Question 1

Over time, an increase in a nation's stock of physical capital will
A) shift the production possibilities curve inward.
B) cause an economy to operate inside its production possibilities curve.
C) shift the production possibilities curve outward.
D) eliminate the basic economic problem of scarcity.

Accepted Answer

An increase in a nation's stock of physical capital enhances its ability to produce goods and services, thus shifting the production possibilities curve outward, indicating economic growth.

Question 2

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
A) she also spends more time doing other things.
B) she spends less time doing other things.
C) Daylight Savings Time begins this week, so everyone moves their clocks ahead one hour.
D) none of the above.

Accepted Answer

If Abigail is already using her time efficiently, she can only allocate more time to studying by reducing the time spent on other activities.

Question 3

Which of the following is true?
A) The production possibilities curve indicates that it will be impossible to expand total output with the passage of time.
B) As long as resources are scarce, output cannot be increased.
C) The size of the economic pie is fixed, and therefore, if one individual has more income, others must have less.
D) Over time, the output of goods and services can be increased through human ingenuity and discovery of better ways of doing things.

Accepted Answer

Over time, human ingenuity, technological advancements, and improved methods can lead to increased efficiency and productivity, allowing for an increase in the output of goods and services.

Question 4

A point on the production possibilities curve represents a combination of goods that is
A) inefficient.
B) efficient.
C) unattainable.
D) attainable.

Accepted Answer

A point on the production possibilities curve represents a combination of goods that is efficient, meaning that it is not possible to produce more of one good without producing less of the other.

Question 5

With time, which one of the following strategies would most likely result in an outward shift in the production possibilities curve of an economy?
A) passage of legislation reducing the workweek to 30 hours
B) instituting a tax policy encouraging consumption at the expense of investment
C) instituting a tax policy encouraging investment at the expense of consumption
D) an increase in the marginal income tax rate, which would reduce the work effort of individuals

Accepted Answer

Encouraging investment increases capital formation, leading to technological advancements and increased productive capacity, which shifts the production possibilities curve outward.

Question 6

Which of the following is true of a production possibilities curve?
A) It reveals the maximum amount of any two goods that can be produced from a fixed quantity of resources.
B) It reveals the ideal level of technology for a country.
C) It assumes that the prices of the two products are equal.
D) For a country that could produce many different goods, it shows which two goods are most important to produce.

Accepted Answer

A production possibilities curve (PPC) illustrates the maximum possible output combinations of two goods that can be produced with available resources and technology, assuming all resources are fully and efficiently utilized.

Question 7

If the citizens of a country were to work harder and take less leisure time, it would
A) shift the production possibilities curve outward.
B) cause an economy to operate inside its production possibilities curve.
C) shift the production possibilities curve inward.
D) cause an economy to move from one point on the production possibilities curve to another point on the curve.

Accepted Answer

If the citizens of a country were to work harder and take less leisure time, it would increase the production of goods and services, shifting the production possibilities curve outward.

Question 8

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
A) is using its resources inefficiently.
B) lacks the necessary technology to produce efficiently.
C) lacks the resources to produce goods efficiently.
D) is utilizing its available resources as efficiently as possible.

Accepted Answer

An economy operating inside the production possibilities curve indicates that it is not using all its resources efficiently, as it could produce more of one or both goods without sacrificing the production of the other.

Question 9

A point inside the production possibilities curve represents a combination of goods that is
A) inefficient.
B) efficient.
C) unattainable.
D) attainable.

Accepted Answer

A point inside the production possibilities curve indicates that resources are not being used to their full potential, hence it is inefficient.

Question 10

Which of the following will be most likely to cause the production possibilities curve for a country to shift inward?
A) an increase in the labor force
B) an increase in unemployment
C) development of an improved technological method of production
D) a decrease in the stock of physical capital

Accepted Answer

A decrease in the stock of physical capital reduces the resources available for production, leading to a potential decrease in the country's overall production capacity, thus shifting the production possibilities curve inward.

Question 11

If the resources of an economy are being used inefficiently, it would be
A) possible to increase production of all goods simultaneously.
B) possible to increase production of one good only if production decreased for the other goods.
C) not possible to increase production of any good.
D) not possible to increase economic growth.
E) possible to increase production with no effort.

Accepted Answer

When resources are used inefficiently, there is slack in the economy, allowing for an increase in the production of all goods simultaneously without sacrificing the production of any other goods.

