Question 1

Production efficiency is represented by ________ a production possibilities frontier.
A)a movement along
B)all points on
C)only one point on
D)all points inside
E)all points outside

Accepted Answer

Production efficiency is represented by all points on the production possibilities frontier, as all these points indicate maximum possible output given the resources available. Points inside the frontier indicate inefficiency, while points outside the frontier indicate unattainable levels of production with the current resources. A movement along the frontier reflects a trade-off between producing more of one good and less of the other, but it does not necessarily indicate a change in overall production efficiency.

Question 2

While moving along a production possibilities frontier,the amount of labour ________,the amount of capital ________,and the level of technology ________.
A)varies;is fixed;is fixed
B)varies;varies;varies
C)is fixed;is fixed;is fixed
D)is fixed;is fixed;varies
E)varies;is fixed;varies

Accepted Answer

While moving along a production possibilities frontier, the amount of labor, the amount of capital, and the level of technology are all fixed. This is because the frontier represents the maximum possible output combinations given these fixed resources and technology.

Question 3

If an economy cannot produce more of one good without producing less of another good,this implies that which of the following has been achieved?
A)Allocative efficiency
B)PPF efficiency
C)Maximum marginal benefit
D)Minimum marginal cost
E)Production efficiency

Accepted Answer

E

Question 4

A major earthquake occurs in the central part of the United States.What impact would this have on the nation's production possibilities frontier and why?
A)A tradeoff would occur to replace the resources and goods destroyed.
B)It would shift outward because unemployment would be reduced.
C)It would not shift because people would get to work to replace any capital that was destroyed.
D)Nothing would happen because the nation would still have the same capabilities.
E)It would shift inward because some of the nation's resources,such as capital and labour,would be destroyed.

Accepted Answer

A major earthquake would likely damage or destroy capital resources and potentially result in the loss of labor resources as people succumb to the natural disaster. This would reduce the total amount of resources available in the economy and therefore shift the production possibilities frontier inward. The economy would need to divert resources away from other uses in order to rebuild and repair the damage caused by the earthquake.

Question 5

Australia produced approximately ________ worth of goods and services in 2011.
A)$100 billion
B)$1 trillion
C)$10 trillion
D)$10 billion
E)$100 trillion

Accepted Answer

According to the Australian Bureau of Statistics, Australia produced approximately $1 trillion worth of goods and services in 2011.

Question 6

The production possibilities frontier illustrates the
A)goods and services people want.
B)limits to people's wants.
C)amount of each good that people want to buy.
D)resources the economy possesses,but not its level of technology.
E)maximum combinations of goods and services that can be produced.

Accepted Answer

The production possibilities frontier (PPF) shows the various combinations of two goods that an economy can produce given its resources and technology. It represents the maximum amount of one good that can be produced for every possible level of production of the other good, given the resources and technology available. It shows the limits to production based on the resources and technology available at a given time.

Question 7

Which of the following is an assumption used when drawing a production possibilities frontier?
i.Human wants and desires are limited to what is available.
ii.Only two goods are considered.
iii.The level of technology is fixed and unchanging.
A)i only
B)ii only
C)i and iii
D)ii and iii
E)i,ii,and iii

Accepted Answer

The production possibilities frontier (PPF) assumes that only two goods are considered for simplicity and that the level of technology is fixed and unchanging to analyze the trade-offs and opportunity costs. It does not assume that human wants and desires are limited to what is available; instead, it illustrates the limits of production capabilities and the choices societies must make.

Question 8

When drawing a production possibilities frontier,which of the following is held constant?
A)The quantity of the goods and services that are produced
B)The amount of money in the economy
C)The available factors of production and the state of technology
D)The prices of goods and services
E)None of the above because nothing is held constant when drawing the production possibilities frontier.

Accepted Answer

The available factors of production and the state of technology are held constant when drawing the production possibilities frontier. This means that the amount of labor, capital, land, and entrepreneurial ability, as well as the level of technology, are assumed to remain unchanged. The other options listed (quantity of goods and services produced, amount of money in the economy, and prices of goods and services) can all change, but the production possibilities frontier is drawn under the assumption that the factors of production and technology remain constant.

Question 9

The production possibilities frontier is the boundary between the
A)rational and irrational choices facing a society.
B)wanted and unwanted combinations of goods and services.
C)affordable and unaffordable combinations of production.
D)goods and services the economy can produce.
E)attainable and unattainable combinations of goods and services.

