Question 1

Economists usually assume that production is subject to increasing opportunity costs because:

Accepted Answer

This is because not all resources are equally suited to producing every good. As we produce more of a certain good, we must use resources that are less and less productive in that area, leading to increasing opportunity costs. This is known as the law of increasing opportunity costs.

Question 2

A two-dimensional production possibility frontier illustrates the _____ facing an economy that _____ only two goods.

Accepted Answer

A production possibility frontier shows the maximum combinations of two goods that an economy can produce using all its resources efficiently. Since resources are scarce, production of one good comes at the cost of producing the other. Hence, the diagram shows the trade-offs that an economy faces in terms of what goods to produce. It does not illustrate prices or shortages, as these are determined by market forces and cannot be represented by a production possibility frontier.

Question 3

One of the controversies surrounding the United States' energy markets is the trade-off between energy production and clean air. Assuming clean air has value, the United States will be on its production possibility frontier if and only if:

Accepted Answer

The production possibility frontier (PPF) represents the maximum output combinations of two goods (in this case, clean air and energy) that can be produced with available resources and technology, assuming that all resources are fully utilized. If resources used to produce clean air and energy are being fully used, it means the economy is operating on its PPF, indicating an efficient allocation of resources between these two goods. Choices A, B, and C do not necessarily indicate that the economy is on its PPF.

Question 4

The production possibility frontier will NOT shift outward due to an:

Accepted Answer

An increase in the unemployment rate indicates a decrease in available workers, meaning the economy is producing less and not operating at full capacity. This would not shift the production possibility frontier outward. The other three choices would all result in an increase in the economy's ability to produce goods and services, shifting the production possibility frontier outward.

Question 5

Use the following to answer questions:
\ 
-(Figure: Production Possibility Frontier for Tealand) Use Figure: Production Possibility Frontier for Tealand. If Tealand is producing 10 million scones and 10 million cups of tea (point A) we know that the economy:

Accepted Answer

If Tealand is producing at a point inside the Production Possibility Frontier (PPF), such as point A with 10 million scones and 10 million cups of tea, it indicates that the economy is using its resources inefficiently. This is because it could produce more of one or both goods without sacrificing the production of the other, assuming it moves to a point on the PPF.

Question 6

All points outside the production possibility frontier are:

Accepted Answer

Points outside the production possibility frontier represent combinations of goods and services that are not currently feasible to produce with the given resources and technology. Therefore, they are labeled as infeasible.

Question 7

All points inside the production possibility frontier represent:

Accepted Answer

Points inside the production possibility frontier represent inefficient production points because the economy could produce more of at least one good without sacrificing the production of any other good, indicating underutilized resources.

Question 8

Use the following to answer questions:
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-(Figure: Production Possibility Frontier for Tealand) Use Figure: Production Possibility Frontier for Tealand. Tealand is producing at point C on its production possibility frontier. What is the opportunity cost of increasing the production of tea from 20 million cups to 30 million cups?

Accepted Answer

The opportunity cost of producing an additional 10 million cups of tea is the amount of scones that must be forgone. Since Tealand is moving along its production possibility frontier, the opportunity cost is represented by the decrease in scone production necessary to increase tea production.

Question 9

If an economy is producing at a point on its production possibilities frontier, it is:

Accepted Answer

Producing on the production possibilities frontier indicates that an economy is using all its resources efficiently, meaning it is efficient in production. However, this does not guarantee that the resources are being allocated in the most beneficial way for society, hence it might not be efficient in allocation.

Question 10

Technological improvements will:

Accepted Answer

Technological improvements allow for more efficient production processes and new products, which increases the economy's productive capacity and shifts the production possibility frontier outward. This means that more goods and services can be produced with the same amount of resources, leading to potential economic growth. Improved technology may also create new job opportunities in fields related to the development and maintenance of technology. Therefore, choice C is the best option.

Question 11

Suppose Oklahoma decides to produce only two goods, oil and football helmets. If Oklahoma is producing on its production possibility frontier, as oil production increases, the production of football helmets will:

Accepted Answer

When Oklahoma is producing on its production possibility frontier (PPF) and decides to increase oil production, it must reallocate resources from producing football helmets to oil production. This trade-off results in a decrease in football helmet production at some rate, which can vary depending on the specific opportunity costs and resource allocation efficiencies. The PPF illustrates the idea of opportunity cost, where increasing production of one good results in the reduction of another due to limited resources.

Question 12

Use the following to answer questions:
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-(Figure: Production Possibility Frontier for Tealand) Use Figure: Production Possibility Frontier for Tealand. Tealand can produce at point E only if:

Accepted Answer

Point E represents a production level outside the frontier, which can only be achieved through economic growth (i.e. an increase in resources or technology). Choices A and B are irrelevant to the possibility of producing at point E, and D would actually decrease the ability to produce at point E by increasing production costs.

Question 13

All points on the production possibility frontier are:

Accepted Answer

Points on the production possibility frontier represent the maximum possible production of two goods with the given resources and technology. Therefore, all points on the curve are efficient, meaning that it is not possible to produce more of one good without sacrificing the production of the other.

Question 14

The production possibility frontier will shift outward because of:

Accepted Answer

The answer of The production possibility frontier will shift outward...