Question 12

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?
A) The production possibilities curves for these countries would have shifted outward.
B) The production possibilities curves for these countries would have shifted inward.
C) The production possibilities curves for these countries would have been unaffected.
D) This would have been illustrated by a movement along the production possibilities curves for these countries, but it would not have shifted them.

Accepted Answer

The Black Plague significantly reduced the labor force, leading to a decrease in the productive capacity of the countries, thus shifting the production possibilities curves inward.

Question 13

As a general rule, technological progress
A) shifts the production possibilities curve outward, away from the origin.
B) reduces the slope of the production possibilities curve, making it flatter.
C) increases the slope of the production possibilities curve, making it steeper.
D) shifts the production possibilities curve inward, toward the origin.

Accepted Answer

Technological progress typically increases an economy's capacity to produce goods and services, which shifts the production possibilities curve outward, indicating growth in potential output.

Question 14

Which of the following will most likely cause an outward shift in the production possibilities curve?
A) a reduction in the man-made productive resources available to the economy as the result of a decline in investment
B) an increase in government payments to farmers for taking land out of production
C) an increase from 40 to 50 hours in the average number of hours worked per week
D) None of the above would cause an outward shift in the production possibilities curve.

Accepted Answer

An increase in the average number of hours worked per week can lead to higher production capacity, thus potentially shifting the production possibilities curve outward.

Question 15

A point outside the production possibilities curve represents a combination of goods that is
A) inefficient.
B) efficient.
C) unattainable.
D) attainable.

Accepted Answer

A point outside the production possibilities curve represents a combination of goods that is unattainable with the current resources and technology.

Question 16

Other things constant, which of the following would you expect to increase the output growth rate of a country?
A) an increase in the rate of taxation on personal income
B) an increase in the rate of investment as a share of total output
C) passage of regulations restricting international trade
D) passage of regulations restricting domestic trade

Accepted Answer

An increase in the rate of investment as a share of total output typically leads to higher capital accumulation, which can enhance productivity and economic growth.

Question 17

If an economy operates at a point within its production possibilities curve,
A) it lacks the resources necessary to reach the curve.
B) it is utilizing all of its resources efficiently.
C) it does not confront the problem of scarce goods relative to unlimited wants.
D) it is not efficiently using all of its resources.

Accepted Answer

When an economy operates within its production possibilities curve, it indicates that not all resources are being used efficiently, leading to underutilization.

Question 18

An improvement in a country's legal system that enhanced the ability of citizens to protect their property rights and enforce contracts would result in which of the following changes to the country's production possibilities curve?
A) a movement from a point on the curve to a point outside the curve
B) a movement from one point to another point along the curve
C) an outward shift of the curve
D) a movement from a point on the curve to a point inside the curve

Accepted Answer

An improvement in the legal system that enhances property rights and contract enforcement would likely lead to increased investment and efficiency, thus expanding the economy's productive capacity and shifting the production possibilities curve outward.

Question 19

Using a production possibilities curve, a technological advance that increases the amount of output for the same amount of inputs would be illustrated as
A) an inward shift of the curve.
B) a movement from one point to another point along the curve.
C) an outward shift of the curve.
D) a movement from a point on the curve to a point inside the curve.

Accepted Answer

A technological advance that increases output with the same inputs would result in an outward shift of the production possibilities curve, indicating that more of both goods can be produced.

Question 20

If an economy uses its resources inefficiently, this situation would be illustrated on a production possibilities diagram as
A) an inward shift of the production possibilities curve.
B) an outward shift of the production possibilities curve.
C) operating at a point outside the production possibilities curve.
D) operating at a point inside the production possibilities curve.

Accepted Answer

Operating at a point inside the production possibilities curve indicates that resources are not being used efficiently, as the economy is not producing at its maximum potential output.

Quiz 2: Some Tools of the Economist

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

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

Which of the following is true?

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

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

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

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

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

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

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

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

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?

As a general rule, technological progress

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

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

Other things constant, which of the following would you expect to increase the output growth rate of a country?

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

An improvement in a country's legal system that enhanced the ability of citizens to protect their property rights and enforce contracts would result in which of the following changes to the country's production possibilities curve?

Using a production possibilities curve, a technological advance that increases the amount of output for the same amount of inputs would be illustrated as

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