Question 1

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

Accepted Answer

A technological advance that increases the amount of output for the same amount of inputs would result in an increase in the economy's production capacity. This would be illustrated by an outward shift of the production possibilities curve, as it shows the economy is able to produce more output with the same resources.

Question 2

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

Accepted Answer

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

Question 3

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?

Accepted Answer

An improvement in a country's legal system that enhances the ability of citizens to protect their property rights and enforce contracts would lead to an increase in economic efficiency and productivity, leading to an outward shift of the country's production possibilities curve. This is because with greater security of property rights and contracts, individuals and firms are incentivized to invest in and utilize their resources more efficiently, leading to higher levels of output and economic growth.

Question 4

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

Accepted Answer

The answer of Suppose an economy produces only two goods,...

Question 5

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

Accepted Answer

By instituting a tax policy encouraging investment at the expense of consumption, individuals and firms will have an incentive to save and invest more, which can lead to an increase in capital stock and technological advancements over time. This can result in an outward shift in the production possibilities curve, as the economy becomes more productive and efficient in producing goods and services. The other options, such as reducing the workweek, discouraging investment, or reducing work effort through higher taxes, are less likely to result in such an outcome.

Question 6

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

Accepted Answer

An economy that operates inside the production possibilities curve is not utilizing its resources as efficiently as possible. It means that there are unused resources or inefficiencies in the production process.

Question 7

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

Accepted Answer

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

Question 8

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

Accepted Answer

A point on the production possibilities curve represents an efficient combination of goods where an increase in the production of one good requires a decrease in the production of the other good. Therefore, option B is the correct choice. Option A represents a point inside the curve, which is inefficient because the economy is not fully utilizing its resources. Option C represents a point outside the curve, which is unattainable because it requires more resources than are available. Option D is a vague option and does not provide any useful information.

Question 9

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

Accepted Answer

If the citizens of a country were to work harder and take less leisure time, it would increase the country's productivity, which would shift the production possibilities curve outward. This is because the country would be able to produce more goods and services with the same amount of inputs. As a result, the maximum amount of goods and services that the country can produce would increase, and the production possibilities curve would shift outward.

Question 10

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

Accepted Answer

Operating at a point inside the production possibilities curve indicates that the economy is not utilizing its resources efficiently. This is because it is producing less than what it is capable of producing, given its available resources.

Question 11

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

Accepted Answer

A decrease in the stock of physical capital would lead to a decrease in productivity and therefore a decrease in the potential output of the economy. This would cause the production possibilities curve to shift inward. An increase in the labor force (A) or development of an improved technological method of production (C) would increase the potential output and shift the curve outward. An increase in unemployment (B) may lead to a decrease in production in the short term, but it would not necessarily have a long-term effect on the production possibilities curve.

Question 12

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

Accepted Answer

An increase in the rate of investment as a share of total output would increase the amount of capital available for production, which would lead to an increase in the output growth rate of a country. The other options, such as an increase in the rate of taxation or the passage of regulations restricting trade, would likely have a negative impact on economic growth.

Question 13

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

Accepted Answer

If the economy operates at a point within its production possibilities curve, it means that it is not utilizing all of its resources efficiently, as it could produce more goods and services without increasing the use of resources. Thus, choice D is the best answer.

Question 14

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?

Accepted Answer

The Black Plague killed a significant portion of the population, which would have decreased the available labor force and overall productivity of the affected countries. As a result, the production possibilities curves would have shifted inward, indicating a decrease in the maximum output that could be produced with available resources.

Question 15

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

Accepted Answer

A production possibilities curve shows the maximum combinations of two goods that can be produced with a given set of resources and existing technology. It assumes that resources are fixed and that the economy is producing efficiently at any point on the curve. It does not assume that the prices of the two products are equal or indicate which goods are most important to produce.

Question 16

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?

Accepted Answer

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

Question 17

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

Accepted Answer

The production possibilities curve shows the maximum combination of two goods that can be produced given a fixed amount of resources and technology. Assuming Sally is currently using all of her time efficiently, any increase in time spent on studying must come at the expense of some other activity. Therefore, in order for Sally to spend more time studying this week, she must spend less time doing other things. Choice A is incorrect because it suggests that Sally can increase her study time without decreasing her time spent on other activities, which is not possible given the limited resources. Choice C is irrelevant and does not address the issue of production possibilities.

Question 18

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

Accepted Answer

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

Question 19

Which of the following will most likely 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 economy's labor resources, which would lead to an outward shift in the production possibilities curve. A reduction in man-made productive resources (choice A) would cause a shift inward, while an increase in government payments to farmers (choice B) would also cause a shift inward due to the decrease in available land for production.

Question 20

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

Accepted Answer

Increasing a nation's stock of physical capital will lead to a more efficient use of resources, allowing for an increase in output of goods and services. This will shift the production possibilities curve outward, indicating a higher level of economic growth and development.

Quiz 2: A : Some Tools of the Economist