Question 1

The economy is currently on its production possibilities frontier (PPF). A politician says that it is possible to get more of everything---more infrastructure, more schools, more national defense, more spending on social programs, and so on. The politician is
A)correct if he is assuming a rightward-shifting PPF.
B)incorrect if he is assuming a rightward-shifting PPF.
C)incorrect if he is assuming a PPF that does not change.
D)correct if he is assuming a PPF that does not change.
E)a and c

Accepted Answer

A rightward-shifting PPF indicates economic growth, allowing for more of everything. If the PPF does not change, it's impossible to get more of everything without sacrificing something else, as the economy is already on its PPF.

Question 2

An economy can produce the following combinations of goods: 50X and 0Y, 40X and 10Y, 30X and 20Y, 20X and 30Y, 10X and 40Y, and 0X and 50Y. The production possibilities frontier (PPF) for the economy is
A)concave downward because the opportunity cost of producing the 10th unit of Y is greater than the opportunity cost of producing the first unit of Y.
B)a straight (downward-sloping) line because the opportunity cost of producing the two goods is constant.
C)concave downward because the opportunity cost of producing the 40th unit of Y is less than the opportunity cost of producing the 10th unit of Y.
D)a straight (downward-sloping) line because the opportunity cost of producing the 10th unit of X is greater than the opportunity cost of producing the 40th unit of X.
E)a straight (downward-sloping) line because the opportunity cost of producing the 30th unit of Y is greater than the opportunity cost of producing the 30th unit of X.

Accepted Answer

The production possibilities frontier (PPF) is a straight (downward-sloping) line because the opportunity cost of producing more of one good in terms of the other remains constant as we move along the PPF. This is evident from the given combinations, where producing 10 more units of Y always requires giving up 10 units of X, indicating a constant trade-off.

Question 3

If a production possibilities frontier (PPF) is concave outward, it follows that
A)opportunity costs are constant between two goods.
B)the opportunity cost (of producing the good on the horizontal axis) rises as more of the good is produced.
C)the opportunity cost (of producing the good on the horizontal axis) falls as more of the good is produced.
D)the opportunity cost (of producing the good on the horizontal axis) first rises and then falls as more of the good is produced.
E)none of the above

Accepted Answer

A concave outward PPF indicates increasing opportunity costs. As more of one good is produced, more and more units of the other good must be given up. This means that the opportunity cost of producing the good on the horizontal axis rises as more of it is produced.

Question 4

What is the reason for the law of increasing opportunity costs?
A)There is no reason: it is just one of the laws of economics.
B)Resources have varying abilities and those with lower opportunity costs of producing a good will be used to produce it before resources with higher opportunity costs produce it.
C)The price of a good rises as more of it is demanded.
D)As more of a good is produced, the taxes applied to the production of the good rise.
E)c and d

Accepted Answer

The law of increasing opportunity costs states that as the production of a good increases, the opportunity cost of producing that good also increases. This is because resources are not equally efficient in producing all goods, and those with the lower opportunity costs will be used first. As we move down the production possibilities curve, we have to give up more and more of one good to produce an additional unit of another good.

Question 5

Points inside (below) the production possibilities frontier (PPF) are
A)unattainable.
B)attainable and productive inefficient.
C)preferable to points that lie on the PPF.
D)attainable and productive efficient.

Accepted Answer

Points inside the PPF are attainable, but they represent productive inefficiency because resources are not being used to their full potential. Therefore, points on the PPF are preferable as they represent the most efficient use of resources. Points outside the PPF are unattainable with current resources and technology.

Question 6

If the economy is currently producing at a point on its production possibilities frontier (PPF), the economy is
A)productive inefficient.
B)operating with no unemployed resources.
C)productive efficient.
D)b and c
E)none of the above

Accepted Answer

When an economy is producing at a point on its production possibilities frontier (PPF), it means all resources are being used efficiently, indicating no unemployed resources (B) and productive efficiency (C).

Question 7

Along its production possibilities frontier (PPF) an economy can produce 0X and 15Y, 10X and 10Y, 20X and 5Y, or 30X and 0Y. It follows that the PPF is
A)a downward-sloping straight line.
B)an upward-sloping straight line.
C)a downward-sloping bowed-outward curve.
D)a downward-sloping bowed-inward curve.

Accepted Answer

The production possibilities frontier (PPF) described shows a constant trade-off between producing X and Y (for every increase in X, there is a proportional decrease in Y, and vice versa), which is characteristic of a straight line with a negative slope.

Question 8

Exhibit 2-7
 
-Refer to Exhibit 2-7. For which of the following is the statement "In order to get more military goods, we have to forfeit some civilian goods" true?
A)a movement from A to C
B)a movement from B to D
C)a movement from F to D
D)a movement from B to A
E)none of the above

Accepted Answer

The answer of Exhibit 2-7
 
-Refer to Exhibit 2-7. For...

