Question 1

Assume an economy is operating on its production possibilities curve, which shows the production of military and civilian goods.If the output of military goods is increased, the output of civilian goods:
A)will increase too.
B)will not change.
C)must decrease.
D)may increase or decrease.

Accepted Answer

Since the economy is already operating on its production possibilities curve, an increase in the output of military goods can only come at the cost of decreasing the output of civilian goods. This is due to the fact that resources are scarce and must be allocated between producing one good or the other. Choosing to produce more military goods means fewer resources are available to produce civilian goods, resulting in a decrease in their output.

Question 2

In general, production possibilities curves are "bowed out" because:
A)it's wasteful to produce too much of any one good.
B)people generally prefer to consume goods in appropriate combinations.
C)of the law of increasing opportunity cost.
D)of the law of demand.

Accepted Answer

The "bowed out" shape of production possibilities curves reflects the law of increasing opportunity cost, which states that as production of one good increases, the opportunity cost of producing an additional unit of this good increases. This is because resources are not perfectly adaptable to the production of all goods, so shifting resources from the production of one good to another becomes increasingly costly.

Question 3

Use the following to answer questions 
Exhibit: Strawberries and Submarines 
-(Exhibit: Strawberries and Submarines)
As the economy moves from point A towards, say, point D, it will find that the opportunity cost of each additional submarine:
A)falls.
B)rises.
C)remains unchanged.
D)none of the above

Accepted Answer

According to the exhibit, as the economy moves from point A towards point D, the production of submarines increases while the production of strawberries decreases. This means that more resources are being diverted towards the production of submarines, resulting in a higher opportunity cost for each additional unit of submarines produced. Therefore, the opportunity cost of each additional submarine rises.

Question 4

Efficient production exists when the economy is:
A)operating inside its production possibilities curve.
B)operating on its production possibilities curve.
C)operating outside its production possibilities curve.
D)moving beyond its production possibilities curve.

Accepted Answer

Operating on the production possibilities curve means that the economy is producing the maximum output possible given its resources and technology. This indicates that the economy is using its resources efficiently and productivity is at its highest level.

Question 5

If an economy is operating on its production possibilities curve, it is:
A)efficient and fully employed.
B)fully employed but not necessarily efficient.
C)efficiently producing but not necessarily fully employed.
D)inevitably going to grow in the future.

Accepted Answer

Operating on the production possibilities curve means that the economy is producing at its maximum potential with its given resources and technology. This implies that every resource available is being utilized efficiently and the economy is fully employed. Therefore, the correct answer is A.

Question 6

Use the following to answer questions 
Exhibit: Production Possibilities Curve-Military and Civilian Goods
 
-(Exhibit: Production Possibilities Curve-Military and Civilian Goods)
If an economy is at point U, and its production possibilities curve is Curve 1, this would indicate that:
A)resources are fully employed.
B)economic growth has taken place.
C)there is inefficiency and/or unemployment.
D)the economy is maximizing its economic objectives.

Accepted Answer

Point U, located inside the production possibilities curve (Curve 1), indicates that not all resources are being used efficiently. This could be due to unemployment or inefficiencies in the economy, meaning the economy is not operating at its full potential.

Question 7

Use the following to answer questions 
Exhibit: Production Possibilities Curve-Military and Civilian Goods
 
-(Exhibit: Production Possibilities Curve-Military and Civilian Goods)
A movement from point G to point U could be a representation of what happened during:
A)World War II.
B)the Great Depression.
C)the postwar expansion following World War II.
D)a period of rapid economic growth.

Accepted Answer

The answer of Use the following to answer questions 
Exhibit:...

Question 8

If an economy is producing a combination of goods that places it inside the production possibilities curve, then it has:
A)economic growth.
B)full employment.
C)efficiency.
D)idle factors of production or inefficient use of resources.

Accepted Answer

If the economy is producing inside the production possibilities curve, it means that it is not using all of its available resources (idle factors of production) or is not using them efficiently (inefficient use of resources). This could be due to reasons such as unemployment, technological inefficiencies or lack of investment in capital.

Question 9

Inefficient production or unemployment exists when the economy is ________ the production possibilities curve.
A)operating inside
B)operating on
C)operating outside
D)moving along

Accepted Answer

Inefficient production or unemployment occurs when an economy is producing at a point inside its production possibilities curve, meaning that it could produce more goods and services than it currently is with its resources.

