Question 1

The Production Possibility Frontier shows:&#10;A) What customers want to buy.&#10;B) What a firm can produce.&#10;C) The maximum combinations of products an economy can produce with its available resources.&#10;D) The minimum outputs of products that can be produced at any moment.

Accepted Answer

The Production Possibility Frontier (PPF) illustrates the maximum combinations of goods or services an economy can produce when all resources are fully and efficiently utilized, highlighting the trade-offs in production volume between different choices.

Question 2

The maximum an economy is able to produce of a product does not depend on:&#10;A) The skills of the labour force&#10;B) The demand&#10;C) The level of capital&#10;D) The level of investment

Accepted Answer

The maximum an economy is able to produce of a product, often referred to as its productive capacity, is determined by factors such as the skills of the labor force, the level of capital, and the level of investment. These factors influence the supply side of the economy. Demand, on the other hand, influences how much of the product is bought at a certain price, but does not directly affect the maximum production capacity of an economy.

Question 3

Productive efficiency occurs when:&#10;A) Everyone is very busy.&#10;B) More of one product can only be produced if less of another is produced.&#10;C) Customers are happy.&#10;D) Costs are maximized.

Accepted Answer

Productive efficiency occurs when an economy or entity is operating at its capacity, meaning it cannot produce more of one good without reducing the output of another. This is due to the efficient allocation of resources and is represented on the production possibility frontier (PPF) where any point on the curve indicates productive efficiency.

Question 4

If an economy is producing within its Production Possibility Frontier:&#10;A) It is productively inefficient.&#10;B) Customers are spending too much.&#10;C) The economy's resources are fully employed.&#10;D) Firms are maximizing profits.

Accepted Answer

When an economy is producing within its Production Possibility Frontier (PPF), it means that not all resources are being used efficiently or to their full capacity, indicating productive inefficiency.

Question 5

An outward shift in the Production Possibility Frontier may be due to:&#10;A) Better training of employees&#10;B) An increase in unemployment&#10;C) Productive inefficiency&#10;D) A fall in demand for goods and services in the economy

Accepted Answer

An outward shift in the Production Possibility Frontier (PPF) indicates an increase in the productive capacity of an economy. Better training of employees can improve labor productivity, leading to an expansion of the economy's production possibilities.

Question 6

The resources of an economy at any moment:&#10;A) Are limited.&#10;B) Are infinite.&#10;C) Are free.&#10;D) Have no opportunity cost.

Accepted Answer

The resources of an economy at any given moment are limited, meaning there is a finite amount of resources available for production and consumption. This limitation is a fundamental concept in economics, leading to the study of how best to allocate these scarce resources.

Question 7

An outward shift in the Production Possibility Frontier could be caused by:&#10;A) A change in demand patterns&#10;B) An increase in demand&#10;C) An increase in the size of the workforce&#10;D) A reallocation of resources between industries

Accepted Answer

An increase in the size of the workforce increases the total amount of labor available, which can lead to an increase in production capacity. This is represented by an outward shift in the Production Possibility Frontier (PPF), indicating that the economy can produce more of both goods.

Question 8

Any combination of products on the Production Possibility Frontier is productively efficient.

Accepted Answer

The Production Possibility Frontier (PPF) represents the maximum combination of goods or services that can be produced in a given time period with available resources, so any point on the PPF is considered productively efficient because it represents the most efficient use of resources.

Question 9

An increase in demand will automatically shift the Production Possibility Frontier outwards.

Accepted Answer

The Production Possibility Frontier (PPF) represents the maximum output combinations of two goods or services an economy can achieve when all resources are fully and efficiently utilized. An increase in demand does not automatically shift the PPF outwards; instead, it might move the economy to a different point on the existing PPF. An outward shift of the PPF requires an increase in the economy's resources or an improvement in technology.

Question 10

The fact that output has to be sacrificed if an economy is productively efficient as resources are switched from one industry to another highlights the concept of ___________ ____.

Accepted Answer

The answer of The fact that output has to be...

Question 11

If an economy is operating within its PPF:&#10;A) It is productively efficient.&#10;B) It can produce more of both goods with the given resources.&#10;C) Resources are being fully utilised.&#10;D) The economy should reduce its production.

Accepted Answer

The answer of If an economy is operating within its...

Question 12

The opportunity cost of producing a good is:&#10;A) The best foregone alternative&#10;B) Its total cost&#10;C) The cost of producing an additional unit&#10;D) All the other potential alternatives

Accepted Answer

The answer of The opportunity cost of producing a good...

Question 13

Which of the following would not be an indication of productive inefficiency within an economy?&#10;A) High levels of unemployment&#10;B) No unemployment&#10;C) Unused factory buildings&#10;D) Idle machinery

Accepted Answer

The answer of Which of the following would not be...

Question 14

Increased investment in capital goods will likely lead to:&#10;A) An inward shift in the PPF&#10;B) No change in the PPF&#10;C) An outward shift in the PPF&#10;D) None of the above

Accepted Answer

The answer of Increased investment in capital goods will likely...

Question 15

Which of the following is not associated with an outward shift in the PPF?&#10;A) A reduction in the retirement age of working individuals.&#10;B) An increase in the birth rate&#10;C) Increased training&#10;D) Technological progress

Accepted Answer

The answer of Which of the following is not associated...

Deck 2: The Production Possibility Frontier PPF