Question 9

If the law of increasing opportunity costs is operable, and currently the opportunity cost of producing the 1,000th unit of good X is 0.5Y, then the opportunity cost of producing the 2,001st unit of good is X is most likely to be
A)less than 0.5Y.
B)more than 0.5Y but less than 2Y.
C)more than 0.5Y.
D)less than 0.5Y but more than zero.
E)none of the above

Accepted Answer

According to the law of increasing opportunity costs, as more units of a good are produced, the opportunity cost of producing additional units increases. Therefore, the opportunity cost of producing the 2,001st unit of good X is likely to be more than 0.5Y. Option A and D are unlikely as the law of increasing opportunity costs states that as production increases, so does the opportunity cost. Option B is less likely as the jump from 1,000th to 2,001st unit is quite significant and would require a substantial increase in resources and effort, hence the opportunity cost is expected to be higher than just double of 0.5Y. Therefore, option C is the best choice.

Question 10

An economy can produce either of these two combinations of goods X and Y: 1,000X and 0Y or 400Y and 0X. Furthermore, the opportunity cost between the two goods is always constant. Which of the following combinations of the two goods, X and Y, lies on the economy's production possibilities frontier?
A)700 units of X and 280 units of Y
B)600 units of X and 250 units of Y
C)400 units of X and 150 units of Y
D)90 units of X and 360 units of Y
E)300 units of X and 280 units of Y

Accepted Answer

The answer of An economy can produce either of these...

Question 11

If the law of increasing opportunity costs is operable, and currently the opportunity cost of producing the 101st unit of good X is 5Y, then the opportunity cost of producing the 201st unit of good is X is
A)less than 5Y.
B)greater than 1/5Y but less than 5Y.
C)greater than 5Y.
D)less than 1/5Y but more than zero.

Accepted Answer

The law of increasing opportunity costs states that as production of a good increases, the opportunity cost of producing an additional unit of that good will increase if all resources are not equally efficient in producing all goods. Therefore, the opportunity cost of producing the 201st unit of good X would be greater than the opportunity cost of producing the 101st unit, which is 5Y.

Question 12

If there is always a 4-for-1 tradeoff between producing good X and good Y, it follows that the opportunity cost of X (in terms of Y) ____________________ and the PPF for these two goods is ______________________.
A)decreases at low levels of X; a straight line
B)rises at high levels of Y; bowed-outward
C)decreases at high levels of X; bowed-outward
D)is always the same; a straight line

Accepted Answer

The 4-for-1 tradeoff indicates a constant opportunity cost, meaning for every unit of X produced, 4 units of Y must be forgone, and vice versa. This constant tradeoff results in a straight-line production possibilities frontier (PPF), reflecting the constant opportunity cost.

Question 13

Currently an economy is producing at a point on its production possibilities frontier for goods X and Y. It is producing 100 units of good X and the opportunity cost of producing 1X is 3Y. If good X is produced at increasing opportunity costs, then when the economy produces 120 units of good X (on the same PPF) the opportunity cost of producing 1X could be ______Y.
A)4
B)2.5
C)2
D)1
E)all of the above

Accepted Answer

Given the economy is producing at increasing opportunity costs, producing more of good X (moving from 100 to 120 units) would mean sacrificing more of good Y per unit of X produced. Therefore, the opportunity cost of producing 1 additional unit of X would increase, making 4Y a possible higher opportunity cost.

Question 14

If an economy can produce a maximum of 100 units of good X and the opportunity cost of 1X is always 5Y, then what is the maximum number of units of good Y the economy can produce?
A)250
B)100
C)20
D)500
E)none of the above

Accepted Answer

The answer of If an economy can produce a maximum...

Question 15

Which scenario below most accurately describes the process by which a technological change can affect employment patterns across industries?
A)A technological advance makes it possible to produce more of good X with less labor.As a result, labor is released from producing good X.Some of this labor ends up producing goods Y and Z.
B)A technological advance makes it possible to produce less of good X with less labor.As a result, labor is released from producing good X.Some of this labor ends up producing good Y.
C)A technological advance makes it possible to produce more of good X with more labor.As a result, more labor is needed to produce good X.There is less labor available to produce goods Y and Z.
D)A technological advance makes it possible to produce more of good X with less labor.As a result, labor becomes more important to the production of good X.More labor ends up producing good X.
E)none of the above

Accepted Answer

Technological advances that increase efficiency in producing a certain good or service can result in labor being released from that industry. This labor can then be reallocated to produce other goods and services. In scenario A, the technological advance allows for more production of good X with less labor, resulting in the release of labor from producing good X. Some of this labor is then reallocated to produce goods Y and Z.

Question 16

The economy can produce 15X and 15Y, 10X and 20Y, 5X and 25Y, or 0X and 30Y. It follows that opportunity cost of 1X is ___Y.
A)4.0
B)5.0
C)2.5
D)1.0
E)none of the above

Accepted Answer

The answer of The economy can produce 15X and 15Y,...

