Question 1

On a graph of a production possibilities frontier,opportunity cost is represented by
A)a point on the horizontal axis.
B)a point on the vertical axis.
C)a ray through the origin.
D)the slope of the production possibilities frontier.
E)the x-axis intercept.

Accepted Answer

Opportunity cost is represented by the slope of the production possibilities frontier. The slope represents the rate at which one good must be given up in order to produce more of another good. This represents the opportunity cost of producing one more unit of the other good.

Question 2

Which one of the following concepts is illustrated by a production possibilities frontier?
A)profit
B)consumption
C)investment
D)monetary exchange
E)the tradeoff between producing one good versus another

Accepted Answer

A production possibilities frontier illustrates the tradeoff between producing one good versus another. It shows the maximum combination of two goods that an economy can produce with its limited resources and technology. It demonstrates the opportunity cost of producing one good in terms of the other.

Question 3

Use the figure below to answer the following questions.
  Figure 2.1.1
-Refer to the production possibilities frontier in Figure 2.1.1.Which one of the following is true about point A?
A)It is unattainable.
B)While no more of good Y can be produced,more of good X can be produced.
C)It is preferred to point B.
D)Resources are either unused or misallocated or both.
E)It is attainable only if the amount of capital goods is increased.

Accepted Answer

D

Question 4

If Harold must decrease production of some other good to increase production of good X,then Harold
A)is producing on his production possibilities frontier.
B)is producing outside his production possibilities frontier.
C)is producing inside his production possibilities frontier.
D)must prefer good X to any other good.
E)has too few capital goods.

Accepted Answer

The answer of If Harold must decrease production of some...

Question 5

If Sam is producing at a point on his production possibilities frontier,then he
A)cannot produce any more of either good.
B)is unaffected by costs and technology.
C)can produce more of both goods.
D)is not subject to scarcity.
E)can increase the production of one good only by decreasing the production of the other.

Accepted Answer

The production possibilities frontier (PPF) represents the maximum combination of goods or services that can be produced with a given set of resources and technology. When producing at a point on the PPF, an economy (or individual, in this case, Sam) is operating efficiently, meaning that to increase the production of one good, it must reduce the production of another due to limited resources. This trade-off is a fundamental concept in economics, illustrating the opportunity cost of allocating resources to one use over another.

Question 6

A point inside a production possibilities frontier
A)indicates some unused or misallocated resources.
B)is unattainable.
C)is preferred to a point on the production possibilities frontier.
D)indicates a point of production efficiency.
E)illustrates the idea of opportunity cost.

Accepted Answer

A point inside the PPF indicates that resources are not being fully utilized or allocated efficiently, which implies that there is unused or misallocated resources.

Question 7

A tradeoff exists when
A)we move from a point within the production possibilities frontier (PPF)to a point on the PPF.
B)we move from a point on the PPF to a point within the PPF.
C)the PPF shifts outward.
D)we move along the PPF.
E)the PPF shifts towards the origin.

Accepted Answer

The answer of A tradeoff exists when
A)we move from a...

Question 8

Which of the following quotations best illustrates a tradeoff?
A)"If the firm reorganized its production process,it could produce more widgets and more gadgets."
B)"The firm should sell more gadgets,even if it means less widget sales."
C)"The more and more gadgets the firm produces,the bigger the fall in widget production."
D)"If the firm invests more in capital equipment,it can expand sales next year."
E)"The firm has been able to lower costs due to its extensive experience in building widgets."

Accepted Answer

This quotation represents a tradeoff because it highlights the negative relationship between producing more gadgets and producing fewer widgets. The firm must decide whether the increased revenue from selling more gadgets is worth the cost of producing fewer widgets.

Question 9

Complete the following sentence.In Figure 2.1.1,
A)movement from A to B would require a technological advance.
B)point B is a point of production efficiency.
C)some resources must be unused at point C.
D)the concept of decreasing opportunity cost is illustrated.
E)movement from C to B would require a technological improvement.

Accepted Answer

Point B is the point on the Production Possibility Frontier where the maximum number of goods can be produced with available resources. Any point below the PPF would be inefficient, while any point above the PPF would be unattainable given the current resources and technology.

Question 10

Refer to the production possibilities frontier in Figure 2.1.1,which one of the following is true about point C?
A)It is attainable only if we consume more of good X.
B)It is unattainable.
C)It is attainable only if we consume less of good Y.
D)It is attainable only if we consume less of good X.
E)It is attainable only if we consume more of good Y.

Accepted Answer

The answer of Refer to the production possibilities frontier in...

Question 11

The production possibilities frontier
A)is the boundary between attainable and unattainable levels of production.
B)is the boundary between what we want to consume and what we want to produce.
C)shows how production increases as prices rise.
D)shows prices at which production is possible and impossible.
E)illustrates why there need not be any scarcity in the world.

Accepted Answer

The production possibilities frontier (PPF) represents the boundary between attainable and unattainable levels of production. It shows the maximum output that can be produced with the given resources and technology. Points inside the PPF are inefficient, while points beyond the PPF are unattainable given the current resources and technology. Therefore, the PPF helps to illustrate the concept of scarcity and the trade-offs between producing different goods and services.

Question 12

Ted chooses to study for his economics exam instead of going to the concert.The concert he will miss is Ted's ________ of studying for the exam.
A)monetary cost
B)absolute cost
C)opportunity cost
D)discretionary cost
E)comparative cost

Accepted Answer

The concept of opportunity cost states that when we make a choice, we give up the opportunity to choose something else. In this scenario, Ted is giving up the opportunity to attend the concert by studying for his economics exam. This is the best example of opportunity cost.

