Question 1

The process observed when an economy's production possibility frontier shifts outward is:

Accepted Answer

Economic growth is the process observed when an economy's production possibility frontier shifts outward, indicating an increase in its capacity to produce goods and services over time. This can be achieved through improvements in technology, increases in capital stock, or expansion of the labor force among other factors. Comparative advantage, specialization, and full employment are important concepts in economics, but they are not directly related to the process of an economy's production possibility frontier shifting outward.

Question 2

When a nation's economy grows:

Accepted Answer

When an economy grows, it can produce more goods and services with its limited resources. This means that it is able to shift its production possibility frontier outward and potentially produce at a higher level of output than before.

Question 3

Increases in resources or improvements in technology will tend to cause a society's production possibility frontier to:

Accepted Answer

Increases in resources or improvements in technology will increase a society's ability to produce goods and services, thus causing the production possibility frontier to shift outward.

Question 4

Assume an economy is operating on its production possibility frontier, which shows the production of military and civilian goods. If the output of military goods is increased, the output of civilian goods:

Accepted Answer

If the economy is already operating on its production possibility frontier, an increase in the output of military goods can only be achieved by producing fewer civilian goods. This is because the resources used to produce military goods come at the expense of the resources that could have been used to produce civilian goods. Therefore, the only possible outcome of increasing military goods is a decrease in civilian goods.

Question 5

Use the following to answer questions:
Figure: Consumer and Capital Goods 
-(Figure: Consumer and Capital Goods) Look at the figure Consumer and Capital Goods. The movement from curve 1 to curve 2 indicates:

Accepted Answer

The movement from curve 1 to curve 2 indicates an increase in the ability of the economy to produce both capital and consumer goods. This means that the economy has become more efficient in utilizing its resources, leading to an increase in its production capacity.

Question 6

Use the following to answer questions:
Figure: Sugar and Freight Trains 
-(Figure: Sugar and Freight Trains) Look at the figure Sugar and Freight Trains. Suppose the economy is operating at point B. The opportunity cost of producing the third freight train would be _____ tons of sugar.

Accepted Answer

At point B, the economy is producing 6 tons of sugar and 3 freight trains. To produce another freight train, the economy would have to decrease sugar production to 0 and increase freight trains production to 4, which means producing 45 fewer tons of sugar (from 6 to 0). Therefore, the opportunity cost of producing the third freight train is 45 tons of sugar.

Question 7

Use the following to answer questions:
Figure: Strawberries and Submarines II 
-(Figure: Strawberries and Submarines II) Look at the figure Strawberries and Submarines II. Suppose the economy is operating at point A. The first submarine, which is achieved at point B, would have an opportunity cost of _____ million tons of strawberries.

Accepted Answer

The answer of Use the following to answer questions:
Figure: Strawberries...

Question 8

Use the following to answer questions:
Figure: Bicycles and Radishes I 
-(Figure: Bicycles and Radishes I) Look at the figure Bicycles and Radishes I. It shows production possibility frontiers for two countries that produce only radishes and bicycles. The axes of the two graphs are measured in equivalent units. Country A is operating at point M, and country B is operating at point N. Suppose country A discovers a new technology that greatly increases its ability to produce bicycles but has no effect on its ability to produce radishes. This would:

Accepted Answer

According to the Law of Increasing Opportunity Cost, as a country produces more of a good, the opportunity cost of producing that good increases. If country A discovers a new technology that greatly increases its ability to produce bicycles, it will produce more bicycles and less radishes. As a result, the opportunity cost of producing radishes in country A will increase. Therefore, the correct answer is B) increase the opportunity cost of producing radishes in country A.

Question 9

Use the following to answer questions:
Figure: Consumer and Capital Goods 
-(Figure: Consumer and Capital Goods) Look at the figure Consumer and Capital Goods. Technological improvements will likely:

Accepted Answer

Technological improvements will increase the efficiency of production, leading to an outward shift of the production possibility frontier to curve 2, allowing for more goods and services to be produced.

