Question 1

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

Accepted Answer

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Question 2

The production possibilities curve bows out because

Accepted Answer

The production possibilities curve bows out because of the law of increasing additional cost. This means that as more and more of one good is produced, the opportunity cost of producing additional units of that good increases, as resources that are better suited for producing the other good are reallocated. This results in the production possibilities curve being bowed out or concave.

Question 3

All points inside the production possibilities curve indicate

Accepted Answer

Points inside the production possibilities curve represent an inefficient allocation of resources where not all resources are being used to their fullest potential.

Question 4

-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 5

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 6

-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 7

When deriving the production possibilities curve,it is assumed that

Accepted Answer

The production possibilities curve assumes that resources are efficiently used, which means that they are used in the best possible way to produce the maximum possible output of both goods. Assumptions about the amount of each good that is to be produced or the prices of resources are not necessary for deriving the general shape of the curve. The assumption that most resources can be used to produce only one good would actually lead to a different type of production possibilities curve called a straight-line production possibilities curve.

Question 8

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

Accepted Answer

If an economy is operating at a point inside the production possibilities curve, it means that it is not utilizing all of its resources to their full potential. This results in inefficiency and a lower level of output than what could be produced. Therefore, the best choice is A, which states that society's resources are being inefficiently utilized.

Question 9

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

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-Which of the following would NOT allow...

Question 10

How does an economy represented by a straight-line production possibilities curve differ from one represented by a traditional production possibilities curve with a bowed shape?

Accepted Answer

In the economy represented by a straight-line production possibilities curve, the law of increasing relative cost does not apply. This means that the opportunity cost of producing one good over the other is constant and does not increase as more of that good is produced. In contrast, in an economy represented by a traditional production possibilities curve with a bowed shape, the law of increasing relative cost applies, meaning that as more of one good is produced, the opportunity cost of producing an additional unit of that good increases, resulting in a bowed shape of the production possibilities curve. Therefore, the straight-line production possibilities curve economy differs from the traditional production possibilities curve economy in terms of the application of the law of increasing relative cost.

Question 11

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

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-Between points "b" and "c" in the...

Question 12

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

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-If the farmer is producing 5000 bushels...

Question 13

What does a production possibilities curve show?

Accepted Answer

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

Question 14

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 it is producing less than it is capable of producing with its available resources. This may be caused by unemployed resources, such as labor or capital, which are not being utilized to their full potential.

Question 15

-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 16

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

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-In the above figure,which of the following...

Question 17

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 maximum combination of two goods that can be produced with a given amount of resources. It illustrates the concept of opportunity cost, where producing more of one good means sacrificing the production of another good.

Question 18

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 consumes 100 bushels of corn today, they will not have enough seed to plant for the next year's crop. Since one bushel of corn provides enough seed for one-quarter of an acre of land, 100 bushels of corn provide seed for 25 acres of land. Therefore, if one consumes 100 bushels of corn today, they will be sacrificing the opportunity to plant 25 acres of land, which would yield 25 x 100 = 2500 bushels of corn next year. Hence, the opportunity cost of consuming another 100 bushels of corn today is 25 bushels of corn next year.

Question 19

-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

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-Refer to the above figure.If the farmer...

Question 20

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

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Quiz 2: Scarcity and the World of Trade-Offs