Question 10

If an economy is operating efficiently and with full employment, the production of more of one commodity will necessarily lead to less of something else being produced because of:
A)the unlimited wants of people.
B)perfectly adaptability of resources in the production of various goods.
C)scarcity.
D)the lack of money capital.

Accepted Answer

Scarcity refers to the limited availability of resources in relation to unlimited wants and needs, which means that producing more of one commodity would require taking resources away from producing something else. If an economy is already operating efficiently and with full employment, it means that resources are already being used to their fullest potential and any increase in production of one good would require reducing production of something else.

Question 11

Use the following to answer questions 
Exhibit: Production Possibilities Curve-Military and Civilian Goods
 
-(Exhibit: Production Possibilities Curve-Military and Civilian Goods)
If the economy is represented by Curve 1, then:
A)point E is unattainable at the present time.
B)point G is superior to point H.
C)point H is superior to point G.
D)factors of production are not being used efficiently.

Accepted Answer

Point E is located beyond the production frontier of Curve 1, indicating that the economy is not currently able to produce at that level with its given resources and technology.

Question 12

When making a choice to do more of one activity, the highest-valued other choice society does not make is called _______ , and it is measured _______ .
A)opportunity cost; in terms of the money it costs
B)increasing cost; in terms of the amount of money spent doing so
C)constant cost; by the slope of the production possibilities curve at that level
D)opportunity cost; by the slope of the production possibilities curve at that level

Accepted Answer

The highest-valued other choice society does not make is called opportunity cost, and it is measured by the slope of the production possibilities curve at that level. This means that as more of one activity is produced, the opportunity cost of producing additional units of that activity increases, as resources become less suited for that activity and more suited for the alternative activity. Therefore, the best choice would be to choose the activity that has the lowest opportunity cost.

Question 13

Use the following to answer questions 
Exhibit: Production Possibilities Curve-Military and Civilian Goods
 
-(Exhibit: Production Possibilities Curve-Military and Civilian Goods)
A movement from point G to H on Curve 1 would:
A)require giving up military goods in order to get more civilian goods.
B)indicate that, in this economy, there is no scarcity.
C)require giving up civilian goods to get more military goods.
D)require greater efficiency in the production of civilian goods.

Accepted Answer

Moving from point G to H on a production possibilities curve typically involves shifting resources from the production of one type of good (in this case, military goods) to another (civilian goods), illustrating the trade-off and opportunity cost inherent in resource allocation decisions.

Question 14

Use the following to answer questions 
Exhibit: Strawberries and Submarines 
-(Exhibit: Strawberries and Submarines)
The downward slope of the production possibilities curve implies that resources:
A)must be used efficiently.
B)are scarce.
C)should not be wasted.
D)should be allocated so that approximately equal amounts of both goods are produced.

Accepted Answer

The downward slope of the production possibilities curve implies that resources are scarce, meaning that there are only a limited amount of resources available to produce both goods. This implies that choices must be made about how to allocate those scarce resources, which is the fundamental economic problem. Therefore, the best choice is B, which implies that resources are scarce.

Question 15

If an economy is producing a combination of goods that places it on the production possibilities curve, then it has:
A)economic growth.
B)full employment.
C)inefficiency.
D)idle factors of production.

Accepted Answer

If the economy is producing a combination of goods that places it on the production possibilities curve, it means it is producing goods at its maximum efficiency with the available resources. Therefore, it is operating at full employment.

Question 16

Any point inside a production possibilities curve indicates:
A)unemployment and/or inefficiency.
B)that the law of increasing opportunity costs is no longer valid.
C)that society doesn't want more of either good.
D)that economic growth is no longer possible.

Accepted Answer

Any point inside the production possibilities curve represents a level of production that is below the maximum potential output. This indicates the presence of unemployment or inefficiency in the economy, as it shows that resources are not being fully utilized to produce the maximum possible output of goods and services.

Question 17

Use the following to answer questions 
Exhibit: Production Possibilities Curve-Military and Civilian Goods
 
-(Exhibit: Production Possibilities Curve-Military and Civilian Goods)
The movement from point G on Curve 1 to point E on Curve 2 means that the:
A)economy has grown.
B)economy has become less efficient.
C)quality and/or the quantity of the factors of production has decreased.
D)demand for military goods has risen.

Accepted Answer

The movement from point G on Curve 1 to point E on Curve 2 shows an increase in the production of both military and civilian goods. This indicates that the economy has grown and is able to produce more output, which is reflected in the shift of the production possibilities curve from Curve 1 to Curve 2.

