Question 1

Carlos can produce the following combinations of X and Y: 10X and 10Y, 5X and 15Y, and 0X and 20Y. The opportunity cost of one unit of X for Carlos is
A)1 unit of Y.
B)2 units of Y.
C)1/2 unit of Y.
D)1/4 unit of Y.
E)none of the above

Accepted Answer

The answer of Carlos can produce the following combinations of...

Question 2

Exhibit 2-8
 
-Refer to Exhibit 2-8. Who has the comparative advantage in the production of good Y?
A)Maria
B)Maya
C)Both Maria and Maya
D)Neither Maria nor Maya

Accepted Answer

Maria has the comparative advantage in the production of good Y because she can produce it at a lower opportunity cost compared to Maya. Comparative advantage is determined by who can produce a good at a lower opportunity cost, not necessarily at a higher productivity.

Question 3

Country X has a high unemployment rate. It follows that country X is operating
A)beyond its production possibilities frontier (PPF).
B)on its PPF.
C)inside (below) its PPF.
D)at a productive efficient point.
E)b and d

Accepted Answer

A high unemployment rate indicates that the country is not utilizing all of its available resources and is producing below its potential, which means it is inside (below) its production possibilities frontier (PPF).

Question 4

Which of the following is not true about production possibilities frontiers?
A)moving from one point to another on a PPF incurs a tradeoff
B)economic growth is shown by shifting the PPF outward
C)unemployment of resources is shown by shifting the PPF inward
D)a PPF can shift inward or outward

Accepted Answer

Unemployment of resources would not shift the PPF inward, but rather imply that the economy is not operating at its full potential and is below the PPF. Shifting the PPF inward could only be caused by factors such as a decrease in resources or a decrease in technological advancement.

Question 5

A person has a comparative advantage in the production of a good when they can produce the product at a(n) ________ opportunity cost compared to another person.
A)higher
B)increasing
C)lower
D)equal

Accepted Answer

A person has a comparative advantage in the production of a good when they can produce the product at a lower opportunity cost compared to another person. This means that they give up less of one good to produce more of another.

Question 6

Keisha can produce the following combinations of X and Y: 100X and 20Y, 50X and 30Y, or 0X and 40Y. The opportunity cost of one unit of Y for Keisha is
A)5 units of X.
B)0.2 units of X.
C)3 units of X.
D)1/2 unit of X.
E)none of the above

Accepted Answer

The opportunity cost of producing one unit of Y for Keisha can be calculated by looking at the change in X when Y is increased by one unit. From the given combinations, moving from 20Y to 30Y (an increase of 10Y), X decreases from 100X to 50X, a decrease of 50X. Therefore, for each unit of Y increased, 5 units of X are forgone (50X/10Y = 5X/Y). This represents the opportunity cost of producing one more unit of Y in terms of forgone units of X.

Question 7

Exhibit 2-8
 
-Refer to Exhibit 2-8. For Maya, the opportunity cost of producing one unit of good Y is ___________ unit(s) of good X.
A)2.00
B)1.00
C)10.00
D)0.50

Accepted Answer

From the graph, the slope of the production possibilities frontier at point T is 2. Therefore, for Maya, the opportunity cost of producing one unit of good Y is 2 units of good X. Maya should produce at point T to maximize production efficiency.

Question 8

Suppose Andrea is taking just two courses and is at a point inside (or below) her PPF of grades for those two courses. If Andrea changes her work habits then it is impossible for
A)either one of her grades to rise.
B)both of her grades to rise.
C)both of her grades to fall.
D)either one of her grades to rise while the other grade remains constant.
E)none of the above is impossible in this situation

Accepted Answer

Being inside or below the PPF (Production Possibility Frontier) implies that Andrea is not utilizing her resources (time, effort, study habits) to their fullest potential. Therefore, by changing her work habits, it's possible for her to improve her performance in both courses (making both grades rise), improve in one course while maintaining her performance in the other (one grade rises while the other remains constant), or even potentially see a decline if the change in habits is not effective (though this is less about the PPF's implications and more about the effectiveness of the change). Thus, none of the scenarios A through D are impossible; improvements or changes in performance are possible in various ways.

Question 9

Suppose Andrea is taking just two courses and is at a point on her PPF of grades for those two courses. Now this PPF shifts inward and Andrea moves to a point on the new PPF. Which of the following would be impossible after her PPF has shifted inward compared to before the PPF shifted?
A)both of her grades to fall
B)both of her grades to rise
C)one of her grades to rise and the other grade to fall
D)one of her grades to fall while the other grade stays constant

Accepted Answer

When the PPF shifts inward, it represents a decrease in the available resources for Andrea to allocate between her two courses. Therefore, it is possible for both of her grades to fall, or for one grade to rise while the other falls (as she may choose to allocate more resources to one course over the other). However, it is not possible for both of her grades to rise after the PPF has shifted inward, as there are less resources available to allocate between the two courses. It is also possible for one grade to fall while the other stays constant, as the decrease in resources may affect one course more than the other.