Accepted Answer

The production possibilities frontier represents the maximum amount of two goods that a society can produce given its resources and technology. It shows the attainable and unattainable combinations of goods and services, which makes option E the best choice. Option A refers to the choices made by individuals, not society as a whole. Option B is incorrect because all combinations on the production possibilities frontier are technically "wanted," but some may not be feasible to produce. Option C is incorrect because affordability is not necessarily a factor in determining the production possibilities frontier. Option D is also incorrect because the production possibilities frontier represents all possible combinations of goods and services that can be produced, not just those that the economy is currently producing.

Question 10

-The table above gives four production possibilities for aeroplanes and cruise ships.In possibility A,how many resources are devoted to the production of aeroplanes?
A)All
B)None
C)Few
D)Most
E)It is impossible to tell without more information about the prices of aeroplanes and cruise ships.

Accepted Answer

In possibility A, all resources are devoted to the production of aeroplanes, as it represents one extreme end of the production possibilities where only aeroplanes are produced and no cruise ships.

Question 11

Moving from one point to another on a production possibilities frontier implies
A)changing the amount of factors of production that are employed.
B)holding the production levels of both goods constant.
C)decreasing the production of both goods.
D)increasing the production of both goods.
E)increasing the production of one good and decreasing the production of another.

Accepted Answer

Moving along the production possibilities frontier involves reallocating resources, which typically means increasing the production of one good while decreasing the production of another due to the trade-offs and opportunity costs involved.

Question 12

In the production possibilities frontier model,an unattainable point lies
A)both on and outside the production possibilities frontier.
B)only on the production possibilities frontier itself.
C)There are no unattainable points in the production possibilities model.
D)only inside the production possibilities frontier.
E)only outside the production possibilities frontier.

Accepted Answer

An unattainable point lies outside the production possibilities frontier because it represents a combination of goods that cannot be produced with the given resources and technology. Points on and inside the frontier are attainable, but may not be efficient or optimal.

Question 13

A production possibilities frontier shows
A)that if price of one good decreases,the price of the other has to increase.
B)the limits to future growth of a nation.
C)how money can be allocated among two kinds of goods.
D)that it is impossible to produce inefficiently.
E)the various combinations of output a nation can produce at a certain time,given its available resources and technology.

Accepted Answer

A production possibilities frontier (PPF) shows the various combinations of output a nation can produce at a certain time, given its available resources and technology. It illustrates the concept of opportunity cost, as producing more of one good means producing less of another good. The PPF also shows the limits to future growth of a nation, as it is a representation of the maximum possible output with the given resources and technology. It does not relate to the prices of goods or production efficiency.

Question 14

Assume that an association of young workers has lobbied the federal government to require that all workers retire once they reach the age of fifty.What impact would this law have on the nation's production possibilities frontier?
A)No impact at all.
B)The level of unemployment would decrease so the production possibilities frontier would shift outward.
C)The nation would move to a new position on its production possibilities frontier but the frontier itself would not shift.
D)The number of young workers would increase so the production possibilities frontier would shift outward.
E)The production possibilities frontier would shift inward.

Accepted Answer

Requiring all workers to retire at the age of fifty would decrease the overall number of workers in the economy, which would lead to a decrease in the potential output or the nation's production possibilities frontier. Therefore, the production possibilities frontier would shift inward.

Question 15

Consider a production possibility frontier with jeans on the vertical axis and shoes on the horizontal axis.As the country moves along the frontier closer to the horizontal axis,
A)more tradeoffs occur.
B)more shoes are produced.
C)more jeans are produced.
D)the country eventually chooses an unattainable point.
E)free lunches occur.

Accepted Answer

As the country moves along the production possibility frontier closer to the horizontal axis, it produces more shoes, which are represented on the horizontal axis.

Question 16

-The table above gives four production possibilities for aeroplanes and cruise ships.In possibility A,how many resources are devoted to the production of cruise ships?
A)All
B)None
C)Most
D)Few
E)It is impossible to tell without more information about the prices of airplanes and cruise ships.

Accepted Answer

In possibility A, all resources are devoted to the production of aeroplanes, meaning none are allocated to cruise ships.