Question 10

Abe starts exercising regularly, and after a few months he can do twice as much of everything. In a single day Abe can now make 10 hamburgers or 8 milkshakes rather than the 5 hamburgers and 4 milkshakes he made in the past. We now know that Abe's production possibility frontier has _____, but his opportunity costs of making milkshakes _____.

Accepted Answer

Abe's ability to produce both hamburgers and milkshakes has increased, meaning his production possibility frontier has shifted to the right. However, the opportunity cost of producing milkshakes has not changed - it is still 1.25 hamburgers per milkshake (5 hamburgers/4 milkshakes in the past vs. 10 hamburgers/8 milkshakes now). Therefore, option A is the correct answer.

Question 11

Use the following to answer questions:
Figure: Strawberries and Submarines II 
-(Figure: Strawberries and Submarines II) Look at the figure Strawberries and Submarines II. Assume that the economy is operating at point A. The opportunity cost of moving to point C is equal to _____ million tons of strawberries:

Accepted Answer

Moving from point A to point C means sacrificing 400 million submarines in order to gain 2 million tons of strawberries. Therefore, the opportunity cost of moving to point C is equal to 200 million tons of strawberries (400/2). Moving to point B means sacrificing 200 million submarines in order to gain 1 million tons of strawberries, which means the opportunity cost is 200 million tons of strawberries (200/1). Since the opportunity cost is the same for both options, the best choice depends on individual preferences.

Question 12

Use the following to answer questions:
Figure: Sugar and Freight Trains 
-(Figure: Sugar and Freight Trains) Look at the figure Sugar and Freight Trains. Suppose the economy is operating at point C. The opportunity cost of producing the fourth freight train would be:

Accepted Answer

At point C, the production is at 2 freight trains and 160 tons of sugar. To produce the next freight train, the economy needs to give up producing 40 tons of sugar (moving from point C to point E) which means the opportunity cost of producing the fourth freight train would be 80 tons of sugar.

Question 13

Use the following to answer questions:
Figure: Strawberries and Submarines II 
-(Figure: Strawberries and Submarines II) Look at the figure Strawberries and Submarines II. Suppose the economy is operating at point B. Achieving production at point F would require that the economy:

Accepted Answer

To achieve production at point F, the economy would need to improve its technology or increase its resources as point F is beyond the current production possibilities frontier.

Question 14

Use the following to answer questions:
Figure: Consumer and Capital Goods 
-(Figure: Consumer and Capital Goods) Look at the figure Consumer and Capital Goods. If the economy is operating at point Y and its relevant production possibility frontier is curve 1:

Accepted Answer

Point Y is on the production possibility frontier curve 1, which means the economy is producing at its maximum potential. Also, since it is on the curve, it is efficient. Therefore, the economy is at full employment and is efficient. Option B and C are incorrect because the economy is not operating below the production possibility frontier and economic growth is possible in the future.

Question 15

Use the following to answer questions:
Figure: Bicycles and Radishes I 
-(Figure: Bicycles and Radishes I) Look at The figure Bicycles and Radishes I. It shows the production possibility frontiers for two countries that produce only radishes and bicycles. The axes of the two graphs are measured in equivalent units. Country A is operating at point M, and country B is operating at point N. The opportunity cost of producing an additional ton of radishes would be greater in:

Accepted Answer

According to the production possibility frontier, as we move from left to right or from top to bottom, the opportunity cost of producing one good increases. Since country B is already producing more radishes than country A, the opportunity cost of producing an additional ton of radishes would be greater in country B.

Question 16

Use the following to answer questions:
Figure: Strawberries and Submarines II 
-(Figure: Strawberries and Submarines II) Look at the figure Strawberries and Submarines II. The downward slope of the production possibility frontier implies that resources:

Accepted Answer

The downward slope of the production possibility frontier indicates that resources are scarce, as there is a trade-off between producing one good (strawberries) and the other (submarines). The closer the economy produces to the frontier, the more efficient and optimal the use of resources. Choices A, C, and D are all important considerations, but the best answer is B as it directly relates to the slope of the curve.