Question 10

Exhibit 2-9
 
-Refer to Exhibit 2-9. Who has the comparative advantage in the production of good A?
A)Alex
B)Adam
C)Both Alex and Adam
D)Neither Alex nor Adam

Accepted Answer

Adam has the lower opportunity cost in the production of good A, as he can produce one unit of good A by giving up only 0.5 units of good B, whereas Alex has to give up one unit of good B to produce one unit of good A. Therefore, Adam has the comparative advantage in the production of good A.

Question 11

Exhibit 2-8
 
-Refer to Exhibit 2-8. If Maria and Maya each specialize in the good in which she has a comparative advantage and then engage in trade, ____________________ can consume a combination of goods that lies beyond her PPF.
A)Maria, but not Maya,
B)Maya, but not Maria,
C)both Maria and Maya
D)neither Maria nor Maya

Accepted Answer

Each person has a comparative advantage in producing one good, meaning they can produce that good at a lower opportunity cost than the other person. By specializing and trading, both Maria and Maya can consume more of both goods than they could produce on their own. Therefore, both Maria and Maya can consume a combination of goods that lies beyond her PPF.

Question 12

Exhibit 2-9
 
-Refer to Exhibit 2-9. Who has the comparative advantage in the production of good B?
A)Alex
B)Adam
C)Both Alex and Adam
D)Neither Alex nor Adam

Accepted Answer

Alex has a lower opportunity cost in producing good B compared to Adam. In order to produce good B, Alex gives up the production of 4 units of good A, whereas Adam gives up the production of 5 units of good A. Therefore, Alex has a comparative advantage in producing good B.

Question 13

Exhibit 2-8
 
-Refer to Exhibit 2-8. For Maya, the opportunity cost of producing one unit of good X is ___________ unit(s) of good Y.
A)2.00
B)1.00
C)10.00
D)0.50

Accepted Answer

According to Exhibit 2-8, Maya's opportunity cost of producing one unit of good X is 0.5 units of good Y. Therefore, she should produce good X if the opportunity cost of producing good Y is higher than 0.5 units of good X.

Question 14

Exhibit 2-8
 
-Refer to Exhibit 2-8. For Maria, the opportunity cost of producing one unit of good Y is ___________ unit(s) of good X.
A)2.00
B)1.00
C)10.00
D)0.50

Accepted Answer

The answer of Exhibit 2-8
 
-Refer to Exhibit 2-8. For...

Question 15

Michael can produce the following combinations of X and Y: 10X and 10Y, 5X and 15Y, and 0X and 20Y. Vernon can produce the following combinations of X and Y: 100X and 20Y, 50X and 30Y, or 0X and 40Y. It follows that
A)Michael has the comparative advantage in producing X and Vernon has the comparative advantage in producing Y.
B)Michael has the comparative advantage in producing Y and Vernon has the comparative advantage in producing X.
C)Neither Michael nor Vernon has a comparative advantage in producing X.
D)Neither Michael nor Vernon has a comparative advantage in producing Y.
E)There is not enough information to answer the question.

Accepted Answer

Comparative advantage is determined by who can produce a good at a lower opportunity cost. Michael can produce Y at a lower opportunity cost compared to X, while Vernon can produce X at a lower opportunity cost compared to Y, given their production possibilities.

Question 16

The PPF between goods X and Y will be a downward-sloping
A)straight line if increasing opportunity costs exist.
B)straight line if decreasing opportunity costs exist.
C)curve that is bowed inward if increasing opportunity costs exist.
D)straight line if constant opportunity costs exist.

Accepted Answer

A PPF will be a straight line if constant opportunity costs exist. This means that the opportunity cost of producing one good remains the same as more of it is produced, and the same for the other good.

Question 17

Exhibit 2-8
 
-Refer to Exhibit 2-8. For Maria, the opportunity cost of producing one unit of good X is ___________ unit(s) of good Y.
A)2.00
B)1.00
C)10.00
D)0.50

Accepted Answer

The opportunity cost of producing one unit of good X is the amount of good Y that must be given up to produce an additional unit of good X. If the information provided in Exhibit 2-8 (which is not visible in this format) suggests that for every unit of good X produced, Maria gives up 1 unit of good Y, then the opportunity cost of producing one unit of good X for Maria is 1 unit of good Y.

