Deck 3: The Economic Problem

Question 1

In the production possibilities frontier model, an unattainable point lies

A)only on the production possibilities frontier itself.
B)only inside the production possibilities frontier.
C)only outside the production possibilities frontier.
D)both on and outside the production possibilities frontier.
E)There are no unattainable points in the production possibilities model.

Answer 1

C

Question 2

The table above gives four production possibilities for airplanes and cruise ships.In possibility A, how many resources are devoted to the production of cruise ships?

A)0
B)few
C)most
D)all
E)It is impossible to tell without more information about the prices of airplanes and cruise ships.

Answer 2

A

Question 3

A production possibilities frontier shows

A)the various combinations of output a nation can produce a certain time, given its available resources and technology.
B)the limits to future growth of a nation.
C)how money can be allocated among two kinds of goods.
D)that if price of one good decreases, the price of the other has to increase.
E)that it is impossible to produce inefficiently.

Answer 3

A

Question 4

Which of the following is an assumption used when drawing a production possibilities frontier?
I∙Human wants and desires are limited to what is available.
Ii∙Only two goods are considered.
Iii∙The level of technology is fixed and unchanging.

A)i only
B)ii only
C)i and iii
D)ii and iii
E)i, ii, and iii

Question 5

The production possibilities frontier is the boundary between the

A)goods and services that the economy can produce.
B)attainable and unattainable combinations of goods and services.
C)wanted and unwanted combinations of goods and services.
D)rational and irrational choices facing a society.
E)affordable and unaffordable combinations of production.

Question 6

Production efficiency is represented by ________ a production possibilities frontier.

A)all points on
B)all points inside
C)all points outside
D)a movement along
E)only one point on

Question 7

In the production possibilities model, the vertical axis measures ________ and the horizontal axis measures ________.

A)the quantity of a good or service; the quantity of another good or service
B)the price of a good or service; the quantity of the good or service
C)the price of a good or service; the price of another good or service
D)the quantity of a good or service; time
E)people's wants; the quantity of a good or service

Question 8

When drawing a production possibilities frontier, which of the following is held constant?

A)the amount of money in the economy
B)the available factors of production and the state of technology
C)the prices of goods and services
D)the quantity of the goods and services that are produced
E)None of the above because nothing is held constant when drawing the production possibilities frontier.

Question 9

The United States produced approximately ________ worth of goods and services in 2011.

A)$15 trillion
B)$15 billion
C)$150 trillion
D)$150 billion
E)$1,500 trillion

Question 10

The production possibilities frontier is the

A)maximum output that can be produced at an opportunity cost of zero.
B)minimum output that can be produced when resources are used inefficiently.
C)boundary between the combinations of goods and services that can be produced and the combinations that cannot be produced, given the available factors of production and the state of technology.
D)boundary between the combinations of goods and services that can be produced and the combinations that cannot be produced when technology is changing.
E)maximum opportunity cost combinations of goods and services.

Question 11

Moving from one point to another on a production possibilities frontier implies

A)increasing the production of both goods.
B)decreasing the production of both goods.
C)increasing the production of one good and decreasing the production of another.
D)holding the production levels of both goods constant.
E)changing the amount of factors of production that are employed.

Question 12

While moving along a production possibilities frontier, the amount of labor ________, the amount of capital ________, and the level of technology ________.

A)is fixed; is fixed; varies
B)varies; is fixed; varies
C)varies; is fixed; is fixed
D)is fixed; is fixed; is fixed
E)varies; varies; varies

Question 13

The production possibilities frontier illustrates the

A)maximum combinations of goods and services that can be produced.
B)resources the economy possess, but not its level of technology.
C)goods and services that people want.
D)limits to people's wants.
E)amount of each good that people want to buy.

Question 14

A major earthquake occurs in the central part of the United States.What impact would this have on the nation's production possibilities frontier and why?

A)It would shift outward because unemployment would be reduced.
B)Nothing would happen because the nation would still have the same capabilities.
C)A tradeoff would occur to replace the resources and goods destroyed.
D)It would shift inward because some of the nation's resources, such as capital and labor, would be destroyed.
E)It would not shift because people would get to work to replace any capital that was destroyed.

