Question 1

Sally wishes to spend more time this week studying for her classes. Using the idea of a production possibilities curve, and assuming Sally is currently spending all of her time efficiently, Sally can spend more time studying this week only if
A) she also spends more time doing other things.
B) she spends less time doing other things.
C) Daylight Savings Time begins this week, so everyone moves their clocks ahead one hour.
D) none of the above.

Accepted Answer

According to the production possibilities curve, in order for Sally to spend more time studying, she would have to decrease the time spent doing other activities. This would shift the curve inward, allowing for more time to be allocated towards studying. The other options (A and C) do not relate to the production possibilities curve and would not have an impact on Sally's ability to spend more time studying.

Question 2

In Europe during the 14th century, the Black Plague killed 24 million people or close to 37 percent of the population. How would this affect the production possibilities curves for the countries of Europe at that time?
A) The production possibilities curves for these countries would have shifted outward.
B) The production possibilities curves for these countries would have shifted inward.
C) The production possibilities curves for these countries would have been unaffected.
D) This would have been illustrated by a movement along the production possibilities curves for these countries, but it would not have shifted them.

Accepted Answer

The Black Plague caused a significant decrease in the population, which would have led to a decrease in the labor force and a potential decrease in the availability of resources, both of which would limit the production possibilities for the countries of Europe. As a result, the production possibilities curves for these countries would have shifted inward.

Question 3

A point on the production possibilities curve represents a combination of goods that is
A) inefficient.
B) efficient.
C) unattainable.
D) attainable.

Accepted Answer

A point on the production possibilities curve represents an efficient combination of goods, meaning that all available resources are being used to their fullest potential to produce a combination of goods. Therefore, all points on the curve are attainable given the current resources and technology. Points inside the curve are inefficient and points outside the curve are currently unattainable.

Question 4

Over time, an increase in a nation's stock of physical capital will
A) shift the production possibilities curve inward.
B) cause an economy to operate inside its production possibilities curve.
C) shift the production possibilities curve outward.
D) eliminate the basic economic problem of scarcity.

Accepted Answer

An increase in a nation's stock of physical capital will allow for more efficient production processes and increase the potential output of the economy, thus shifting the production possibilities curve outward.

Question 5

Other things constant, which of the following would you expect to increase the output growth rate of a country?
A) an increase in the rate of taxation on personal income
B) an increase in the rate of investment as a share of total output
C) passage of regulations restricting international trade
D) passage of regulations restricting domestic trade

Accepted Answer

An increase in the rate of investment as a share of total output would increase the country's capital stock and productivity, leading to an increase in output growth rate. Taxation and regulations restrict economic activity and can lead to slower growth rates.

Question 6

Which of the following will most likely cause an outward shift in the production possibilities curve?
A) a reduction in the man-made productive resources available to the economy as the result of a decline in investment
B) an increase in government payments to farmers for taking land out of production
C) an increase from 40 to 50 hours in the average number of hours worked per week
D) None of the above would cause an outward shift in the production possibilities curve.

Accepted Answer

An increase in the average number of hours worked per week would increase the labor input available for production, causing an outward shift in the production possibilities curve. A reduction in man-made productive resources (Option A) or an increase in government payments to farmers for taking land out of production (Option B) would decrease the resources available for production, causing an inward shift in the production possibilities curve. Option D is incorrect, as an outward shift in the production possibilities curve can occur due to technological advancements, an increase in resource availability, or an increase in the labor force.

Question 7

Using a production possibilities curve, a technological advance that increases the amount of output for the same amount of inputs would be illustrated as
A) an inward shift of the curve.
B) a movement from one point to another point along the curve.
C) an outward shift of the curve.
D) a movement from a point on the curve to a point inside the curve.

Accepted Answer

A technological advance that increases the amount of output for the same amount of inputs would cause an outward shift of the production possibilities curve, as the economy is now able to produce more of both goods.

Question 8

A point inside the production possibilities curve represents a combination of goods that is
A) inefficient.
B) efficient.
C) unattainable.
D) attainable.

