 illustrates the tradeoff we face. We can produce pizzas or pizza ovens along PPF 0. By using some resources to produce pizza ovens today, the PPF shifts outward in the future.
26 Gains from Trade Comparative Advantage and Absolute Advantage A person has a comparative advantage in an activity if that person can perform the activity at a lower opportunity cost than anyone else. A person has an absolute advantage if that person is more productive than others. Absolute advantage involve comparing productivities while comparative advantage involves comparing opportunity costs. Let s look at Liz and Joe who operate smoothie bars.
27 Gains from Trade Liz's Smoothie Bar In an hour, Liz can produce 30 smoothies or 30 salads. Liz's opportunity cost of producing 1 smoothie is 1 salad. Liz's opportunity cost of producing 1 salad is 1 smoothie. Liz s customers buy salads and smoothies in equal number, so she produces 15 smoothies and 15 salads an hour.
28 Gains from Trade Joe's Smoothie Bar In an hour, Joe can produce 6 smoothies or 30 salads. Joe's opportunity cost of producing 1 smoothie is 5 salads. Joe's opportunity cost of producing 1 salad is 1/5 smoothie. Joe s spend 10 minutes making salads and 50 minutes making smoothies, so he produces 5 smoothies and 5 salads an hour.
29 Gains from Trade Liz s Comparative Advantage Liz s opportunity cost of a smoothie is 1 salad. Joe s opportunity cost of a smoothie is 5 salads. Liz s opportunity cost of a smoothie is less than Joe s. So Liz has a comparative advantage in producing smoothies.
30 Gains from Trade Joe s Comparative Advantage Joe s opportunity cost of a salad is 1/5 smoothie. Liz s opportunity cost of a salad is 1 smoothie. Joe s opportunity cost of a salad is less than Liz s. So Joe has a comparative advantage in producing salads.
31 Gains from Trade Achieving the Gains from Trade Liz and Joe produce the good in which they have a comparative advantage: Liz produces 30 smoothies and 0 salads. Joe produces 30 salads and 0 smoothies.
32 Gains from Trade Liz and Joe trade: Liz sells Joe 10 smoothies and buys 20 salads. Joe sells Liz 20 salads and buys 10 smoothies. After trade: Liz has 20 smoothies and 10 salads. Joe has 20 smoothies and 10 salads.
33 Gains from Trade Gains from trade: Liz gains 5 smoothies and 5 salads an hour Joe gains 5 smoothies and 5 salads an hour
34 Gains from Trade Figure 2.6 shows the gains from trade. Joe initially produces at point A on his PPF. Liz initially produces at point A on her PPF.
35 Gains from Trade Joe s opportunity cost of producing a salad is less than Liz s. So Joe has a comparative advantage in producing salad.
36 Gains from Trade Liz s opportunity cost of producing a smoothie is less than Joe s. So Liz has a comparative advantage in producing smoothies.
37 Gains from Trade Joe specializes in producing salad and he produces 30 salads an hour at point B on his PPF.
38 Gains from Trade Liz specializes in producing smoothies and produces 30 smoothies an hour at point B on her PPF.
39 Gains from Trade They trade salads for smoothies along the red Trade line. The price of a salad is 2 smoothies or the price of a smoothie is ½ of a salad.
40 Gains from Trade Joe buys smoothies from Liz and moves to point C a point outside his PPF. Liz buys salads from Joe and moves to point C a point outside her PPF.
41 Economic Coordination To reap the gains from trade, the choices of individuals must be coordinated. To make coordination work, four complimentary social institutions have evolved over the centuries: Firms Markets Property rights Money
42 Economic Coordination A firm is an economic unit that hires factors of production and organizes those factors to produce and sell goods and services. A market is any arrangement that enables buyers and sellers to get information and do business with each other. Property rights are the social arrangements that govern ownership, use, and disposal of resources, goods or services. Money is any commodity or token that is generally acceptable as a means of payment.
43 Economic Coordination Circular Flows Through Markets Figure 2.7 illustrates how households and firms interact in the market economy. Factors of production, goods and services flow in one direction. Money flows in the opposite direction.