Question 15

If an economy cannot produce more of one good without producing less of another good, this implies that which of the following has been achieved?

A)allocative efficiency
B)minimum marginal cost
C)PPF efficiency
D)production efficiency
E)maximum marginal benefit

Question 16

In a production possibilities frontier diagram, the attainable production points are shown as

A)only the points on the production possibilities frontier.
B)only the points beyond the production possibilities frontier.
C)only the points inside the production possibilities frontier.
D)the points inside and the points on the production possibilities frontier.
E)any of the production points.

Question 17

Assume that an association of young workers has lobbied Congress to require that all workers retire once they reach the age of fifty.What impact would this law have on the nation's production possibilities frontier?

A)no impact at all
B)The level of unemployment would decrease so the production possibilities frontier would shift outward.
C)The nation would move to a new position on its production possibilities frontier but the frontier itself would not shift.
D)The production possibilities frontier would shift inward.
E)The number of young workers would increase so the production possibilities frontier would shift outward.

Question 18

The table above gives four production possibilities for airplanes and cruise ships.In possibility A, how many resources are devoted to the production of airplanes?

A)0
B)few
C)most
D)all
E)It is impossible to tell without more information about the prices of airplanes and cruise ships.

Question 19

Consider a production possibility frontier with jeans on the vertical axis and shoes on the horizontal axis.As the country moves along the frontier closer to the horizontal axis,

A)more jeans are produced.
B)the country eventually chooses an unattainable point.
C)free lunches occur.
D)more tradeoffs occur.
E)more shoes are produced.

Question 20

When all of the available factors of production are being efficiently employed, the

A)economy is producing at a point within its PPF.
B)economy is producing at a point on its PPF.
C)economy is producing at a point beyond its PPF.
D)PPF disappears.
E)opportunity cost of changing production is infinite.

Question 21

The table above shows a production possibilities frontier for an economy.If the economy tried to produce a combination of 250 loaves of bread and 800 books,

A)there is some unemployment.
B)there is full employment.
C)the tradeoff between bread and books is inefficient.
D)it cannot produce this combination because it lacks enough resources or technology.
E)it is enjoying a free lunch.

Question 22

The figure above shows a nation's production possibilities frontier.In the figure, point A shows

A)the maximum quantity of pizza that can be produced.
B)the minimum quantity of pizza that the society must produce.
C)an unattainable point.
D)an attainable point with unemployed resources.
E)More information is needed to determine which of the above answers is correct.

Question 23

When production efficiency does NOT occur,
I∙an economy is producing at a point within its PPF.
Ii∙there are unemployed resources.
Iii∙allocative efficiency can not occur.

A)i only
B)i and ii
C)iii only
D)i and iii
E)i, ii, and iii

Question 24

The above figure shows the production possibility frontier for an economy.The point or points that are attainable and production efficient are

A)points B and C.
B)points A, B, and C.
C)point E.
D)points A, B, C, and D.
E)points A and D.

Question 25

A point on the production possibilities frontier reflects an

A)attainable point with full employment of all resources.
B)attainable point without full employment of all resources.
C)unattainable point with full employment of all resources.
D)unattainable point without full employment of all resources.
E)None of the above answers are correct.

Question 26

Consider a production possibility frontier with books and tables.A combination of 1000 books and 500 tables is on the frontier.Which of the following are true?
I) Production of 700 books and 400 tables is attainable but inefficient.
Ii) Production of 1000 books and 600 tables is unattainable.
Iii) Production of 500 books and 1000 tables is inside the frontier.

A)i and ii
B)i, ii and iii
C)i and iii
D)ii and iii
E)i only

Question 27

The above figure shows the production possibility frontier for an economy.The point or points that are attainable are

A)points B and C.
B)points A, B, and C.
C)point E.
D)points A, B, C, and D.
E)points A and D.