Question 15

The opportunity cost of production:

Accepted Answer

Opportunity cost is the value of the next best alternative that must be forgone or sacrificed in order to produce a certain good. Therefore, option B is the correct answer. Option A is incorrect because the price of a good is based on supply and demand and does not reflect the opportunity cost of production. Option C is incorrect because as production increases, the opportunity cost of producing that good may increase. Option D is incorrect because the gain from producing a good is the revenue earned from selling the good, which also does not reflect the opportunity cost of production.

Question 16

The effect of an increase in productive inputs such as labor and capital can be shown by a(n):

Accepted Answer

An outward shift of the production possibility frontier occurs when there is an increase in productive inputs such as labor and capital. This means that the economy can produce more goods and services, showing an increase in productivity. Points inside the production possibility frontier are inefficient, movements along the frontier imply that the economy is producing the same amount of two goods but changing the combination of production, while inward shifts represent a decrease in the economy's ability to produce goods and services.

Question 17

Consider a production possibility frontier for Italy. If in 2016 Italy's resources are not being fully utilized, Italy will be somewhere _____ of its production possibility frontier.

Accepted Answer

If Italy's resources are not being fully utilized, it means that they are producing less than their maximum potential. Therefore, they will be inside their production possibility frontier.

Question 18

Suppose Poland is producing on its production possibilities frontier, and it decides to increase the production of steel and decrease the production of vodka. The bowed-out production possibility frontier suggests that there will be a(n) _____ opportunity cost of producing more steel.

Accepted Answer

The bowed-out (concave) shape of the production possibilities frontier indicates that resources are not equally efficient in producing both goods. As Poland moves along the production possibility frontier, the opportunity cost of producing more steel will increase, meaning that it will have to give up more and more vodka production to produce additional units of steel. Therefore, the opportunity cost of producing more steel is increasing.

Question 19

In terms of the production possibility frontier, the inefficient use of available resources is shown by:

Accepted Answer

Production at a point inside the production possibility frontier indicates that the economy is not using all its available resources efficiently. This can be due to factors such as unemployment, underutilization of capital, or inefficient allocation of resources.

Question 20

The production possibility frontier is bowed out because:

Accepted Answer

The production possibility frontier is bowed out because resources are not equally suited for the production of both goods. This means that some resources may be better suited for producing one good than the other, causing the curve to bend.

Quiz 2: Economic Models: Trade-Offs and Trade

Economists usually assume that production is subject to increasing opportunity costs because:

A two-dimensional production possibility frontier illustrates the _ facing an economy that _ only two goods.

One of the controversies surrounding the United States' energy markets is the trade-off between energy production and clean air. Assuming clean air has value, the United States will be on its production possibility frontier if and only if:

The production possibility frontier will NOT shift outward due to an:

All points outside the production possibility frontier are:

All points inside the production possibility frontier represent:

If an economy is producing at a point on its production possibilities frontier, it is:

Technological improvements will:

Suppose Oklahoma decides to produce only two goods, oil and football helmets. If Oklahoma is producing on its production possibility frontier, as oil production increases, the production of football helmets will:

All points on the production possibility frontier are:

The production possibility frontier will shift outward because of:

The opportunity cost of production:

The effect of an increase in productive inputs such as labor and capital can be shown by a(n) :

Consider a production possibility frontier for Italy. If in 2016 Italy's resources are not being fully utilized, Italy will be somewhere _____ of its production possibility frontier.

Suppose Poland is producing on its production possibilities frontier, and it decides to increase the production of steel and decrease the production of vodka. The bowed-out production possibility frontier suggests that there will be a(n) _____ opportunity cost of producing more steel.

In terms of the production possibility frontier, the inefficient use of available resources is shown by:

The production possibility frontier is bowed out because:

Quiz 2: Economic Models: Trade-Offs and Trade

Economists usually assume that production is subject to increasing opportunity costs because:

A two-dimensional production possibility frontier illustrates the _____ facing an economy that _____ only two goods.

One of the controversies surrounding the United States' energy markets is the trade-off between energy production and clean air. Assuming clean air has value, the United States will be on its production possibility frontier if and only if:

The production possibility frontier will NOT shift outward due to an:

Use the following to answer questions: \\ -(Figure: Production Possibility Frontier for Tealand) Use Figure: Production Possibility Frontier for Tealand. If Tealand is producing 10 million scones and 10 million cups of tea (point A) we know that the economy:

All points outside the production possibility frontier are:

All points inside the production possibility frontier represent:

If an economy is producing at a point on its production possibilities frontier, it is:

Technological improvements will:

Suppose Oklahoma decides to produce only two goods, oil and football helmets. If Oklahoma is producing on its production possibility frontier, as oil production increases, the production of football helmets will:

Use the following to answer questions: \\ -(Figure: Production Possibility Frontier for Tealand) Use Figure: Production Possibility Frontier for Tealand. Tealand can produce at point E only if:

All points on the production possibility frontier are:

The production possibility frontier will shift outward because of:

The opportunity cost of production:

The effect of an increase in productive inputs such as labor and capital can be shown by a(n) :

Consider a production possibility frontier for Italy. If in 2016 Italy's resources are not being fully utilized, Italy will be somewhere _____ of its production possibility frontier.

Suppose Poland is producing on its production possibilities frontier, and it decides to increase the production of steel and decrease the production of vodka. The bowed-out production possibility frontier suggests that there will be a(n) _____ opportunity cost of producing more steel.

In terms of the production possibility frontier, the inefficient use of available resources is shown by:

The production possibility frontier is bowed out because:

A two-dimensional production possibility frontier illustrates the _ facing an economy that _ only two goods.