HW1 MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Production efficiency is achieved when A) the ability is gained to produce goods and services
The Economic Problem: Scarcity and Choice #1 What is Production? Production is the process by which resources are transformed into useful forms. Resources, or inputs, refer to anything provided by nature
Chapter 2 The Economic Problem Test Bank MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The production possibilities frontier A) refers to the
ECON 101 MIDTERM 1 REVIEW SESSION (WINTER 2015) BY BENJI HUANG TABLE OF CONTENT I. CHAPTER 1: WHAT IS ECONOMICS II. CHAPTER 2: THE ECONOMIC PROBLEM III. CHAPTER 3: DEMAND AND SUPPLY IV. CHAPTER 4: ELASTICITY
Chapter Summary 4 Demand, Supply, and Market Equilibrium In this chapter, we ve seen how demand and supply determine prices. We also learned how to predict the effects of changes in demand or supply on
Exam 1 Practice Questions Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) the owners of the factors of production, while what amounts of those
conomics 202 Principles Of Macroeconomics Professor Yamin hmad Lecture 2: Review of Some Key oncepts rom Microeconomics Scarcity and Opportunity ost PP Marginal ost, Marginal enefit bsolute dvantage, omparative
1. Given that resources are scarce: A) A "free lunch" is possible but only for a limited number of people B) Poor countries must make choices but rich countries do not have to make choices C) Opportunity
Chapter 8 THE ECONOMY AT FULL EMPLOYMENT: THE CLASSICAL MODEL* The Classical Model: A Preview Topic: Real Variables 1) Real variables A) are those that determine the cost of living. B) are those that determine
AS Economics Unit 1: Markets and Market Failure Syllabus, Key Terms & Charts 10.1 The Economic Problem The Nature and Purpose of Economic Activity The central purpose of economic activity is the production
Basic Microeconomics Demand is a term that represents models that eplain how a set of variables influence buyer or consumer behavior. There are two ways to perceive demand: 1) Demand is a schedule of quantities
3 Demand, Supply, and Market Equilibrium The price of vanilla is bouncing. A kilogram (2.2 pounds) of vanilla beans sold for $50 in 2000, but by 2003 the price had risen to $500 per kilogram. The price
CHAPTER 1: LIMITS, ALTERNATIVES, AND CHOICES Introduction At the heart of the study of economics is the simple but very real prospect that we cannot have it all. We have too few resources to meet all of
Scarcity and Choice Central problem in economics: how to chose among competing alternatives given the limited resources of decision-makers Examples: Decision-Maker CA state government Federal government
Department of Economics University of Roma Tre Academic year: 2013 2014 Natural Resources and International Trade Instructors: Prof. Silvia Nenci Prof. Luca Salvatici firstname.lastname@example.org email@example.com
(Refer Slide Time: 00:28) Managerial Economics Prof. Trupti Mishra S.J.M. School of Management Indian Institute of Technology, Bombay Lecture - 13 Consumer Behaviour (Contd ) We will continue our discussion
Consumer and Consumer and February 6, 2007 Reading: Chapter 6 Introduction Consumer surplus Producer surplus Efficiency and the gains from trade s 2 Introduction Connections to: Opportunity costs to consumers
1 PROBLEM SET#3 PART I: MULTIPLE CHOICE 1. In general, elasticity is a measure of a. the extent to which advances in technology are adopted by producers. b. the extent to which a market is competitive.
