Question 1

Over time, an increase in a nation's stock of physical capital will

Accepted Answer

An increase in a nation's stock of physical capital will lead to an increase in productivity and efficiency in production, allowing for more goods and services to be produced. This will shift the production possibilities curve outward, indicating an increase in potential output.

Question 2

Which of the following will be most likely to cause the production possibilities curve for a country to shift inward?

Accepted Answer

A decrease in the stock of physical capital will limit the country's ability to produce goods and services, thus causing the production possibilities curve to shift inward.

Question 3

If the citizens of a country were to work harder and take less leisure time, it would

Accepted Answer

Working harder and taking less leisure time would increase the amount of labor available in the economy, which would likely lead to an increase in production and a shift outward of the production possibilities curve. This would allow the economy to produce more goods and services and operate at a higher level of efficiency.

Question 4

A point outside the production possibilities curve represents a combination of goods that is

Accepted Answer

A point outside the production possibilities curve represents a combination of goods that is unattainable, meaning that it cannot be produced with the available resources and technology.

Question 5

As a general rule, technological progress

Accepted Answer

Technological progress enables an economy to produce more output with the same amount of resources, which means that the production possibilities curve shifts outward away from the origin. This occurs because new technology allows for greater efficiency and productivity in the use of resources. As a result, more output can be produced for the same input of resources, leading to the expansion of the production possibilities frontier.

Question 6

Which of the following will most likely cause an outward shift in the production possibilities curve?

Accepted Answer

An increase in the average number of hours worked per week will lead to an increase in labor resources available to the economy, leading to an outward shift in the production possibilities curve. A reduction in man-made productive resources (choice A) would cause an inward shift in the curve, as would an increase in government payments to farmers for taking land out of production (choice B). Therefore, choice C is the only option that would cause an outward shift.

Question 7

If an economy operates at a point within its production possibilities curve,

Accepted Answer

When an economy operates at a point inside its production possibilities curve, it means it is not fully utilizing all its resources efficiently, and it is not producing at its maximum potential. This implies that there are unused resources, which could be used to produce more goods and services, leading to an increase in the economy's output. Therefore, D is the best choice.

Question 8

Increasing opportunity costs of producing goods imply that the production possibilities curve will be

Accepted Answer

The answer of Increasing opportunity costs of producing goods imply...

Question 9

Abigail wishes to spend more time this week studying for her classes. Using the idea of a production possibilities curve, and assuming Abigail is currently spending all of her time efficiently, Abigail can spend more time studying this week only if

Accepted Answer

According to the production possibilities curve, the only way to increase the production of one good (studying) is to decrease the production of another good (other activities). Therefore, Abigail can only spend more time studying if she spends less time doing other things. Choice C (Daylight Savings Time) is irrelevant and choice A is incorrect as it suggests an increase in overall productivity, rather than a reallocation of time.

Question 10

The production possibilities curve illustrates the basic principle that

Accepted Answer

The production possibilities curve shows the maximum amount of two goods that can be produced given the resources and technology available. It also illustrates the principle of opportunity cost, which means that producing more of one good requires sacrificing some production of the other good. Therefore, if all resources are being used efficiently, producing more of one good can only be achieved by producing less of the other good. Choice D reflects this principle.

Question 11

A production possibilities curve graphically represents the maximum quantities of two products produced when all resources in the economy are efficiently utilized. An economy that operates inside this production possibilities curve

Accepted Answer

If an economy is operating inside its production possibilities curve, it means that it is not utilizing its resources as efficiently as possible. It is producing less than its maximum potential output, indicating a waste of resources and inefficiency.

Question 12

With time, which one of the following strategies would most likely result in an outward shift in the production possibilities curve of an economy?

Accepted Answer

Instituting a tax policy encouraging investment at the expense of consumption would encourage businesses to invest in new technologies, equipment, and human capital, which would improve productivity and allow for an outward shift of the production possibilities curve over time. The other options would likely result in a decrease in productivity and a shift inward of the curve.

Question 13

Which of the following most accurately indicates the implications of an economy's production possibilities curve?

Accepted Answer

The answer of Which of the following most accurately indicates...

Question 14

A point inside the production possibilities curve represents a combination of goods that is

Accepted Answer

The answer of A point inside the production possibilities curve...

Question 15

If an economy uses its resources inefficiently, this situation would be illustrated on a production possibilities diagram as

Accepted Answer

Operating at a point inside the production possibilities curve indicates that the economy is not using its resources efficiently because it is producing less than what it could potentially produce with the given resources.

Question 16

In Europe during the 14th century, the Black Plague killed 24 million people or close to 37 percent of the population. How would this affect the production possibilities curves for the countries of Europe at that time?

Accepted Answer

The Black Plague had a devastating effect on the population of Europe, which would have resulted in a decrease in the available labor force and a contraction in the size of the economy. This would have led to a lower level of production possibilities, causing a leftward shift of the production possibilities curves for the countries of Europe during the 14th century. Therefore, Option B is the best choice.

Question 17

Which of the following is true of a production possibilities curve?

Accepted Answer

A production possibilities curve shows the maximum combination of two goods that can be produced from a fixed amount of resources, assuming full and efficient use of those resources. It does not reveal the ideal level of technology, assume equal prices, or indicate which goods are most important to produce for a country that can produce many different goods.

Question 18

A point on the production possibilities curve represents a combination of goods that is

Accepted Answer

A point on the production possibilities curve represents a combination of goods that is efficient. It means that producing any other combination of goods is not possible with the given resources and technology.

Question 19

A production possibilities curve indicates that when resources are being used efficiently,

Accepted Answer

A production possibilities curve is a graphical representation of the trade-offs between two goods that can be produced with limited resources. The curve shows the maximum amount of one good that can be produced for each possible level of production of the other good, assuming that all resources are fully employed. Therefore, in order to produce more of one good, some resources must be shifted away from the production of the other good. This means that the only way to produce more of one good is by producing less of the other good, as shown by the curve.

Question 20

If the resources of an economy are being used inefficiently, it would be

Accepted Answer

The answer of If the resources of an economy are...

Quiz 2: Some Tools of the Economist