Accepted Answer

The answer of A point inside the production possibilities curve...

Question 9

If an economy uses its resources inefficiently, this situation would be illustrated on a production possibilities diagram as
A) an inward shift of the production possibilities curve.
B) an outward shift of the production possibilities curve.
C) operating at a point outside the production possibilities curve.
D) operating at a point inside the production possibilities curve.

Accepted Answer

Operating at a point inside the production possibilities curve indicates that the economy is not using its resources efficiently and is producing less than it is capable of. This is often referred to as inefficient or underutilized production.

Question 10

If the resources of an economy are being used inefficiently, it would be
A) possible to increase production of all goods simultaneously.
B) possible to increase production of one good only if production decreased for the other goods.
C) not possible to increase production of any good.
D) not possible to increase economic growth.
E) possible to increase production with no effort.

Accepted Answer

The answer of If the resources of an economy are...

Question 11

With time, which one of the following strategies would most likely result in an outward shift in the production possibilities curve of an economy?
A) passage of legislation reducing the workweek to 30 hours
B) instituting a tax policy encouraging consumption at the expense of investment
C) instituting a tax policy encouraging investment at the expense of consumption
D) an increase in the marginal income tax rate, which would reduce the work effort of individuals

Accepted Answer

Instituting a tax policy that encourages investment at the expense of consumption would lead to an increase in capital accumulation, which would result in an outward shift of the production possibilities curve over time. This is because an increase in investment leads to greater availability of the capital stock, which can increase productivity and output in the long run. The other choices would not result in an outward shift of the production possibilities curve, and may even lead to a shift inward.

Question 12

A point outside the production possibilities curve represents a combination of goods that is
A) inefficient.
B) efficient.
C) unattainable.
D) attainable.

Accepted Answer

The answer of A point outside the production possibilities curve...

Question 13

If the citizens of a country were to work harder and take less leisure time, it would
A) shift the production possibilities curve outward.
B) cause an economy to operate inside its production possibilities curve.
C) shift the production possibilities curve inward.
D) cause an economy to move from one point on the production possibilities curve to another point on the curve.

Accepted Answer

If the citizens of a country were to work harder and take less leisure time, it would increase the labor input, resulting in an increase in productivity and efficiency, leading to an outward shift in the production possibilities curve.

Question 14

Suppose an economy produces only two goods, computers and TVs. If the economy operates at a point on its production possibilities curve, it can produce more computers only if
A) it also produces more TVs.
B) it charges more for TVs.
C) it shifts to a point inside its production possibilities curve.
D) it produces fewer TVs.

Accepted Answer

The production possibilities curve represents the maximum output combinations of two goods that an economy can achieve. To produce more of one good, the economy must produce less of the other, assuming resources are fully utilized.

Question 15

Which of the following is true of a production possibilities curve?
A) It reveals the maximum amount of any two goods that can be produced from a fixed quantity of resources.
B) It reveals the ideal level of technology for a country.
C) It assumes that the prices of the two products are equal.
D) For a country that could produce many different goods, it shows which two goods are most important to produce.

Accepted Answer

A production possibilities curve shows the different combinations of two goods that can be produced with a fixed amount of resources. It assumes that the technology is constant and that the prices of the two products do not change. It does not reveal which goods are most important to produce, but rather shows the trade-off between producing one good over the other.

Question 16

Which of the following will be most likely to cause the production possibilities curve for a country to shift inward?
A) an increase in the labor force
B) an increase in unemployment
C) development of an improved technological method of production
D) a decrease in the stock of physical capital

Accepted Answer

An inward shift of the production possibilities curve signifies a decrease in the maximum output that a country can produce. This is caused by a decrease in the stock of physical capital, which means that the resources available for production have declined, leading to a reduction in potential output.

Question 17

Suppose that country A produces mostly consumption goods and few investment goods, while country B produces mostly investment goods with few consumption goods. Other things constant, which of the following is most likely to happen in the future?
A) The per capita income of country A will grow more rapidly than country B.
B) The population of country B will grow more rapidly than country A.
C) The production possibilities curve (PPC) of country B will shift out more rapidly than the PPC of country A.
D) The production possibilities curve (PPC) of country A will shift out more rapidly than the PPC of country B.