THE ECONOMY AT 29 FULL EMPLOYMENT CHAPTER Objectives After studying this chapter, you will able to Describe the relationship between the quantity of labour employed and real GDP Explain what determines
University of California-Davis Economics 1B-Intro to Macro Handout 1 TA: Jason Lee Email: firstname.lastname@example.org The Preliminaries: Office Hours are Wednesday 3-4pm and Thursday 4-5pm at 133 SSH I will have
1 Basic economic concepts By the end of this chapter you should be able to: define the term economics ; explain what an economy is; explain the concept of scarcity and the inevitability of choice ; define
CHAPTER 1 The Central Idea CHAPTER OVERVIEW Economic interactions involve scarcity and choice. Time and income are limited, and people choose among alternatives every day. In this chapter, we study the
Elasticity of Demand and Supply Price Elasticity of Demand (Ep) Calculating Percentage Change Significance of Price Elasticity of Demand (Ep) Determinants of Price Elasticity of Demand (Ep) For Next Time
1 chapter 1. Both households and societies face many decisions because a. resources are scarce. b. populations may increase or decrease over time. c. wages for households and therefore society fluctuate
Chapter 3 Market Demand, Supply, and Elasticity After reading chapter 3, MARKET DEMAND, SUPPLY, AND ELASTICITY, you should be able to: Discuss the Law of Demand and draw a Demand Curve. Distinguish between
Potential GDP and Economic Growth CHAPTER17 C H A P T E R C H E C K L I S T When you have completed your study of this chapter, you will be able to 1 Explain the forces that determine potential GDP and
Model Building and Gains from Trade Previously... Economics is the study of how people allocate their limited resources to satisfy their nearly unlimited wants. Scarcity refers to the limited nature of
PUBLIC GOODS AND EXTERNALITIES I. PRIVATE GOODS a. PRIVATE GOODS are produced through the competitive market system. They encompass the full range of goods available to the consumer in stores and shops
chapter 6 >> Consumer and Producer Surplus Section 3: Consumer Surplus, Producer Surplus, and the Gains from Trade One of the nine core principles of economics we introduced in Chapter 1 is that markets
Chapter 6 The Two Extremes: Perfect Competition and Pure Monopoly Learning Objectives List the four characteristics of a perfectly competitive market. Describe how a perfect competitor makes the decision
Chapter 8 Selling With a Strategy Strategy Defined A strategy is a to assemble your resources Skills Knowledge Energy Time People and decide how to use themto accomplish your objectives. In selling, an
CHAPTER 2: THE MARKET SYSTEM AND THE CIRCULAR FLOW Introduction The problem of scarcity forces societies to make choices about what to produce, how to produce those goods, and who will receive the goods
Microeconomics Topic 3: Understand how various factors shift supply or demand and understand the consequences for equilibrium price and quantity. Reference: Gregory Mankiw s rinciples of Microeconomics,
I. Learning Objectives In this chapter students should learn: A. How to differentiate demand side market failures and supply side market failures. B. The origin of consumer surplus and producer surplus,
Chapter 3 A Classical Economic Model what determines the economy s total output/income how the prices of the factors of production are determined how total income is distributed what determines the demand
ECON 202: Principles of Microeconomics Chapter 1 Economics: Foundations and Models Economics: Foundations and Models 1. Introduction. 2. Three key economic ideas. 3. The economic problem that every society
The Circular Flow of Income and Expenditure Imports HOUSEHOLDS Savings Taxation Govt Exp OTHER ECONOMIES GOVERNMENT FINANCIAL INSTITUTIONS Factor Incomes Taxation Govt Exp Consumer Exp Exports FIRMS Capital
Economics EOC Quiz Answer Key Microeconomic Concepts - (SSEMI1) Flow Of Goods, (SSEMI2) Law Of Demand, (SSEMI3) Economic Behavior, (SSEMI4) Organization And Role Of Business Student Name: Teacher Name:
Econ 201 Exam 1 F2002 Professor Phil Miller Name: Student Number: Multiple Choice (3 points each) Directions: Identify the letter of the choice that best completes the statement or answers the question.
