Question 1

Why has India's economy grown faster than the United States' in recent years?
A) India production has focused more on consumer goods.
B) India has lowered its population growth rate.
C) India has attained a higher standard of living than the United States.
D) India's production has focused more on capital goods.
E) India has placed more focus on its citizens' immediate needs.

Accepted Answer

India's production has focused more on capital goods, such as infrastructure projects, which has resulted in increased investment and economic growth.

Question 2

Draw a production possibilities frontier (PPF)that shows a pizza shop's production trade-offs between producing pizzas and stromboli.Suppose the pizza shop upgrades to a larger,more automated oven.On the same graph,show how the PPF changes.(The oven is used to bake both pizzas and stromboli.)

Accepted Answer

The answer of Draw a production possibilities frontier (PPF)that shows...

Question 3

What does it mean when society is operating inside the production possibilities frontier (PPF)?

Accepted Answer

The answer of What does it mean when society is...

Question 4

Consider the following scenario to answer the following questions: Kukla makes tables, with an opportunity cost of 3 rugs per every 4 tables. Zola makes rugs, with an opportunity cost of 2 tables per every 3 rugs.
-Ollie proposes that Kukla give Zola 2 tables in exchange for 1 rug.What are Kukla's and Zola's reactions?
A) Kukla likes the proposal,but Zola does not.
B) Zola likes the proposal,but Kukla does not.
C) Kukla and Zola both like the proposal.
D) Neither Kukla nor Zola likes the proposal.
E) Ollie's proposal is not feasible.

Accepted Answer

Zola would like the proposal because they would gain 1 table at an opportunity cost of only 2/3 of a rug. This is better than their current opportunity cost of 3/2 tables per rug. Kukla, on the other hand, would not like the proposal because they would be losing 2 tables at an opportunity cost of 3/4 of a rug. This is worse than their current opportunity cost of 3/4 tables per rug. Therefore, only Zola likes the proposal.

Question 5

How will a reduction in the national unemployment rate affect a nation's production possibilities frontier (PPF)?

Accepted Answer

The answer of How will a reduction in the national...

Question 6

Consider the following scenario to answer the following questions: Kukla makes tables, with an opportunity cost of 3 rugs per every 4 tables. Zola makes rugs, with an opportunity cost of 2 tables per every 3 rugs.
-Ollie proposes that Kukla give Zola 1 table in exchange for 2 rugs.What are Kukla's and Zola's reactions?
A) Kukla likes the proposal,but Zola does not.
B) Zola likes the proposal,but Kukla does not.
C) Kukla and Zola both like the proposal.
D) Neither Kukla nor Zola likes the proposal.
E) Ollie's proposal is not feasible.

Accepted Answer

Kukla's opportunity cost for one table is 3/4 of a rug, so giving away one table for 2 rugs is beneficial for Kukla. However, Zola's opportunity cost for 2 rugs is 2/3 of a table, so giving away 2 rugs for only one table is not beneficial for Zola. Therefore, Kukla likes the proposal, but Zola does not.

Question 7

The figure depicts a shift in a society’s production possibilities frontier (PPF) for the manufacture of trains and planes: train-manufacturing capacity expands while plane-manufacturing capacity shrinks. Refer to this figure to answer the following questions. 
-Which point represents an output that was efficient before the shift but is inefficient afterward?
A) point A
B) point B
C) point C
D) point D
E) point E

Accepted Answer

The answer of The figure depicts a shift in a...

Question 8

For what kind of society does a shift away from the production of capital goods and toward the production of consumer goods make sense?
A) a society with a scarcity of natural resources
B) a society with a high unemployment rate
C) a society with a low per-capita income
D) a society with a large per-capita stock of capital goods
E) a society with a large population

Accepted Answer

A shift towards the production of consumer goods is more sensible for a society with a large per-capita stock of capital goods because it indicates that the society already has a substantial amount of infrastructure and machinery (capital goods) to support the production of consumer goods. This shift can help in meeting the immediate needs and improving the quality of life of its citizens.

Question 9

How can a person who is "better" or more efficient (in that he or she has an absolute advantage in the production of various goods on the PPF)at producing several things be made even better off by specialization and trade?

Accepted Answer

The answer of How can a person who is "better"...

Question 10

Suppose that during Coco's afternoon shift working at the library,she could either reshelve books or process interlibrary loan (ILL)requests.Draw a production possibilities frontier (PPF)that describes Coco's production trade-offs.Her production of each of these goods is subject to increasing relative costs in production,so be sure that the graph reflects this fact.
Now suppose that a new online request system increases Coco's efficiency at processing ILL requests but does not affect her reshelving ability.Show,on the same graph,how this new innovation changes the PPF.

Accepted Answer

The answer of Suppose that during Coco's afternoon shift working...