Question 13

Production efficiency is achieved when
A)the production possibilities frontier shifts outward at an even pace.
B)there are no more tradeoffs.
C)all resources are equally productive in all activities.
D)resources are not equally productive in all activities.
E)we produce goods and services at the lowest possible cost.

Accepted Answer

Production efficiency is achieved when we produce goods and services at the lowest possible cost. This means that resources are allocated in the most efficient manner, minimizing wastage and maximizing output. It is not necessary for the production possibilities frontier to shift outward at an even pace, nor is it required that there are no more tradeoffs. It is also not necessary for all resources to be equally productive in all activities, as resources may be specialized for a particular type of production. However, it is important that resources are utilized in the most efficient way possible.

Question 14

If Harold can increase production of good X without decreasing production of any other good,then Harold
A)is producing on his production possibilities frontier.
B)is producing outside his production possibilities frontier.
C)is producing inside his production possibilities frontier.
D)must have a linear production possibilities frontier.
E)must prefer good X to any other good.

Accepted Answer

The answer of If Harold can increase production of good...

Question 15

Which one of the following concepts is not illustrated by a production possibilities frontier?
A)scarcity
B)monetary exchange
C)opportunity cost
D)attainable and unattainable points
E)the tradeoff between producing one good versus another

Accepted Answer

A production possibilities frontier illustrates the concepts of scarcity, opportunity cost, attainable and unattainable points, and the tradeoff between producing one good versus another. However, it does not illustrate monetary exchange, which involves the exchange of money for goods and services.

Question 16

If Sam is producing at a point inside his production possibilities frontier,then he
A)can increase production of both goods with zero opportunity cost.
B)is fully using all his resources and allocating his resources to their best use.
C)must be doing the best he can with limited resources.
D)is unaffected by costs and technology.
E)has a high opportunity cost of moving from this point.

Accepted Answer

Producing inside the production possibilities frontier indicates that not all resources are being fully utilized, so it's possible to increase production of both goods without sacrificing the production of one for the other, hence with zero opportunity cost.

Question 17

A situation in which resources are either unused or misallocated or both is represented in a production possibilities frontier diagram by
A)any point on either the horizontal or the vertical axis.
B)a point above or to the right of the production possibilities frontier.
C)a point outside the production possibilities frontier.
D)a point inside the production possibilities frontier.
E)a point on or inside the production possibilities frontier.

Accepted Answer

A point inside the production possibilities frontier indicates that resources are either unused or misallocated or both, because it is possible to produce more of one good without sacrificing the production of another. Points on or outside the frontier represent all possible combinations of the two goods given the available resources, whereas points inside the frontier indicate that resources are not being used to their full potential. Therefore, choice D is the correct answer. The other choices are incorrect because they either represent impossible combinations of the two goods (choice C) or optimal allocations of resources (choices A, B, and E).

Question 18

Opportunity cost of an action is
A)the best choice that can be made.
B)the highest-valued alternative forgone.
C)the money cost.
D)the comparative cost.
E)the absolute cost.

Accepted Answer

Opportunity cost is the highest-valued alternative forgone while making a choice. Therefore, the best choice is the one that has the lowest opportunity cost.

Question 19

The concept of opportunity cost
A)cannot be explained by using a production possibilites frontier.
B)explains that goods are swapped for other goods.
C)implies that when a person is more efficient in the production of one good,he should produce that good and exchange it for some good that he is relatively less efficient at producing.
D)implies that a double coincidence of wants must be present for exchange to take place.
E)implies that because productive resources are scarce,we must give up some of one good to acquire more of another.

Accepted Answer

The concept of opportunity cost implies that because productive resources are scarce, we must give up some of one good to acquire more of another. This means that there is a trade-off between producing one good over another, and the cost of producing one good is the forgone opportunity to produce another good.

Question 20

A production possibilities frontier is negatively sloped because
A)more goods are purchased as price falls.
B)of opportunity cost.
C)some resources are unused.
D)there is not enough capital in the economy.
E)of increasing consumption.

Accepted Answer

A production possibilities frontier is negatively sloped because of the concept of opportunity cost, which refers to the trade-offs that must be made when deciding how to allocate resources. As more of one good is produced, the opportunity cost of producing additional units of that good increases, leading to a trade-off in which less of the other good can be produced. This trade-off results in a negatively sloped production possibilities frontier.

Quiz 2: The Economic Problem

On a graph of a production possibilities frontier,opportunity cost is represented by

Which one of the following concepts is illustrated by a production possibilities frontier?

Use the figure below to answer the following questions. Figure 2.1.1 -Refer to the production possibilities frontier in Figure 2.1.1.Which one of the following is true about point A?

If Harold must decrease production of some other good to increase production of good X,then Harold

If Sam is producing at a point on his production possibilities frontier,then he

A point inside a production possibilities frontier

A tradeoff exists when

Which of the following quotations best illustrates a tradeoff?

Complete the following sentence.In Figure 2.1.1,

Refer to the production possibilities frontier in Figure 2.1.1,which one of the following is true about point C?

The production possibilities frontier

Ted chooses to study for his economics exam instead of going to the concert.The concert he will miss is Ted's ________ of studying for the exam.

Production efficiency is achieved when

If Harold can increase production of good X without decreasing production of any other good,then Harold

Which one of the following concepts is not illustrated by a production possibilities frontier?

If Sam is producing at a point inside his production possibilities frontier,then he

A situation in which resources are either unused or misallocated or both is represented in a production possibilities frontier diagram by

Opportunity cost of an action is

The concept of opportunity cost

A production possibilities frontier is negatively sloped because