Question 28

Production efficiency occurs

A)anywhere inside or on the production possibilities frontier.
B)when the total cost of production is minimized.
C)at all points on the production possibilities frontier.
D)at only one point on the production possibilities frontier.
E)at all points inside the production possibilities frontier.

Question 29

The figure above shows the production possibilities frontier for a country.In order for it to produce at point E, the

A)country would need to acquire more resources and/or more advanced technology.
B)production of compact cars would need to decrease.
C)production of SUVs would need to decrease.
D)country would need to use its resources more efficiently.
E)country would need to determine that compact cars and SUVs are equally important to it.

Question 30

Which point in the figure above is an attainable combination that would have unemployed resources?

A)point A
B)point B
C)point C
D)point D
E)point A and point B

Question 31

The figure above shows the production possibilities frontier for a country.A combination of 4 million gallons of milk and 4 million gallons of ice cream is

A)unattainable.
B)attainable and production efficient.
C)attainable and production inefficient.
D)unattainable and production efficient.
E)More information is needed to determine if the point is attainable or not.

Question 32

The figure above shows the production possibilities frontier for a country.A combination of 3 million gallons of milk and 3 million gallons of ice cream is

A)unattainable.
B)attainable and production efficient.
C)attainable and production inefficient.
D)unattainable and production efficient.
E)More information is needed to determine if the point is attainable or not.

Question 33

Suppose a country operates on its production possibility frontier when it produces 1000 books and 1000 tables.The combination of _________ reflects ____________

A)500 books and 1000 tables; an inefficient but attainable point.
B)1000 books and 500 tables; an efficient point.
C)1000 books and 1000 tables; a free lunch.
D)500 books and 500 tables; an attainable and efficient point.
E)1000 books and 1500 tables; a free lunch.

Question 34

The figure above shows the production possibilities frontier for a country.If the country is producing at point D, then the

A)resources are being used efficiently.
B)technology associated with producing SUVs and compact cars is advancing.
C)resources are not being used efficiently and/or are unemployed.
D)production of SUVs and compact cars is maximized.
E)None of the above answers are correct because it is not possible to produce at point D.

Question 35

The figure above shows the production possibilities frontier for a country.A combination of 2 million gallons of milk and 2 million gallons of ice cream is

A)unattainable.
B)attainable and production efficient.
C)attainable and production inefficient.
D)attainable but more than production efficient.
E)More information is needed to determine if the point is attainable or not.

Question 36

The table above shows a production possibilities frontier for an economy.Which of the following combinations is unattainable?

A)0 loaves of bread and 800 books
B)100 loaves of bread and 800 books
C)200 loaves of bread and 800 books
D)300 loaves of bread and 200 books
E)0 loaves of bread and 0 books

Question 37

If there is unemployment in an economy, then the

A)production possibilities frontier will shift inwards.
B)economy is operating at an unattainable point.
C)production possibilities frontier will shift outwards.
D)economy is producing at a point inside the production possibilities frontier.
E)production possibilities frontier must be bowed inward.

Question 38

The figure above shows a nation's production possibilities frontier.In the figure, point B shows

A)an unattainable point.
B)an attainable point.
C)a point with a free lunch.
D)a point with no trade off.
E)a point at which there are unemployed resources.

Question 39

If a society moves from a period of time with significant unemployment to a time with full employment, its production possibilities frontier will

A)shift leftward.
B)shift rightward.
C)not shift because the society moves from one point on the frontier to a point inside the frontier.
D)not shift because the society moves from a point inside the frontier to a point on the frontier.
E)not shift because the society moves from one point on the frontier to a point outside the frontier.

Question 40

Point D in the above PPF figure is

A)an attainable production combination with unemployed resources.
B)a tradeoff.
C)an unattainable production combination.
D)a production combination that can be attained once resources are fully employed.
E)More information is needed to determine which of the above answers is correct.

Question 41

Which of the following statements is correct?

A)If capital is idle, the economy is producing at its full potential.
B)The production possibilities frontier shows that there are no limits to production.
C)A tradeoff is a limit that forces an exchange or a substitution of one thing for something else.
D)Any point on or within the PPF is production efficient.
E)None of the above answers are correct.

