Deck 2: Production Possibilities Frontier Framework

Question 1

If the PPF for two goods is a downward-sloping straight line, the resources used to produce those goods are equally well-suited to the production of both goods.

Answer 1

True

Question 2

A decrease in the quantity of resources available causes a movement from one point on a given PPF to another point along the same PPF.

Answer 2

False

Question 3

The law of increasing opportunity cost results from the varying ability of resources to adapt to the production of different goods and it helps to explain why production possibilities curves are typically bowed outward.

Answer 3

True

Question 4

Through war, many of the factories in country 1 are destroyed and many of its people are killed. As a result, the country's

A)production possibilities frontier (PPF) after the war has probably shifted to the right compared to its PPF prior to the war.
B)PPF after the war has probably shifted to the left compared to its PPF prior to the war.
C)PPF after the war is probably the same PPF as before the war.
D)ability to produce goods and services has increased.
E)b and d

Question 5

Opportunity cost is illustrated by a movement from one point to another on the production possibilities frontier.

Question 6

A production possibilities frontier separates an attainable region from an unattainable region.

Question 7

Which of the following statements is true?

A)In a world of efficiently used scarce resources, more of one good necessarily means less of some other good.
B)The law of increasing opportunity costs assumes that all people have the same ability to produce goods.
C)Efficiency implies that it is impossible to get more of one good without getting less of another.
D)Even if a country has unemployed resources, it can still be operating on its production possibilities frontier (PPF).
E)a and c

Question 8

The economy moves from point A, where it produces 100 units of X and 200 units of Y, to point B, where it produces 200 units of X and 150 units of Y. It follows that

A)point A is a productive inefficient point.
B)point A may be a productive inefficient point.
C)point A may be a productive efficient point.
D)point B is a productive efficient point.
E)b and c

Question 9

Points that lie outside (or beyond) the PPF are

A)attainable.
B)unattainable.
C)efficient.
D)inefficient.

Question 10

The law of increasing opportunity cost helps to explain why PPF's are typically bowed-outward.

Question 11

With respect to a PPF for goods X and Y, productive efficiency implies that in order to produce more of good X there will be a reduction in production of good Y.

Question 12

In a PPF graph of goods X and Y, points that lie beyond (to the right of) the PPF represent combinations of the two goods that are currently unattainable.

Question 13

If a society's unemployment rate rises from 5 percent to 8 percent, the result will be a leftward shift of the society's PPF.

Question 14

In a situation where two goods can be produced by two different people, it is possible for one person to have a comparative advantage in the production of both goods and the other person to have the comparative advantage in the production of neither good.

Question 15

It is possible through trade for a country to consume a combination of goods that lies beyond its production possibilities frontier.

Question 16

Production possibilities frontiers (PPFs) can shift outward, but they do not shift inward.

Question 17

A decrease in unemployment causes the PPF to shift outward (to the right).

Question 18

When opportunity costs are constant, the PPF will be a straight line.

Question 19

When an economy is not using all of its resources, it is producing at a point below its production possibilities frontier.

Question 20

Economic growth is illustrated by a shift inward (toward the origin) of the PPF.

Question 21

A PPF can

A)shift outward but not inward.
B)shift inward but not outward.
C)shift inward or outward.
D)shift neither inward nor outward.

Question 22

Consider two points on the PPF: point A, at which there are 50 apples and 40 pears, and point B, at which there are 46 apples and 41 pears. If the economy is currently at point A, the opportunity cost of moving to point B is

A)1 pear.
B)4 apples.
C)3 apples.
D)41 pears.

Question 23

Suppose the economy goes from a point on its production possibilities frontier (PPF) to a point below that PPF. Assuming that the PPF has not shifted, this could be due to

A)a gain of resources.
B)a loss of resources.
C)technological improvement in the production of both goods.
D)a new law that interferes with productive efficiency.

Question 24

The point where the PPF intersects the vertical axis is

A)unattainable.
B)attainable and productive efficient.
C)attainable but productive inefficient.
D)attainable and neither productive efficient nor productive inefficient.

Question 25

If increasingly more units of good Y must be given up as each successive unit of good X is produced, then the PPF for these two goods is

A)a downward-sloping straight line.
B)circular.
C)an upward-sloping curve.
D)a downward-sloping curve that is bowed outward.
E)a downward-sloping curve that is bowed inward.

Question 26

Which of the following statements is true?

A)The concept of opportunity costs cannot be illustrated within a PPF framework.
B)If scarcity did not exist, neither would a PPF.
C)All PPFs are downward-sloping straight lines.
D)There are more attainable points than unattainable points in every PPF diagram.

Question 27

Suppose the economy goes from a point on its production possibilities frontier (PPF) to a point below that PPF. Assuming that the PPF has not shifted, this could be due to

A)a gain of resources.
B)a loss of resources.
C)technological improvement in the production of both goods.
D)an increase in unemployment of some resources.

Question 28

Which of the following is an illustration of the law of increasing opportunity costs?

A)As more cars are produced, the opportunity cost of each additional car is greater than for the preceding unit.
B)As more cars are produced, the opportunity cost of each additional car is less than for the preceding unit.
C)As more cars are produced, the opportunity cost of each additional car is the same as for the preceding unit.
D)People pay lower prices for cars the higher the costs of producing cars.

Question 29

Consider two points on a PPF: point A, at which there are 500 oranges and 100 apricots, and point B, at which there are 501 oranges and 95 apricots. If the economy is currently at point B, the opportunity cost of moving to point A is

A)5 apricots.
B)1 orange.
C)95 apricots.
D)500 oranges.

Question 30

Consider two straight-line PPFs. They have the same vertical intercept, but curve I is flatter than curve II. The opportunity cost of producing the good on the horizontal axis

A)is greater along curve I.
B)is greater along curve II.
C)is the same along both curves.
D)cannot be compared for the two curves without more information.

Question 31

The PPF between goods X and Y will be a downward-sloping

A)straight line if increasing opportunity costs exist.
B)straight line if decreasing opportunity costs exist.
C)curve that is bowed outward if increasing opportunity costs exist.
D)curve that is bowed outward if constant opportunity costs exist.

Question 32

Both country 1 and country 2 are located on their respective production possibilities frontiers (PPFs) for consumer goods and capital goods, but country 1 produces twice the output of both types of goods compared to country 2. It follows that

A)country 1's PPF lies further to the right than country 2's PPF.
B)country 1 has a smaller population than country 2.
C)country 1 has a bigger population than country 2.
D)country 1 is efficient and country 2 is inefficient.
E)none of the above

Question 33

Consider two straight-line PPFs. They have the same vertical intercept, but curve I is flatter than curve II. The opportunity cost of producing the good on the vertical axis

A)is greater along curve I.
B)is greater along curve II.
C)is the same along both curves.
D)cannot be compared for the two curves without more information.

Question 34

A decrease in the quantity of resources

A)shifts the PPF leftward.
B)shifts the PPF rightward.
C)moves the economy up a given PPF.
D)moves the economy down a given PPF.

Question 35

Points that lie inside (or below) the PPF are

A)unattainable.
B)attainable and productive efficient.
C)attainable and productive inefficient.
D)attainable and neither productive efficient nor productive inefficient.

Question 36

Consider the following combinations of guns and butter that can be produced: 0 guns, 20,000 units of butter; 5,000 guns, 15,000 units of butter; 10,000 guns, 10,000 units of butter; 15,000 guns, 5,000 units of butter; 20,000 guns, 0 units of butter. The PPF between guns and butter is

A)a downward-sloping bowed-out curve.
B)a downward-sloping straight line.
C)an upward-sloping straight line.
D)It is impossible to answer this question without knowing which good would be plotted on the vertical axis.

Question 37

For each additional lamp produced, a constant opportunity cost is incurred in terms of bookshelves. This means that

A)it takes more resources to produce a lamp than a bookshelf.
B)it takes fewer resources to produce a lamp than a bookshelf.
C)for every lamp produced, a constant number of bookshelves is forfeited.
D)for every lamp produced, a different number of bookshelves is forfeited.

Question 38

The point where the PPF intersects the horizontal axis is

A)unattainable.
B)attainable and productive efficient.
C)attainable but productive inefficient.
D)attainable and neither productive efficient nor productive inefficient.

Question 39

If there is always a three-for-one tradeoff between goods X and Y, then the PPF between X and Y is

A)a downward-sloping curve that is bowed outward.
B)a downward-sloping curve that is bowed inward.
C)a downward-sloping straight line.
D)an upward-sloping straight line.

Question 40

An increase in the quantity of resources available

A)shifts the PPF leftward.
B)shifts the PPF rightward.
C)moves the economy to a new point up along a given PPF.
D)moves the economy to a new point down along a given PPF.

Question 41

Exhibit 2-2

Refer to Exhibit 2-2. If PPF₂ is the relevant production possibilities frontier, a significant loss of the quantity of resources available could

A)move this society from point D to point G on PPF .
B)shift this society to PPF .
C)shift this society to PPF .
D)not affect this society.

Question 42

Which of the following statements is true?

A)Productive inefficiency implies that it is possible to produce more of one good and no less of another, but only if additional resources are made available.
B)Productive efficiency implies that it is possible to produce more of one good and no less of another, even without additional resources.
C)Productive inefficiency implies that it is impossible to produce more of one good and no less of another.
D)Productive inefficiency implies that it is possible to produce more of one good and no less of another, even without additional resources.

Question 43

Productive efficiency implies that

A)it is impossible to obtain gains in one area without losses in another.
B)it is possible to obtain gains in one area without losses in another.
C)there are too many resources available.
D)there are too few resources available.

Question 44

Exhibit 2-1

Refer to Exhibit 2-1. Scarcity exists

A)at point C but not at point A.
B)neither at point C nor at point A.
C)at both point C and at point A.
D)at point A but not at point C.

Question 45

A PPF is more likely to be a downward-sloping curve that is bowed outward than a downward-sloping straight line because most resources are

A)better suited for the production of some goods than others.
B)used efficiently.
C)relatively cheap at low levels of output.
D)used to produce consumption goods.

Question 46

Exhibit 2-1

Refer to Exhibit 2-1. The movement from point A to point B is a movement from

A)a productive efficient point to a productive inefficient point.
B)a point with more guns and less butter to a point with more butter and even more guns.
C)a productive efficient point to another productive efficient point.
D)a productive inefficient point to a productive efficient point.

Question 47

Suppose the economy goes from a point on its production possibilities frontier (PPF) to a point directly to the left of it. Assuming that the PPF has not shifted, this could be due to

A)a gain of resources.
B)a loss of resources.
C)technological improvement in the production of both goods.
D)the implementation of a new law that interferes with productive efficiency.

Question 48

An economy is productive efficient if it produces

A)more than enough food to feed everyone.
B)more goods and services in each successive year.
C)maximum output with given resources and technology.
D)enough output so that no one lives in poverty.

Question 49

Exhibit 2-1

Refer to Exhibit 2-1. The opportunity cost of moving from point B to A is

A)10,000 units of butter.
B)20,000 units of butter.
C)50,000 units of guns.
D)the maximum amount of butter that can be produced with available resources.

Question 50

Productive inefficiency implies that

A)it is possible to obtain gains in one area without losses in another.
B)it is impossible to obtain gains in one area without losses in another.
C)there are too many resources.
D)there are too few resources.
E)none of the above

Question 51

In the production possibilities framework, economic growth is depicted by the PPF

A)shifting leftward (toward the origin).
B)shifting rightward (away from the origin).
C)becoming a straight line rather than a bowed outward curve.
D)becoming bowed outward rather than a straight line.

Question 52

Exhibit 2-1

Refer to Exhibit 2-1. A movement from point B to point D

A)could only happen through economic growth.
B)is necessarily a movement from a productive efficient point to a productive inefficient point.
C)is a movement from a productive efficient point to another productive efficient point.
D)is necessarily a movement from a productive inefficient point to another productive inefficient point.

Question 53

Exhibit 2-2

Refer to Exhibit 2-2. If PPF₂ is the relevant production possibilities frontier, then point __________ is unattainable.

A)A
B)G
C)D
D)J

Question 54

Exhibit 2-1

Refer to Exhibit 2-1. If the economy is at point C, it follows that

A)more guns and more butter could be produced with available resources than are currently being produced.
B)only more guns could be produced with available resources than are currently being produced.
C)only more butter can be produced with available resources than are currently being produced.
D)C is an unattainable point.

Question 55

Exhibit 2-2

Refer to Exhibit 2-2. If PPF₂ is the relevant production possibilities frontier, then point __________ is productive efficient.

A)B
B)D
C)I
D)F
E)both b and d

Question 56

Economic growth causes the PPF to

A)shift leftward.
B)shift rightward.
C)remain constant.
D)go from a straight line to a curve.

Question 57

Exhibit 2-2

Refer to Exhibit 2-2. If PPF₂ is the relevant production possibilities frontier, then point __________ illustrates productive inefficiency.

A)A
B)B
C)C
D)J
E)a, b, or c

Question 58

Which of the following statements is false?

A)If there are only two goods, guns and butter, it is possible to produce more of both goods through economic growth.
B)If there are only two goods, guns and butter, it is possible to produce more of both goods if the economy is currently operating at a productive inefficient point.
C)If there are only two goods, guns and butter, it is possible to produce more of both goods if the economy is currently operating at a productive efficient point.
D)If there are only two goods, guns and butter, producing more of one means producing less of the other if the economy is currently operating at a productive efficient point.

Question 59

Exhibit 2-1

Refer to Exhibit 2-1. The opportunity cost of moving from point A to B is

A)10,000 units of butter.
B)20,000 units of butter.
C)20,000 units of guns.
D)10,000 units of guns.

Question 60

Exhibit 2-1

Refer to Exhibit 2-1. The PPF illustrates

A)constant opportunity costs between guns and butter.
B)that guns are more important than butter.
C)increasing opportunity costs between guns and butter.
D)the opportunity cost of one unit of guns is four units of butter.
E)none of the above

Question 61

If there is an increase in the amount of good B foregone as every additional unit of good A is produced, the PPF between goods A and B would

A)be a straight line.
B)be a bowed-outward curve.
C)be a bowed-inward curve.
D)not exist.

Question 62

Exhibit 2-2

Refer to Exhibit 2-2. The production possibilities frontiers shown in this exhibit depict _______________ opportunity costs.

A)constant
B)increasing
C)decreasing
D)There is not enough information provided to answer this question.

Question 63

Exhibit 2-3

Refer to Exhibit 2-3. If PPF₁ is the relevant production possibilities frontier, society can only choose to produce at a point that lies

A)below PPF₁.
B)below or on PPF₁.
C)on PPF₂.
D)none of the above

Question 64

Exhibit 2-3

Refer to Exhibit 2-3. If PPF₁ is the relevant production possibilities frontier, society may move to PPF₂ as a result of

A)an increase in resources.
B)a decrease in resources.
C)an increase in technology.
D)both a and c
E)both b and c

Question 65

A PPF is a straight line as a result of

A)constant opportunity costs.
B)increasing opportunity costs.
C)decreasing opportunity costs.
D)scarcity.
E)choice.

Question 66

Within the production possibilities frontier (PPF) framework, choice is depicted by the

A)PPF itself.
B)PPF being bowed outward.
C)need to select among the points making up the PPF.
D)straight-line PPF.

Question 67

In an eight-hour day, Andy can produce either 24 loaves of bread or 8 pounds of butter. In an eight-hour day, John can produce either 8 loaves of bread or 8 pounds of butter. The opportunity cost of producing 1 pound of butter is

A)1/3 hour for Andy and 1 hour for John.
B)1 hour for Andy and 1 hour for John.
C)3 loaves of bread for Andy and 1 loaf of bread for John.
D)1/3 loaves of bread for Andy and 1 loaf of bread for John.
E)none of the above

Question 68

Exhibit 2-4

Refer to Exhibit 2-4. This economy is productive

A)efficient, if it operates at point B or C.
B)efficient, if it operates at point A or D.
C)inefficient, if it operates at point A or D.
D)inefficient regardless of the particular point.
E)both a and b

Question 69

Exhibit 2-4

Refer to Exhibit 2-4. The opportunity cost of moving from point A to point B is

A)60,000 copiers.
B)40,000 copiers.
C)20,000 copiers.
D)20,000 fax machines.
E)40,000 fax machines.

Question 70

Exhibit 2-4

Refer to Exhibit 2-4. As more fax machines are produced, the opportunity cost of producing them

A)increases.
B)decreases.
C)remains constant.
D)first decreases and then increases.

Question 71

Exhibit 2-3

Refer to Exhibit 2-3. If PPF₁ is the relevant production possibilities frontier, a shift to PPF₂ may depict

A)economic growth.
B)an increase in resources.
C)an increase in technology.
D)both b and c
E)all of the above

Question 72

A PPF is bowed outward as a result of

A)constant opportunity costs.
B)increasing opportunity costs.
C)decreasing opportunity costs.
D)scarcity.
E)choice.

Question 73

Exhibit 2-5

Refer to Exhibit 2-5. The economy is currently operating at point F. The opportunity cost of moving to point E is approximately ____________ televisions.

A)35
B)55
C)zero
D)40

Question 74

With a constant opportunity cost between goods A and B, the PPF for goods A and B would

A)be a straight line.
B)be a bowed-outward line.
C)be a bowed-inward line.
D)not exist.

Question 75

Exhibit 2-4

Refer to Exhibit 2-4. The line joining points A and D is called the

A)production function frontier.
B)utility function.
C)production possibilities frontier.
D)demand curve.

Question 76

If resources are better suited toward the production of one good than toward another good, then the PPF for those two goods is

A)a straight line.
B)bowed outward.
C)upward sloping.
D)any of the above

Question 77

A productive efficient society

A)produces at a point on its PPF.
B)can produce more of one good only by giving up some of another good.
C)cannot produce unlimited amounts of a good.
D)still has to make choices.
E)all of the above

Question 78

An advance in technology commonly refers to the ability to produce

A)the same output with a smaller quantity of resources.
B)more output with a fixed quantity of resources.
C)more output with a greater quantity of resources.
D)both a and b
E)both b and c

Question 79

Exhibit 2-5

Refer to Exhibit 2-5. As more fax machines are produced, the opportunity cost of producing them

A)increases.
B)decreases.
C)remains constant.
D)first decreases and then increases.

Question 80

A society is productive inefficient when

A)it produces at a point inside (below) its PPF.
B)it does not produce the maximum output with its given resources and technology.
C)it can produce more of one good without giving up some of another good.
D)both a and b
E)all of the above