Question 17

Suppose an economy can produce a maximum of 10 units of good X and the opportunity cost of 1X is always 2Y. What is the maximum number of units of good Y the economy can produce?
A)10
B)200
C)20
D)500
E)none of the above

Accepted Answer

Since the opportunity cost of 1X is always 2Y, producing 1X means giving up producing 2Y. Therefore, the economy can produce a maximum of 10X or 20Y. If the economy produces 10X, it gives up producing 20Y; if it produces 9X, it gives up producing 18Y, and so on. Therefore, the maximum number of units of Y the economy can produce is 20Y (when producing 0X and all resources are allocated to producing Y).

Question 18

The economy was at point A producing 100X and 200Y. It moved to point B where it produces 200X and 300Y. It follows that
A)point A may have been a point below the economy's PPF, while point B may lie on the PPF.
B)the economy's PPF could have shifted outward and point A was a point on the economy's old PPF.
C)the economy has moved from one point on its PPF to another point on the same PPF.
D)a or b
E)a or c

Accepted Answer

The increase in production of both goods X and Y from point A to point B could be due to either the economy moving from a point below its production possibilities frontier (PPF) to a point on the PPF (indicating more efficient use of resources) or the outward shift of the PPF itself (indicating an increase in the economy's capacity to produce), as described in options A and B.

Question 19

Productive efficiency implies
A)the possibility of gains in one area without losses in another.
B)that more output has been produced.
C)the impossibility of gains in one area without losses in another.
D)that prices are stable.
E)c and d

Accepted Answer

Productive efficiency occurs when an economy or entity cannot produce more of one good without reducing the output of another good, hence indicating the impossibility of gains in one area without losses in another.

Question 20

The law of increasing opportunity costs states that as
A)less of a good is produced, the higher the opportunity costs of producing that good.
B)more of a good is produced, the lower the opportunity costs of producing that good.
C)more of a good is produced, the higher the opportunity costs of producing that good.
D)more of a good is produced, the opportunity cost of producing the good remains the same.
E)a and b

Accepted Answer

As more of a good is produced, the resources that are best suited for producing it are used up first. As a result, the opportunity cost of producing more of the good increases because producers must give up more and more of other goods to produce each additional unit of the good.

Quiz 2: Production Possibilities Frontier Framework

The economy is currently on its production possibilities frontier (PPF) . A politician says that it is possible to get more of everything---more infrastructure, more schools, more national defense, more spending on social programs, and so on. The politician is

An economy can produce the following combinations of goods: 50X and 0Y, 40X and 10Y, 30X and 20Y, 20X and 30Y, 10X and 40Y, and 0X and 50Y. The production possibilities frontier (PPF) for the economy is

If a production possibilities frontier (PPF) is concave outward, it follows that

What is the reason for the law of increasing opportunity costs?

Points inside (below) the production possibilities frontier (PPF) are

If the economy is currently producing at a point on its production possibilities frontier (PPF) , the economy is

Along its production possibilities frontier (PPF) an economy can produce 0X and 15Y, 10X and 10Y, 20X and 5Y, or 30X and 0Y. It follows that the PPF is

Exhibit 2-7 -Refer to Exhibit 2-7. For which of the following is the statement "In order to get more military goods, we have to forfeit some civilian goods" true?

If the law of increasing opportunity costs is operable, and currently the opportunity cost of producing the 1,000th unit of good X is 0.5Y, then the opportunity cost of producing the 2,001st unit of good is X is most likely to be

An economy can produce either of these two combinations of goods X and Y: 1,000X and 0Y or 400Y and 0X. Furthermore, the opportunity cost between the two goods is always constant. Which of the following combinations of the two goods, X and Y, lies on the economy's production possibilities frontier?

If the law of increasing opportunity costs is operable, and currently the opportunity cost of producing the 101st unit of good X is 5Y, then the opportunity cost of producing the 201st unit of good is X is

If there is always a 4-for-1 tradeoff between producing good X and good Y, it follows that the opportunity cost of X (in terms of Y) and the PPF for these two goods is __.

If an economy can produce a maximum of 100 units of good X and the opportunity cost of 1X is always 5Y, then what is the maximum number of units of good Y the economy can produce?

Which scenario below most accurately describes the process by which a technological change can affect employment patterns across industries?

The economy can produce 15X and 15Y, 10X and 20Y, 5X and 25Y, or 0X and 30Y. It follows that opportunity cost of 1X is ___Y.

Suppose an economy can produce a maximum of 10 units of good X and the opportunity cost of 1X is always 2Y. What is the maximum number of units of good Y the economy can produce?

The economy was at point A producing 100X and 200Y. It moved to point B where it produces 200X and 300Y. It follows that

Productive efficiency implies

The law of increasing opportunity costs states that as