Question 42

To find the opportunity cost of producing one more unit of any product while on the production possibilities frontier requires

A)setting the amounts of the two products equal to each other.
B)setting the change in one product equal to the change in the other product.
C)dividing the amount of the product forgone by the amount of the product gained.
D)subtracting the change in the product whose production increased from the change in the product whose production decreased.
E)None of these describe how to find opportunity cost.

Question 43

Points inside the PPF are all

A)unattainable and have fully employed resources.
B)attainable and have fully employed resources.
C)unattainable and have some unemployed resources.
D)attainable and have some unemployed resources.
E)unaffordable.

Question 44

A movement from one point on a production possibilities frontier to another represents

A)a tradeoff.
B)a free lunch.
C)full employment of labor but not capital.
D)unemployment.
E)an advance in technology.

Question 45

The production possibilities frontier is a graph showing the

A)exact point of greatest efficiency for producing goods and services.
B)tradeoff between free lunches.
C)maximum combinations of goods and services that can be produced.
D)minimum combinations of goods and services that can be produced.
E)resources available for the economy's production use.

Question 46

During a time of high unemployment, a country can increase the production of one good or service

A)without decreasing the production of something else.
B)but must decrease the production of something else.
C)and must increase the production of something else.
D)by using resources in the production process twice.
E)but the opportunity cost is infinite.

Question 47

The production possibilities frontier is a boundary that separates

A)the combinations of goods that can be produced from the combinations of services.
B)attainable combinations of goods and services that can be produced from unattainable ones.
C)equitable combinations of goods and services that can be produced from inequitable ones.
D)fair combinations of goods and services that can be consumed from unfair ones.
E)affordable production points from unaffordable points.

Question 48

As we move along the production possibilities frontier,

A)the production of one good increases as the production of the other good decreases.
B)the possibilities of tradeoffs diminish.
C)a tradeoff is not possible because nations need all goods.
D)more of both goods can be produced.
E)less of both goods can be produced.

Question 49

A movement from a point inside the production possibilities frontier to a point on the production possibilities frontier represents

A)a tradeoff.
B)a free lunch.
C)full employment of labor but not capital.
D)unemployment of labor but not capital.
E)an infinite opportunity cost.

Question 50

The opportunity cost of producing one more unit of a good is calculated by dividing the

A)increase in the quantity of that good by the decrease in the quantity of other good.
B)total quantity of that good by the total quantity of other good.
C)decrease in the quantity of the other good by the increase in the quantity of the good whose opportunity cost we're calculating.
D)total quantity of the other good by the total quantity of the good whose opportunity cost we're calculating.
E)price of the good whose opportunity cost we are calculating by the number of units of the other good that are forgone.

Question 51

The above figure shows the production possibility frontier for an economy.The point or points that are not attainable are

A)points B and C.
B)points A, B, and C.
C)point E.
D)points A, B, C, and D.
E)points A and D.

Question 52

When a nation is producing on its production possibilities frontier, if more resources are used to produce one good, then the production of other goods

A)must increase.
B)must decrease.
C)must remain the same.
D)must change but they might increase or decrease.
E)might increase if the nation can produce more efficiently.

Question 53

The negative slope of the production possibilities frontier represents the idea

A)that free lunches are possible.
B)of tradeoffs, that in order to produce more of one good, the nation must produce less of another.
C)of unemployment.
D)of inefficient production.
E)that prices rise as less is produced.

Question 54

A free lunch (the absence of a tradeoff)when the production of a good is increased is possible for the entire economy only if

A)less of some product is produced.
B)prices are decreased.
C)prices are increased.
D)resources are used inefficiently.
E)there is a movement along the PPF.

Question 55

A reason the production possibilities frontier exists is

A)unlimited resources and technology.
B)scarcity of resources.
C)scarcity of resources and unlimited technology.
D)unemployment.
E)that people's wants are unlimited.

Question 56

In order for Ireland to grow more potatoes, wool production must decrease.This situation is an example of

A)producing at a point that lies beyond the PPF.
B)zero opportunity cost.
C)opportunity benefit.
D)a free lunch.
E)a tradeoff.