Question 17

Efficient production occurs when the economy is:

Accepted Answer

Operating on its production possibility frontier means that the economy is producing the maximum amount of goods and services that it is capable of producing with its current resources and technology. This represents an efficient use of resources because any additional production would require an increase in resources or technology, and any decrease in production would mean that resources are being unused or used inefficiently.

Question 18

Use the following to answer questions:
Figure: Strawberries and Submarines II 
-(Figure: Strawberries and Submarines II) Look at the figure Strawberries and Submarines II. Point F:

Accepted Answer

The answer of Use the following to answer questions:
Figure: Strawberries...

Question 19

Use the following to answer questions: 
-(Table: Production Possibilities Schedule II) Look at the table Production Possibilities Schedule II. The production of eight units of consumer goods and two units of capital goods per period would result in:

Accepted Answer

According to the table, producing eight units of consumer goods and two units of capital goods per period would result in using only 80% of the available resources. This means that some resources are still available but remain unused or inefficiently used. Therefore, the correct choice is C - some unused or inefficiently used resources.

Question 20

Use the following to answer question:
Figure: Bicycles and Radishes II 
-(Figure: Bicycles and Radishes II) Look at the figure Bicycles and Radishes II. The country depicted in this figure is operating at point M. It could achieve production at point I only if it:

Accepted Answer

Point I represents a higher level of production than point M, so to achieve that level of production, the country would need to have access to more resources or improve its technology. Choice A is not correct because point M already represents the most efficient use of the country's resources. Choices B and C may lead to increased production, but they alone cannot bring the country to point I.

Quiz 2: Economic Models: Trade-Offs and Trade 25

The process observed when an economy's production possibility frontier shifts outward is:

When a nation's economy grows:

Increases in resources or improvements in technology will tend to cause a society's production possibility frontier to:

Assume an economy is operating on its production possibility frontier, which shows the production of military and civilian goods. If the output of military goods is increased, the output of civilian goods:

Use the following to answer questions: Figure: Consumer and Capital Goods -(Figure: Consumer and Capital Goods) Look at the figure Consumer and Capital Goods. The movement from curve 1 to curve 2 indicates:

Use the following to answer questions: Figure: Sugar and Freight Trains -(Figure: Sugar and Freight Trains) Look at the figure Sugar and Freight Trains. Suppose the economy is operating at point B. The opportunity cost of producing the third freight train would be _____ tons of sugar.

Use the following to answer questions: Figure: Consumer and Capital Goods -(Figure: Consumer and Capital Goods) Look at the figure Consumer and Capital Goods. Technological improvements will likely:

Use the following to answer questions: Figure: Sugar and Freight Trains -(Figure: Sugar and Freight Trains) Look at the figure Sugar and Freight Trains. Suppose the economy is operating at point C. The opportunity cost of producing the fourth freight train would be:

Use the following to answer questions: Figure: Strawberries and Submarines II -(Figure: Strawberries and Submarines II) Look at the figure Strawberries and Submarines II. Suppose the economy is operating at point B. Achieving production at point F would require that the economy:

Use the following to answer questions: Figure: Consumer and Capital Goods -(Figure: Consumer and Capital Goods) Look at the figure Consumer and Capital Goods. If the economy is operating at point Y and its relevant production possibility frontier is curve 1:

Use the following to answer questions: Figure: Strawberries and Submarines II -(Figure: Strawberries and Submarines II) Look at the figure Strawberries and Submarines II. The downward slope of the production possibility frontier implies that resources:

Efficient production occurs when the economy is:

Use the following to answer questions: Figure: Strawberries and Submarines II -(Figure: Strawberries and Submarines II) Look at the figure Strawberries and Submarines II. Point F:

Use the following to answer questions: -(Table: Production Possibilities Schedule II) Look at the table Production Possibilities Schedule II. The production of eight units of consumer goods and two units of capital goods per period would result in:

Use the following to answer question: Figure: Bicycles and Radishes II -(Figure: Bicycles and Radishes II) Look at the figure Bicycles and Radishes II. The country depicted in this figure is operating at point M. It could achieve production at point I only if it: