Question 1

The production possibilities curve bows out because

Accepted Answer

The production possibilities curve bows out because of the law of increasing additional cost. As more of a good is produced, increasing amounts of the other good must be given up because resources are not equally efficient in producing both goods. This results in an increasing opportunity cost, which causes the curve to be bowed out from the origin. Choices A, C, and D do not accurately explain why the production possibilities curve bows out.

Question 2

How can the concepts of opportunity costs, scarcity and choice by illustrated by the production possibilities curve?

Accepted Answer

The answer of How can the concepts of opportunity costs,...

Question 3

-In the above figure, which of the following points indicates the efficient use of resources?

Accepted Answer

The answer of 
-In the above figure, which of the...

Question 4

What does the slope of the production possibilities curve represent? Explain.

Accepted Answer

The answer of What does the slope of the production...

Question 5

A country operates inside its production possibilities curve; this may be caused by

Accepted Answer

If a country is operating inside its production possibilities curve, it means that it is not using all of its available resources. This could be due to unemployment, which means that there are not enough workers to fully utilize all of the resources available in the economy.

Question 6

-Which of the following would NOT allow society to move to point "h" in the above figure?

Accepted Answer

More efficient use of current resources would allow society to move to a point on the existing production possibilities frontier, not beyond it to point "h".

Question 7

-If the farmer is producing 5000 bushels of soybeans at point "b" in the above figure, we know that

Accepted Answer

The answer of 
-If the farmer is producing 5000 bushels...

Question 8

-Which of the following statements about a movement along the production possibilities curve in the above figure is FALSE?

Accepted Answer

The production possibilities curve illustrates the concept of opportunity cost, which is the cost of forgoing the next best alternative when making a decision. Therefore, choosing one point over another on the curve always involves opportunity costs, making statement D false.

Question 9

-Refer to the above figure. If the farmer is growing 8,000 bushels of beans and 8,000 bushels of wheat, then we know that

Accepted Answer

The point described (8,000 bushels of both beans and wheat) would fall inside the production possibilities curve, indicating that not all resources are being used efficiently or to their full potential.

Question 10

-Refer to the above figure. If the farmer is producing 4,000 bushels of beans and 38,000 bushels of wheat, then we know the farmer

Accepted Answer

The answer of 
-Refer to the above figure. If the...

Question 11

A movement along the production possibilities curve would imply that

Accepted Answer

A movement along the production possibilities curve indicates a change in the quantities of goods and services produced due to a change in the allocation of resources between those goods and services. This may occur due to a change in consumer preferences, technology, or resource availability. However, in this scenario, options A and B refer to a shift of the production possibilities curve, not a movement along it. Option D is incorrect because an increase in leisure time would lead to a decrease in productivity, not an increase. Thus, the correct answer is C, which implies that society has chosen a different set of outputs.

Question 12

If the production possibilities curve is a downward sloping straight line, then

Accepted Answer

When the production possibilities curve is a downward sloping straight line, it implies that resources can be shifted from the production of one good to another with no loss in efficiency, indicating perfect adaptability for alternative uses. This contrasts with a bowed-out curve, which would suggest increasing opportunity costs and specialized resources.

Question 13

What does a production possibilities curve show?

Accepted Answer

The answer of What does a production possibilities curve show?...

Question 14

All points inside the production possibilities curve indicate

Accepted Answer

All points inside the production possibilities curve indicate inefficiency in production, meaning that resources are not being used efficiently and efficiently. This can result in lower levels of output and higher costs. Points on the curve or outside the curve indicate maximum production efficiency. Choice A is incorrect because it relates to insufficient supply, which is not indicated by points inside the curve. Choices C and D relate to the law of increasing or decreasing relative cost, which may affect production efficiency but does not have a direct relation to points inside the curve.

Question 15

When deriving the production possibilities curve, it is assumed that

Accepted Answer

The production possibilities curve assumes efficient use of resources, meaning that resources are being used in the most productive way possible. This allows us to accurately plot the different combinations of goods that can be produced with the given resources. All other choices, such as A and C, may or may not be true but are not necessary assumptions for deriving the production possibilities curve.

Question 16

If an economy is operating at a point inside the production possibilities curve, then

Accepted Answer

If an economy is operating inside the PPC, it means that it is producing below its maximum potential with the given resources. This indicates inefficiency in resource allocation and utilization.

Question 17

Suppose an acre of land yields 100 bushels of corn and that one bushel of corn provides enough seed for one-quarter of an acre of land. The opportunity cost of consuming another 100 bushels of corn today is

Accepted Answer

If one acre yields 100 bushels of corn, then four bushels of corn are needed to seed one acre of land. Therefore, consuming 100 bushels of corn today means there will be a loss of 25 bushels of corn next year (100/4 = 25). This makes the opportunity cost of consumption 25 bushels of corn next year, so the best choice is B.

Question 18

-Between points "b" and "c" in the above figure, the opportunity cost of 250 more bushels of corn is

Accepted Answer

The answer of 
-Between points "b" and "c" in the...

Question 19

-The shape of the production possibilities curve in the above figure indicates that

Accepted Answer

The shape of the production possibilities curve typically reflects increasing costs due to the law of increasing opportunity costs. As production of one good (e.g., corn or cloth) increases, the opportunity cost of producing an additional unit of that good increases, indicating that resources are not perfectly adaptable between the production of corn and cloth. This scenario leads to a concave curve, illustrating increasing costs for producing both goods.

Question 20

A graphical representation which shows the trade-off that occurs when more of one output is obtained at the sacrifice of another is called

Accepted Answer

A production possibilities curve shows the trade-off between the production of two different goods or services. It illustrates the maximum combinations of outputs that can be produced using available resources and technology while sacrificing the production of another output. The other answer choices do not accurately describe this concept.

Quiz 2: Scarcity and the World of Trade-Offs