Class: Date: Ch 6- Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The phrase "decreasing marginal benefit" means that a. the more you consume of the product,
RELEVANT TO ACCA QUALIFICATION PAPER F1 / FOUNDATIONS IN ACCOUNTANCY PAPER FAB Introduction to microeconomics The new Paper F1/FAB, Accountant in Business carried over many subjects from its Paper F1 predecessor,
Econ 201 Practice Test 1 Professor V. Tremblay MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Scarcity can best be defined as a situation in which:
Taxes and Subsidies PRINCIPLES OF ECONOMICS (ECON 210) BEN VAN KAMMEN, PHD Introduction We have already established that taxes are one of the reasons that supply decreases. Subsidies, which could be called
Session 1 THE ECONOMIC & BUSINESS ENVIRONMENT SETTING THE SCENE 1 of 38 Scarcity + Scarcity = limited nature of society s resources Businesses allocate scarce resources among competing uses, taking into
Ch. 6 Lecture Notes I. Price Elasticity of Demand A. Law of demand tells us that consumers will respond to a price decrease by buying more of a product (other things remaining constant), but it does not
Chapter 13. Aggregate Demand and Aggregate Supply Analysis Instructor: JINKOOK LEE Department of Economics / Texas A&M University ECON 203 502 Principles of Macroeconomics In the short run, real GDP and
Chapter 2 Production Possibilities Frontier, Economic Growth, and Gains from Trade A simple but powerful model of the economy is the production possibilities frontier (PPF) model. Economic growth and the
23 Finance, Saving, and Investment Learning Objectives The flows of funds through financial markets and the financial institutions Borrowing and lending decisions in financial markets Effects of government
MBA 640, Survey of Microeconomics, Quiz #4 Fall 2006 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) In the short run, A) there are no variable
Chapter 2 Economic Resources and Systems Section 2.2 Economic Systems Click here to advance to the next slide. Read to Learn Describe the three basic economic questions each country must answer to make
Final Exam Economics 101 Fall 2003 Wallace Final Exam (Version 1) Answers 1. The marginal revenue product equals A) total revenue divided by total product (output). B) marginal revenue divided by marginal
C h a p t e r 8 THE ECONOMY AT FULL EMPLOYMENT: THE CLASSICAL MODEL* * Chapter Key Ideas Outline Our Economy s Anchor A. The economy is like a boat on a rolling sea. Potential GDP provides an anchor for
A Lecture Presentation in PowerPoint to Accompany Principles of Economics Second Edition by N. Gregory Mankiw Prepared by Mark P. Karscig, Department of Economics & Finance, Central Missouri State University.
Miami Dade College ECO 2013.005 Principles of Macroeconomics Spring 2014 Midterm #1 2/12/14 1. A point on a nation s production possibilities curve represents a) An undesirable combination of goods and
EXAM TWO REVIEW: A. Explicit Cost vs. Implicit Cost and Accounting Costs vs. Economic Costs: Economic Cost: the monetary value of all inputs used in a particular activity or enterprise over a given period.
, Spring 2008 February 21, 2008 PLEDGE: I have neither given nor received unauthorized help on this exam. SIGNED: PRINT NAME: Econ 202 Midterm 1 1. What will happen to the equilibrium price of hamburgers
Where are we? To do today: finish the derivation of the demand curve using indifference curves Go on then to chapter Production and Cost Utility and indifference curves The point is to find where on the
The Market at Work: Supply and Demand Previously... Scarcity refers to the limited nature of society s resources. The production possibilities frontier (PPF) is an illustration of the goods and services
CASE FAIR OSTER PEARSON Publishing as Prentice Hall PRINCIPLES OF MICROECONOMICS E L E V E N T H E D I T I O N Prepared by: Fernando Quijano w/shelly Tefft 2of 35 Input Demand: The Labor and Land Markets
Chapter 5 Efficiency and Equity Test Bank MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) All of the following statements about marginal benefit
NAME: STUDENT ID: Midterm Exam #2 ECON 101, Section 2 summer 2004 Ying Gao Instructions Please read carefully! 1. Print your name and student ID number at the top of this cover sheet. 2. Check that your
In this chapter, look for the answers to these questions: Why do monopolies arise? Why is MR < P for a monopolist? How do monopolies choose their P and Q? How do monopolies affect society s well-being?