Question 18

If all factors of production that are available for use under current market conditions are being utilized, then the economy has:
A)economic growth.
B)comparative advantage.
C)full employment.
D)inefficient production.

Accepted Answer

When all factors of production are being utilized, it means that the economy has reached full employment, which is the level of employment where all available labor resources are being utilized in the most efficient way. Economic growth refers to an increase in the production capacity of the economy, which is not the case here because all resources are being fully utilized. Comparative advantage refers to the ability of an individual, firm or country to produce a good or service at a lower opportunity cost than others, and is not relevant here. Inefficient production means that the resources are not being utilized in the most efficient way, which is not the case here because all available resources are being utilized.

Question 19

Use the following to answer questions 
Exhibit: Strawberries and Submarines 
-(Exhibit: Strawberries and Submarines)
Suppose the economy is now operating at point C.Achieving production at point F would require:
A)that the economy achieve full employment and an efficient allocation of resources.
B)that the economy reduce its production of strawberries.
C)that the economy reduce its production of submarines.
D)that the economy improve its technology or increase the quantities of factors of production it has.

Accepted Answer

Achieving production at point F would require an improvement in technology or increase in factors of production. This is because point F is outside the production possibilities curve (PPC) of the economy, showing that the economy does not have the capability to produce at this level with its current technology and resources. Therefore, an improvement in technology or increase in factors of production is needed to achieve production at point F.

Question 20

If an economy is producing a level of output that is on its production possibilities curve, the economy
A)has idle resources.
B)has idle resources but is using resources efficiently.
C)has no idle resources but is using them inefficiently.
D)has no idle resources and is using resources efficiently.

Accepted Answer

When an economy is producing on its production possibilities curve, it means that it is using all of its available resources efficiently. Therefore, there are no idle resources and the economy is using them efficiently.

Quiz 2: Confronting Scarcity: Choices in Production

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

In general, production possibilities curves are "bowed out" because:

Use the following to answer questions Exhibit: Strawberries and Submarines -(Exhibit: Strawberries and Submarines) As the economy moves from point A towards, say, point D, it will find that the opportunity cost of each additional submarine:

Efficient production exists when the economy is:

If an economy is operating on its production possibilities curve, it is:

Use the following to answer questions Exhibit: Production Possibilities Curve-Military and Civilian Goods -(Exhibit: Production Possibilities Curve-Military and Civilian Goods) If an economy is at point U, and its production possibilities curve is Curve 1, this would indicate that:

Use the following to answer questions Exhibit: Production Possibilities Curve-Military and Civilian Goods -(Exhibit: Production Possibilities Curve-Military and Civilian Goods) A movement from point G to point U could be a representation of what happened during:

If an economy is producing a combination of goods that places it inside the production possibilities curve, then it has:

Inefficient production or unemployment exists when the economy is ________ the production possibilities curve.

If an economy is operating efficiently and with full employment, the production of more of one commodity will necessarily lead to less of something else being produced because of:

Use the following to answer questions Exhibit: Production Possibilities Curve-Military and Civilian Goods -(Exhibit: Production Possibilities Curve-Military and Civilian Goods) If the economy is represented by Curve 1, then:

When making a choice to do more of one activity, the highest-valued other choice society does not make is called _ , and it is measured _ .

Use the following to answer questions Exhibit: Production Possibilities Curve-Military and Civilian Goods -(Exhibit: Production Possibilities Curve-Military and Civilian Goods) A movement from point G to H on Curve 1 would:

Use the following to answer questions Exhibit: Strawberries and Submarines -(Exhibit: Strawberries and Submarines) The downward slope of the production possibilities curve implies that resources:

If an economy is producing a combination of goods that places it on the production possibilities curve, then it has:

Any point inside a production possibilities curve indicates:

Use the following to answer questions Exhibit: Production Possibilities Curve-Military and Civilian Goods -(Exhibit: Production Possibilities Curve-Military and Civilian Goods) The movement from point G on Curve 1 to point E on Curve 2 means that the:

If all factors of production that are available for use under current market conditions are being utilized, then the economy has:

Use the following to answer questions Exhibit: Strawberries and Submarines -(Exhibit: Strawberries and Submarines) Suppose the economy is now operating at point C.Achieving production at point F would require:

If an economy is producing a level of output that is on its production possibilities curve, the economy