Question 57

Points on the PPF are all

A)unattainable and have fully employed resources.
B)free lunches.
C)inefficient.
D)attainable and have some unemployed resources.
E)production efficient.

Question 58

The saying "There's no such thing as a free lunch," applies

A)when there is some unemployment.
B)on the production possibilities frontier.
C)to unattainable combinations of goods and services.
D)when more of one good can be produced without decreasing production of another.
E)at all points inside the PPF.

Question 59

In a production possibilities frontier graph, the cost of producing more units of a good is measured by the

A)dollar value of the resources used to produce the good.
B)amount of the other good or service that must be forgone.
C)dollar value of the additional output.
D)area in the arc between the PPF and a straight line drawn between the starting point and the ending point.
E)None of the above answers is correct.

Question 60

Moving along the production possibilities frontier itself illustrates

A)the existence of tradeoffs.
B)the existence of unemployment of some factors of production.
C)the benefits of free lunches.
D)how free lunches can be exploited through trade.
E)how tradeoffs need not occur if the economy is efficient.

Question 61

The above figure shows the production possibility frontier for a country.Suppose the country is producing at point A.What would be the opportunity cost to increase the production of rice to 12 tons?

A)6 thousand bottles of wine
B)15 thousand bottles of wine
C)9 thousand bottles of wine
D)6 tons of rice
E)Nothing, it is a free lunch

Question 62

On a production possibilities frontier, 500 pounds of apples and 1,200 pounds of bananas can be produced while at another point on the same frontier, 300 pounds of apples and 1,300 pounds of bananas can be produced.Between these points, what is the opportunity cost of producing a pound of apples?

A)2 pounds of bananas
B)100 pounds of bananas
C)2 pounds of apples
D)0.5 of a pound of bananas
E)5/12 of a pound of bananas

Question 63

The above figure shows the production possibility frontier for a country.What is the opportunity cost per ton of rice to move from point D to E?

A)3000 bottles of wine
B)333 bottles of wine
C)3 bottles of wine
D)1/3 of a bottle of wine
E)None of the above answers is correct.

Question 64

The figure above shows the production possibilities frontier for a country.If the economy is operating at point B, then the opportunity cost of another million gallons of milk is

A)4 gallons of ice cream for a gallon of milk.
B)3 gallons of ice cream for a gallon of milk.
C)1 gallon of ice cream for a gallon of milk.
D)1/3 of a gallon of ice cream for a gallon of milk.
E)zero because after producing another million gallons of milk then zero gallons of ice cream are produced.

Question 65

To calculate the opportunity cost per unit, you divide the decrease in the quantity of the forgone item by the

A)decrease in the quantity of the other item.
B)increase in the quantity of the other item obtained.
C)price of the item obtained.
D)price of the item forgone.
E)price of the item obtained and then multiply by the price of the item forgone.

Question 66

The above figure shows the production possibility frontier for a country.Suppose the country is producing at point D.What is the opportunity cost of increasing the production of rice to 15 tons?

A)9 thousand bottles of wine
B)6 thousand bottles of wine
C)15 thousand bottles of wine
D)12 tons of rice
E)Nothing, it is a free lunch.

Question 67

A country produces only apples and bananas.Moving from point A to point B along its production possibilities frontier, 5 apples are gained and 4 bananas are forgone.What is the opportunity cost of an apple?

A)4 bananas
B)5/4 of a bananas
C)4/5 of a banana
D)1 apple
E)None of the above answers is correct.

Question 68

The table above shows a nation's production possibilities frontier.If the nation chooses to increase the production of robots from 2 to 3 and it is on its PPF, it will have to forgo ________ pizzas.

A)37
B)34
C)3
D)35.5
E)None of the above answers is correct.

Question 69

The above figure shows the production possibility frontier for a country.Suppose the country is producing at point A.What is the opportunity cost of increasing the production of rice to 12 tons?

A)15 thousand bottles of wine
B)6 thousand bottles of wine
C)9 thousand bottles of wine
D)12 tons of rice
E)Nothing, it is a free lunch.

