Question 1

If the PPF for two goods is a downward-sloping straight line, the resources used to produce those goods are equally well-suited to the production of both goods.

Accepted Answer

If the PPF for two goods is a downward-sloping straight line, it implies that the opportunity cost of producing one good increases as more of it is produced, which assumes that the resources used in the production are not equally well-suited for both goods.

Question 2

A decrease in the quantity of resources available causes a movement from one point on a given PPF to another point along the same PPF.

Accepted Answer

A decrease in the quantity of resources available causes a shift of the entire Production Possibility Frontier (PPF) inward, not a movement along the same PPF.

Question 3

The law of increasing opportunity cost results from the varying ability of resources to adapt to the production of different goods and it helps to explain why production possibilities curves are typically bowed outward.

Accepted Answer

The law of increasing opportunity cost states that as the production of one good increases, the opportunity cost of producing an additional unit of that good increases as well. This is because resources are not equally adaptable to the production of all goods. The concept helps to explain why production possibilities curves are typically bowed outward, as resources become increasingly specialized in the production of specific goods.

Question 4

Through war, many of the factories in country 1 are destroyed and many of its people are killed. As a result, the country's
A)production possibilities frontier (PPF) after the war has probably shifted to the right compared to its PPF prior to the war.
B)PPF after the war has probably shifted to the left compared to its PPF prior to the war.
C)PPF after the war is probably the same PPF as before the war.
D)ability to produce goods and services has increased.
E)b and d

Accepted Answer

War is a destructive force that often results in the destruction of infrastructure, factories, and loss of life. This means that the country's resources and workforce are depleted, which reduces its ability to produce goods and services. Therefore, the country's PPF after the war has probably shifted to the left compared to its PPF prior to the war.

Question 5

Opportunity cost is illustrated by a movement from one point to another on the production possibilities frontier.

Accepted Answer

Opportunity cost refers to the trade-off between two options, and the movement along the production possibilities frontier represents the opportunity cost of producing more of one good/service, which means producing less of another. Therefore, opportunity cost is illustrated by a movement from one point to another on the production possibilities frontier.

Question 6

A production possibilities frontier separates an attainable region from an unattainable region.

Accepted Answer

This is true because any point on or inside the PPF is attainable given the available resources and technology, while any point outside the PPF is unattainable with those same resources and technology.

Question 7

Which of the following statements is true?
A)In a world of efficiently used scarce resources, more of one good necessarily means less of some other good.
B)The law of increasing opportunity costs assumes that all people have the same ability to produce goods.
C)Efficiency implies that it is impossible to get more of one good without getting less of another.
D)Even if a country has unemployed resources, it can still be operating on its production possibilities frontier (PPF).
E)a and c

Accepted Answer

Both statements A and C are true because they reflect fundamental principles of economics related to scarcity and efficiency. Statement A illustrates the trade-off principle, indicating that to produce more of one good, society must sacrifice the production of another good due to limited resources. Statement C emphasizes that efficiency in resource use means that to increase the production of one good, production of another must decrease, assuming all resources are fully utilized.

Question 8

The economy moves from point A, where it produces 100 units of X and 200 units of Y, to point B, where it produces 200 units of X and 150 units of Y. It follows that
A)point A is a productive inefficient point.
B)point A may be a productive inefficient point.
C)point A may be a productive efficient point.
D)point B is a productive efficient point.
E)b and c

Accepted Answer

The movement from point A to point B, where more of one good is produced with less of another, does not necessarily indicate inefficiency at point A. It could mean a reallocation of resources. Thus, point A may be productively inefficient or efficient, depending on other factors not specified in the scenario.

Question 9

Points that lie outside (or beyond) the PPF are
A)attainable.
B)unattainable.
C)efficient.
D)inefficient.

Accepted Answer

Points that lie beyond the PPF are unattainable because they represent production levels that are not currently possible given the available resources and technology. Therefore, they cannot be considered efficient or inefficient as they cannot be produced at all.

Question 10

The law of increasing opportunity cost helps to explain why PPF's are typically bowed-outward.

Accepted Answer

The law of increasing opportunity cost states that as the production of one good increases, the opportunity cost of producing an additional unit of that good also increases. This is because resources are not perfectly adaptable to the production of all goods, so as more resources are allocated to one good, there are fewer resources available for producing other goods. This leads to a trade-off where the opportunity cost of producing one good is higher the more of that good is produced. As a result, when we graph the production possibilities frontier (PPF) for two goods, the PPF is typically bowed-outward, illustrating the increasing opportunity cost of producing more of one good in terms of the other good.

Question 11

With respect to a PPF for goods X and Y, productive efficiency implies that in order to produce more of good X there will be a reduction in production of good Y.

Accepted Answer

Productive efficiency on a PPF means that it is impossible to produce more of one good without giving up some production of the other good. Therefore, if more of good X is produced, some production of good Y must be sacrificed.

Question 12

In a PPF graph of goods X and Y, points that lie beyond (to the right of) the PPF represent combinations of the two goods that are currently unattainable.

Accepted Answer

This is because points beyond the PPF represent production levels that are currently not possible with the given resources available.

Question 13

If a society's unemployment rate rises from 5 percent to 8 percent, the result will be a leftward shift of the society's PPF.

Accepted Answer

The unemployment rate does not directly affect the society's Production Possibility Frontier (PPF), which represents the maximum output combinations of two goods or services an economy can achieve when all resources are fully and efficiently employed. An increase in unemployment indicates underutilization of labor resources, not a change in the economy's productive capacity.

Question 14

In a situation where two goods can be produced by two different people, it is possible for one person to have a comparative advantage in the production of both goods and the other person to have the comparative advantage in the production of neither good.

Accepted Answer

Comparative advantage implies that if one person has a comparative advantage in producing one good, the other person must have a comparative advantage in producing the other good, as comparative advantage is based on the relative opportunity cost of production between two parties.

Question 15

It is possible through trade for a country to consume a combination of goods that lies beyond its production possibilities frontier.

Accepted Answer

By trading with other countries, a country can consume goods that it is not capable of producing within its own production possibilities frontier. This is because it can acquire those goods through trade in exchange for goods that it does produce efficiently.

Question 16

Production possibilities frontiers (PPFs) can shift outward, but they do not shift inward.

Accepted Answer

PPFs can shift inward due to factors such as natural disasters, war, or a decrease in resources or technology.

Question 17

A decrease in unemployment causes the PPF to shift outward (to the right).

Accepted Answer

A decrease in unemployment does not shift the Production Possibility Frontier (PPF) outward; it allows an economy to operate closer to its existing PPF by utilizing idle resources more efficiently. The PPF represents potential output levels of two goods given fixed resources and technology; shifts occur with changes in these factors, not unemployment levels.

Question 18

When opportunity costs are constant, the PPF will be a straight line.

Accepted Answer

When opportunity costs are constant, it means that the resources are equally efficient in producing both goods. This results in a linear PPF, as the tradeoff between the two goods remains constant.

Question 19

When an economy is not using all of its resources, it is producing at a point below its production possibilities frontier.

Accepted Answer

This is because the production possibilities frontier represents the maximum possible output of an economy given its resources and technology. If the economy is not using all of its resources, it is not producing at its maximum potential and is therefore operating below its production possibilities frontier.

Question 20

Economic growth is illustrated by a shift inward (toward the origin) of the PPF.

Accepted Answer

Economic growth is illustrated by a shift outward (away from the origin) of the PPF, as the economy is able to produce more goods and services with the same level of resources.

Quiz 2: Production Possibilities Frontier Framework