Question 11

Comment on the role of models in economics.What are the strengths and weaknesses of using them to explore the world around us?

Accepted Answer

The answer of Comment on the role of models in...

Question 12

The figure depicts a shift in a society’s production possibilities frontier (PPF) for the manufacture of trains and planes: train-manufacturing capacity expands while plane-manufacturing capacity shrinks. Refer to this figure to answer the following questions. 
-Which point ceases to represent a production possibility?
A) point A
B) point B
C) point C
D) point D
E) point E

Accepted Answer

The answer of The figure depicts a shift in a...

Question 13

Suppose that,during an afternoon at Hambre's favorite ski resort,Hambre could either make additional runs down the slopes or produce and sip hot chocolate by the fire in the lodge.Draw a production possibilities frontier (PPF)that describes his production trade-offs between runs skied (by riding the chairlift to the top and skiing down the slope)versus cups of hot chocolate produced and sipped.Hambre's production of each of these goods is subject to constant marginal opportunity costs in production,so be sure that,in the graph,the opportunity cost of one activity in terms of the other is the same at any point on the PPF.
Now suppose that a new superfast ski lift reduces the time it takes to get to the top of the mountain.Show,on the same graph,how this changes the PPF.

Accepted Answer

The answer of Suppose that,during an afternoon at Hambre's favorite...

Question 14

The figure depicts a shift in a society’s production possibilities frontier (PPF) for the manufacture of trains and planes: train-manufacturing capacity expands while plane-manufacturing capacity shrinks. Refer to this figure to answer the following questions. 
-Which point represents an efficient level of output both before and after the shift?
A) point A
B) point B
C) point C
D) point D
E) point E

Accepted Answer

Point C represents an efficient level of output both before and after the shift. It is on the original PPF and also on the new PPF, indicating that resources are being fully utilized in both scenarios. Additionally, choosing point C allows for a greater quantity of trains to be produced while still producing some planes, rather than completely sacrificing plane production at points A and B or producing fewer trains at points D and E.

Question 15

What assumptions do economists make when developing a production possibilities frontier (PPF)?

Accepted Answer

The answer of What assumptions do economists make when developing...

Question 16

A poker player wins some cash.Which use of the money would most naturally be considered an investment?
A) buying a round of drinks for everyone at a bar
B) using the money to play more poker
C) paying off debts owed to bookies
D) shopping for groceries
E) buying a book of tips for poker players

Accepted Answer

Buying a book of tips for poker players could be considered an investment as it has the potential to improve the player's skills and potentially lead to more winnings in the future.

Question 17

When an economy shifts away from production of consumer goods and toward production of capital goods,for the average worker this trade-off means
A) a higher standard of living.
B) longer work hours.
C) a lower savings rate (as a percentage of income).
D) more leisure time.
E) more disposable income.

Accepted Answer

When an economy shifts toward production of capital goods, it often means that there will be a greater demand for workers in industries that produce these goods. This can lead to longer work hours for the average worker as they are needed to produce the necessary capital goods. While there may be potential benefits of a shift toward capital goods production, such as higher productivity in the long run, for the average worker the trade-off is likely to be longer work hours.

Question 18

Draw a production possibilities frontier (PPF)for good A and good B.Suppose that these goods are subject to increasing relative costs in production,and be sure that your graph reflects this fact.
Now suppose that a new and innovative technology enhances the production of good A but not good B.Illustrate how this new innovation changes the production possibilities frontier (PPF).

Accepted Answer

The answer of Draw a production possibilities frontier (PPF)for good...

Question 19

Explain how scarcity is the root cause of the trade-offs and opportunity cost illustrated in the production possibilities frontier (PPF).

Accepted Answer

The answer of Explain how scarcity is the root cause...

Question 20

Consider the following scenario to answer the following questions: Kukla makes tables, with an opportunity cost of 3 rugs per every 4 tables. Zola makes rugs, with an opportunity cost of 2 tables per every 3 rugs.
-Ollie proposes that Kukla give Zola 2 tables in exchange for 2 rugs.What are Kukla's and Zola's reactions?
A) Kukla likes the proposal,but Zola does not.
B) Zola likes the proposal,but Kukla does not.
C) Kukla and Zola both like the proposal.
D) Neither Kukla nor Zola likes the proposal.
E) Ollie's proposal is not feasible.

Accepted Answer

Kukla's opportunity cost for 2 tables is to give up 1.5 rugs (3 rugs per 4 tables). Zola's opportunity cost for 2 rugs is to give up 4/3 tables (2 tables per 3 rugs). Therefore, Kukla gains 0.5 rugs (2 - 1.5) in value and Zola gains 2/3 tables (4/3 - 2) in value from the exchange. Both Kukla and Zola benefit from the trade, so they both should like the proposal.

Quiz 2: Model Building and Gains From Trade

Why has India's economy grown faster than the United States' in recent years?