Question 70

On a production possibilities frontier, 500 pounds of apples and 1,200 pounds of bananas can be produced while at another point on the same frontier, 300 pounds of apples and 1,300 pounds of bananas can be produced.Between these points, what is the opportunity cost of producing a pound of bananas?

A)2 pounds of bananas
B)200 pounds of apples
C)2 pounds of apples
D)0.5 a pound of apples
E)12/5 = 2.4 pounds of apples

Question 71

The above figure shows the production possibility frontier for a country.Suppose the country is producing at point E.What would be the opportunity cost to increase the production of wine to 9 thousand bottles?

A)12 tons of rice
B)15 thousand bottles of wine
C)9 thousand bottles of wine
D)3 tons of rice
E)Nothing, it is a free lunch.

Question 72

The above figure shows the production possibility frontier for a country.Suppose the country is producing at point D.What would be the opportunity cost to move to point C?

A)6 thousand bottles of wine
B)15 thousand bottles of wine
C)12 tons of rice
D)Nothing, it is a free lunch
E)This movement is not possible without economic growth.

Question 73

A country produces only apples and bananas.Moving from point A to point B along its production possibilities frontier, 5 apples are forgone and 4 bananas are gained.What is the opportunity cost of a banana?

A)4 apples
B)5/4 of an apple
C)4/5 of an apple
D)1 banana
E)None of the above answers is correct.

Question 74

Robinson Crusoe divides his time between catching fish and gathering fruit.Part of his production possibilities frontier is given in the above table.Mr.Crusoe, while lonesome, is efficient and always stays on his PPF.Mr.Crusoe is consuming 20 pounds of fish.Then he decides to slowly become a vegetarian and decrease his consumption of fish to 9 pounds.This decision means that Mr.Crusoe will

A)incur an opportunity cost of 9 pounds of fruit.
B)incur an opportunity cost of 20 pounds of fish.
C)be able to enjoy a gain of 9 pounds of fruit.
D)incur an opportunity cost of 99 pounds of fruit.
E)incur an opportunity cost of 9 pounds of fish.

Question 75

Robinson Crusoe divides his time between catching fish and gathering fruit.Part of his production possibilities frontier is given in the above table.If Mr.Crusoe is on his PPF and he increases the amount of fruit he gathers from 56 to 90 pounds, the opportunity cost is

A)37 pounds of fish.
B)31 pounds of fish.
C)17 pounds of fish.
D)34 pounds of fruit.
E)90 pounds of fruit.

Question 76

The above figure shows the production possibility frontier for a country.What is the opportunity cost per ton of rice to move from point B to point D?

A)1000 bottles of wine
B)500 bottles of wine
C)2 bottles of wine
D)1/2 of a bottle of wine
E)None of the above answers is correct.

Question 77

The figure above shows the production possibilities frontier for a country.The opportunity cost of a gallon of milk between combination point A and B is

A)4 gallons of ice cream for a gallon of milk.
B)3 gallons of ice cream for a gallon of milk.
C)1 gallon of ice cream for a gallon of milk.
D)1/3 of a gallon of ice cream for a gallon of milk.
E)zero because at point A zero milk is being produced.

Question 78

The table above shows a nation's production possibilities frontier.The opportunity cost of a robot between combination D and E is

A)4 pizzas.
B)34 pizzas.
C)30 pizzas.
D)1/4 of a pizza.
E)undefined because neither point is production efficient.

Question 79

The table above shows a nation's production possibilities frontier.If the nation wants to produce 4 robots and 34 pizzas

A)it will shift the production possibilities frontier.
B)the opportunity cost is 9 pizzas.
C)the nation will be producing inefficiently.
D)it will be unable to do so because the production point is unattainable.
E)the nation will then be producing at a production efficient point.

Question 80

The above figure shows the production possibility frontier for a country.What is the opportunity cost to move from point D to point E?

A)6 thousand bottles of wine
B)15 thousand bottles of wine
C)6 tons of rice
D)9 thousand bottles of wine
E)Nothing, it is a free lunch