Measuring a Nation s Income I. Review of the Definitions of Microeconomics and Macroeconomics A. Definition of microeconomics: the study of how households and firms make decisions and how they interact
Mankiw/Taylor Web site resources Case Study Chapter 1 Ten Principles of Economics One of the most important events in economics in recent times occurred during 2007 2009. The financial crisis and the recession
TOPIC IV: MARKETS IN ACTION - Applications of S&D and E D &E S A. Using E D and E S to increase our understanding of the impact of a change in S or D. B. Price ceilings and price floors C. Trade quotas
International Trade Restrictions Governments restrict international trade to protect domestic producers from competition. Governments use four sets of tools: Tariffs Import quotas Other import barriers
Short-Run Production and Costs The purpose of this section is to discuss the underlying work of firms in the short-run the production of goods and services. Why is understanding production important to
Worksheet 11.1 Circular Flow Simulation Please note this is a class activity. Why not suggest it to your teacher? Objective: To understand how productive resources, goods and services and money flow from
Scarcity and Production Possibilities Economics 120: Global Macroeconomics 1 1.1 Goals and Learning Objectives Goals and Learning Objectives Goals: Understand definition and goal of macroeconomics. Understand
Chapter 6 Competitive Markets After reading Chapter 6, COMPETITIVE MARKETS, you should be able to: List and explain the characteristics of Perfect Competition and Monopolistic Competition Explain why a
ECN 221 Chapter 5 practice problems This is not due for a grade 1. Assume the price of pizza is $2.00 and the price of Beer is $1.00 and that at your current levels of consumption, the Marginal Utility
A Theory of Consumer Behavior Preliminaries 1. Introduction The fundamental question in economics is 2. Consumer Preferences Given limited resources, how are goods and service allocated? 1 3. Indifference
C H A P T E R 1 Ten Principles of Economics P R I N C I P L E S O F Economics N. Gregory Mankiw Premium PowerPoint Slides by Ron Cronovich 2009 South-Western, a part of Cengage Learning, all rights reserved
Chapter 7: Market Structures Section 1 Key Terms perfect competition: a market structure in which a large number of firms all produce the same product and no single seller controls supply or prices commodity:
Economics Basics Tutorial http://www.investopedia.com/university/economics/ Thanks very much for downloading the printable version of this tutorial. As always, we welcome any feedback or suggestions. http://www.investopedia.com/contact.aspx
8. a. The effect of falling production costs in the market for computers results in a shift to the right in the supply curve, as shown in Figure 14. As a result, the equilibrium price of computers declines
N. Gregory Mankiw Principles of Economics Chapter 10. EXTERNALITIES Solutions to Problems and Applications 1. The Club conveys a negative externality on other car owners because car thieves will not attempt
Masaryk University - Brno Department of Economics Faculty of Economics and Administration BPE_MIC1 Microeconomics 1 Fall Semester 2011 Final Exam - 05.12.2011, 9:00-10:30 a.m. Test A Guidelines and Rules:
Competency: Basic Economic Concepts and Principles 1. Define money (characteristics, role, and forms) and trace how money and resources flow through the American economic system. 2. Utilize decision-making
Introduction hapter Two hoice, Opportunity osts and Specialization n economic system has to solve three coordination problems: What, and how much, to produce. How to produce it. For whom to produce it.
Name: 1. During the long run: Economics 100 Exam 2 A. Output is limited because of the law of diminishing returns B. The scale of operations cannot be changed C. The firm must decide how to use the current
Microeconomics Instructor Miller Practice Problems Monopolistic Competition 1. A monopolistically competitive market is described as one in which there are A) a few firms producing an identical product.
General Equilibrium Theory 1 Overview 1. General Equilibrium Analysis I Partial Equilibrium Bias 2. Efficiency and Perfect Competition 3. General Equilibrium Analysis II The Efficiency if Competition The
1 Supplement Unit 1. Demand, Supply, and Adjustments to Dynamic Change Introduction This supplemental highlights how markets work and their impact on the allocation of resources. This feature will investigate
Study Questions 6 (Foreign Exchange Markets) MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The currency used to buy imported goods is 1) A) the