Question 17

The production possibilities frontier is the
A)boundary between the combinations of goods and services that can be produced and the combinations that cannot be produced,given the available factors of production and the state of technology.
B)minimum output that can be produced when resources are used inefficiently.
C)maximum output that can be produced at an opportunity cost of zero.
D)boundary between the combinations of goods and services that can be produced and the combinations that cannot be produced when technology is changing.
E)maximum opportunity cost combinations of goods and services.

Accepted Answer

The production possibilities frontier represents the maximum combinations of goods and services that an economy can produce given its resources and technology. It is the boundary between what is possible and what is not possible to produce. Choice B is incorrect because the production possibilities frontier includes all possible combinations of output, including those that are produced inefficiently. Choice C is incorrect because opportunity cost is not zero – producing more of one good requires giving up some production of another good. Choice D is incorrect because the production possibilities frontier represents the maximum combinations of goods and services that can be produced given current technology, not when technology is changing. Choice E is incorrect because the production possibilities frontier does not directly relate to opportunity cost combinations.

Question 18

In a production possibilities frontier diagram,the attainable production points are shown as
A)only the points inside the production possibilities frontier.
B)the points inside and the points on the production possibilities frontier.
C)only the points on the production possibilities frontier.
D)only the points beyond the production possibilities frontier.
E)any of the production points.

Accepted Answer

The production possibilities frontier (PPF) represents the maximum output that an economy can produce with a given amount of resources and technology. Any point on the PPF represents an attainable combination of two goods that can be produced with the given resources and technology. However, any point inside the PPF represents an underutilization of resources, and any point outside the PPF is unattainable with the given resources and technology. Therefore, the attainable production points are the points inside and on the PPF. Option B is the correct answer.

Question 19

When all of the available factors of production are being efficiently employed,the
A)economy is producing at a point beyond its PPF.
B)economy is producing at a point on its PPF.
C)PPF disappears.
D)economy is producing at a point within its PPF.
E)opportunity cost of changing production is infinite.

Accepted Answer

When all of the available factors of production are being efficiently employed, the economy is producing at a point on its PPF. This is because the PPF shows the maximum possible combination of goods that can be produced given the available resources and technology. When all resources are being utilized efficiently, the economy is producing at its maximum potential, which is represented by a point on the PPF.

Question 20

In the production possibilities model,the vertical axis measures ________ and the horizontal axis measures ________.
A)the quantity of a good or service;the quantity of another good or service
B)people's wants;the quantity of a good or service
C)the quantity of a good or service;time
D)the price of a good or service;the price of another good or service
E)the price of a good or service;the quantity of the good or service

Accepted Answer

The production possibilities model typically measures the quantity of one good or service on the vertical axis and the quantity of another good or service on the horizontal axis, illustrating trade-offs and opportunity costs.

Quiz 3: The Economic Problem

Production efficiency is represented by ________ a production possibilities frontier.

While moving along a production possibilities frontier,the amount of labour ,the amount of capital ,and the level of technology .

If an economy cannot produce more of one good without producing less of another good,this implies that which of the following has been achieved?

A major earthquake occurs in the central part of the United States.What impact would this have on the nation's production possibilities frontier and why?

Australia produced approximately ________ worth of goods and services in 2011.

The production possibilities frontier illustrates the

Which of the following is an assumption used when drawing a production possibilities frontier? i.Human wants and desires are limited to what is available. ii.Only two goods are considered. iii.The level of technology is fixed and unchanging.

When drawing a production possibilities frontier,which of the following is held constant?

The production possibilities frontier is the boundary between the

-The table above gives four production possibilities for aeroplanes and cruise ships.In possibility A,how many resources are devoted to the production of aeroplanes?

Moving from one point to another on a production possibilities frontier implies

In the production possibilities frontier model,an unattainable point lies

A production possibilities frontier shows

Assume that an association of young workers has lobbied the federal government to require that all workers retire once they reach the age of fifty.What impact would this law have on the nation's production possibilities frontier?

Consider a production possibility frontier with jeans on the vertical axis and shoes on the horizontal axis.As the country moves along the frontier closer to the horizontal axis,

-The table above gives four production possibilities for aeroplanes and cruise ships.In possibility A,how many resources are devoted to the production of cruise ships?

The production possibilities frontier is the

In a production possibilities frontier diagram,the attainable production points are shown as

When all of the available factors of production are being efficiently employed,the

In the production possibilities model,the vertical axis measures and the horizontal axis measures .