Question 18

Country 1 produces two goods, A and B. Country 2 produces the same two goods. Currently, country 1 produces 100A and 200B and country 2 produces 300A and 700B. Which of the following statements is true?
A)If country 1 is on its production possibilities frontier, then country 2 must be on its PPF, too.
B)The PPF for country 1 is necessarily closer to the origin (or further to the left) than the PPF for country 2.
C)If country 1 is productive inefficient, then so is country 2.
D)Country 2 is operating on its PPF, but country 1 is clearly not operating on its PPF.
E)none of the above

Accepted Answer

The information provided does not allow us to determine the position of either country on their respective production possibilities frontiers (PPFs), nor does it allow us to compare the PPFs of the two countries directly. The PPF depends on resources, technology, and efficiency, none of which are detailed in the statement.

Question 19

Exhibit 2-8
 
-Refer to Exhibit 2-8. Who has the comparative advantage in the production of good X?
A)Maria
B)Maya
C)Both Maria and Maya
D)Neither Maria nor Maya

Accepted Answer

Maya has a lower opportunity cost of producing good X (2 units of good Y) compared to Maria's opportunity cost (3 units of good Y). Therefore, Maya has the comparative advantage in the production of good X.

Question 20

If Luke can bake bread at a lower opportunity cost than Jason, and Jason can produce paintings at a lower opportunity cost than Luke, it follows that
A)Luke has a comparative advantage in paintings and Jason has a comparative advantage in baking bread.
B)Both Luke and Jason have a comparative advantage in baking bread.
C)Both Luke and Jason have a comparative disadvantage in producing paintings.
D)Luke has a comparative advantage in baking bread and Jason has a comparative advantage in producing paintings.
E)There is not enough information to answer the question.

Accepted Answer

The concept of comparative advantage states that individuals or countries should specialize in producing the good or service in which they have a lower opportunity cost. In this scenario, since Luke can bake bread at a lower opportunity cost than Jason, he has a comparative advantage in baking bread. Similarly, since Jason can produce paintings at a lower opportunity cost than Luke, he has a comparative advantage in producing paintings. Therefore, the answer is D – Luke has a comparative advantage in baking bread, and Jason has a comparative advantage in producing paintings.

Quiz 2: Production Possibilities Frontier Framework

Carlos can produce the following combinations of X and Y: 10X and 10Y, 5X and 15Y, and 0X and 20Y. The opportunity cost of one unit of X for Carlos is

Exhibit 2-8 -Refer to Exhibit 2-8. Who has the comparative advantage in the production of good Y?

Country X has a high unemployment rate. It follows that country X is operating

Which of the following is not true about production possibilities frontiers?

A person has a comparative advantage in the production of a good when they can produce the product at a(n) ________ opportunity cost compared to another person.

Keisha can produce the following combinations of X and Y: 100X and 20Y, 50X and 30Y, or 0X and 40Y. The opportunity cost of one unit of Y for Keisha is

Exhibit 2-8 -Refer to Exhibit 2-8. For Maya, the opportunity cost of producing one unit of good Y is ___________ unit(s) of good X.

Suppose Andrea is taking just two courses and is at a point inside (or below) her PPF of grades for those two courses. If Andrea changes her work habits then it is impossible for

Suppose Andrea is taking just two courses and is at a point on her PPF of grades for those two courses. Now this PPF shifts inward and Andrea moves to a point on the new PPF. Which of the following would be impossible after her PPF has shifted inward compared to before the PPF shifted?

Exhibit 2-9 -Refer to Exhibit 2-9. Who has the comparative advantage in the production of good A?

Exhibit 2-8 -Refer to Exhibit 2-8. If Maria and Maya each specialize in the good in which she has a comparative advantage and then engage in trade, ____________________ can consume a combination of goods that lies beyond her PPF.

Exhibit 2-9 -Refer to Exhibit 2-9. Who has the comparative advantage in the production of good B?

Exhibit 2-8 -Refer to Exhibit 2-8. For Maya, the opportunity cost of producing one unit of good X is ___________ unit(s) of good Y.

Exhibit 2-8 -Refer to Exhibit 2-8. For Maria, the opportunity cost of producing one unit of good Y is ___________ unit(s) of good X.

Michael can produce the following combinations of X and Y: 10X and 10Y, 5X and 15Y, and 0X and 20Y. Vernon can produce the following combinations of X and Y: 100X and 20Y, 50X and 30Y, or 0X and 40Y. It follows that

The PPF between goods X and Y will be a downward-sloping

Exhibit 2-8 -Refer to Exhibit 2-8. For Maria, the opportunity cost of producing one unit of good X is ___________ unit(s) of good Y.

Country 1 produces two goods, A and B. Country 2 produces the same two goods. Currently, country 1 produces 100A and 200B and country 2 produces 300A and 700B. Which of the following statements is true?

Exhibit 2-8 -Refer to Exhibit 2-8. Who has the comparative advantage in the production of good X?

If Luke can bake bread at a lower opportunity cost than Jason, and Jason can produce paintings at a lower opportunity cost than Luke, it follows that