Accepted Answer

The answer of Suppose that country A produces mostly consumption...

Question 18

An improvement in a country's legal system that enhanced the ability of citizens to protect their property rights and enforce contracts would result in which of the following changes to the country's production possibilities curve?
A) a movement from a point on the curve to a point outside the curve
B) a movement from one point to another point along the curve
C) an outward shift of the curve
D) a movement from a point on the curve to a point inside the curve

Accepted Answer

An improvement in the legal system that enhances the ability of citizens to protect their property rights and enforce contracts is likely to create a more stable and predictable economic environment that encourages investment, entrepreneurship, and innovation. This leads to an increase in economic efficiency and productivity, which creates an outward shift of the production possibilities curve. Therefore, the correct answer is (C) an outward shift of the curve.

Question 19

If an economy operates at a point within its production possibilities curve,
A) it lacks the resources necessary to reach the curve.
B) it is utilizing all of its resources efficiently.
C) it does not confront the problem of scarce goods relative to unlimited wants.
D) it is not efficiently using all of its resources.

Accepted Answer

If an economy operates at a point within its production possibilities curve, it means that it is not fully utilizing all of its resources efficiently, and therefore not producing as much as it could. This could be due to factors such as inefficiencies in production processes, a lack of investment in technology or human capital, or other problems that limit the economy's output potential.

Question 20

A production possibilities curve graphically represents the maximum quantities of two products produced when all resources in the economy are efficiently utilized. An economy that operates inside this production possibilities curve
A) is using its resources inefficiently.
B) lacks the necessary technology to produce efficiently.
C) lacks the resources to produce goods efficiently.
D) is utilizing its available resources as efficiently as possible.

Accepted Answer

When an economy operates inside the production possibilities curve, it indicates that the resources are not being used efficiently. This could be due to factors such as unused or underutilized resources, inefficiencies in production processes, or inefficient allocation of resources.

Quiz 2: Some Tools of the Economist

Sally wishes to spend more time this week studying for her classes. Using the idea of a production possibilities curve, and assuming Sally is currently spending all of her time efficiently, Sally can spend more time studying this week only if

In Europe during the 14th century, the Black Plague killed 24 million people or close to 37 percent of the population. How would this affect the production possibilities curves for the countries of Europe at that time?

A point on the production possibilities curve represents a combination of goods that is

Over time, an increase in a nation's stock of physical capital will

Other things constant, which of the following would you expect to increase the output growth rate of a country?

Which of the following will most likely cause an outward shift in the production possibilities curve?

Using a production possibilities curve, a technological advance that increases the amount of output for the same amount of inputs would be illustrated as

A point inside the production possibilities curve represents a combination of goods that is

If an economy uses its resources inefficiently, this situation would be illustrated on a production possibilities diagram as

If the resources of an economy are being used inefficiently, it would be

With time, which one of the following strategies would most likely result in an outward shift in the production possibilities curve of an economy?

A point outside the production possibilities curve represents a combination of goods that is

If the citizens of a country were to work harder and take less leisure time, it would

Suppose an economy produces only two goods, computers and TVs. If the economy operates at a point on its production possibilities curve, it can produce more computers only if

Which of the following is true of a production possibilities curve?

Which of the following will be most likely to cause the production possibilities curve for a country to shift inward?

Suppose that country A produces mostly consumption goods and few investment goods, while country B produces mostly investment goods with few consumption goods. Other things constant, which of the following is most likely to happen in the future?

An improvement in a country's legal system that enhanced the ability of citizens to protect their property rights and enforce contracts would result in which of the following changes to the country's production possibilities curve?

If an economy operates at a point within its production possibilities curve,

A production possibilities curve graphically represents the maximum quantities of two products produced when all resources in the economy are efficiently utilized. An economy that operates inside this production possibilities curve