Question 1

Consider Canada's production possibilities boundary.Suppose a scientific breakthrough leads to a lower-cost method of producing battery-operated cars in Canada.The likely effect would be to move Canada's current production
A)to a point beyond its new production possibilities boundary.
B)to a point inside its new production possibilities boundary.
C)possibilities boundary outward.
D)possibilities boundary inward.
E)above the level of U.S.production.

Accepted Answer

With the introduction of a lower-cost method of producing battery-operated cars, Canada will be able to produce more cars at a lower cost. This will shift their production possibilities boundary outward, allowing them to produce more goods and services beyond their previous production possibilities boundary.

Question 2

A move from inside the production possibilities boundary to the boundary itself could be caused by
A)the employment of previously idle resources.
B)a reallocation of resources from military to civilian goods.
C)technological progress.
D)an increase in the labour supply.
E)an improvement in the government's ability to control its spending.

Accepted Answer

The employment of previously idle resources can increase production without requiring any technological progress or increases in labour supply, which would move the economy to the production possibilities boundary.

Question 3

Consider a production possibilities boundary showing the quantity of military goods and the quantity of civilian goods on the two axes.A movement along the production possibilities boundary could be caused by
A)the employment of previously idle resources.
B)the reallocation of resources between military and civilian goods.
C)the growth of productive capacity.
D)an increase in the labour supply.
E)technological progress.

Accepted Answer

A movement along the production possibilities boundary can only be caused by the reallocation of resources between military and civilian goods. The production possibilities boundary shows the maximum possible combination of military and civilian goods that can be produced given the current resources and technology. Any movement along the boundary represents a trade-off between military and civilian goods, as producing more of one requires producing less of the other. The other options listed (A, C, D, E) would shift the entire production possibilities boundary outward or inward, representing an increase or decrease in the total amount of goods that can be produced.

Question 4

In recent years,several large Canadian-owned mining and resource companies have been sold to foreign owners.The immediate effect on Canada's production possibilities boundary is
A)a shift outward.
B)a shift inward.
C)no change.
D)a movement along.
E)a movement to a point beyond the boundary.

Accepted Answer

The sale of Canadian-owned mining and resource companies to foreign owners does not immediately change the country's resources or technology, thus the production possibilities boundary remains unchanged.

Question 5

If there is always a three-for-one trade-off between the production of goods X and Y,then the production possibilities boundary for X and Y is
A)a downward-sloping curve convex to the origin.
B)semi-circular.
C)a downward-sloping straight line.
D)a downward-sloping straight line that is broken at one point.
E)a downward-sloping curve concave to the origin.

Accepted Answer

The given information suggests that there is a constant trade-off ratio between the production of goods X and Y. This implies that as we produce more of good X, the opportunity cost of producing it in terms of foregone units of Y increases at a constant rate. This relationship is best represented by a downward-sloping straight line, where the slope measures the trade-off ratio, also known as the opportunity cost of producing X in terms of Y. Therefore, the production possibilities boundary for X and Y is best represented by a downward-sloping straight line.

Question 6

The world price of oil fell in 2014-2015 from over $100 per barrel to less than $50.As a producer of oil,what effect did this change have on Canada's production possibilities boundary?
A)a shift outward
B)a shift inward
C)movement to a point beyond the boundary
D)movement to a point within the boundary
E)no change

Accepted Answer

The answer of The world price of oil fell in...

Question 7

On a diagram of a production possibilities boundary,the concept of opportunity cost is illustrated by the
A)distance from the origin to the boundary.
B)negative slope of the boundary.
C)boundary being concave to the origin.
D)unattainable points outside the boundary.
E)area bounded by the two axes and the boundary.

Accepted Answer

The negative slope of the production possibilities boundary illustrates the concept of opportunity cost, indicating that to produce more of one good, a certain amount of another good must be given up, reflecting the trade-offs and opportunity costs involved in production decisions.

Question 8

On a diagram of a production possibilities boundary,the concept of scarcity is illustrated by the
A)points on the boundary.
B)area within the boundary.
C)distance from the origin to the boundary.
D)negative slope of the boundary.
E)unattainable points outside the boundary.

Accepted Answer

The production possibilities boundary represents the maximum combination of two goods that can be produced with a given amount of resources. Therefore, any points outside the boundary are unattainable, representing the concept of scarcity – there are not enough resources to produce beyond this limit.

Question 9

Consider Canada's production possibilities boundary.Suppose fire destroys many millions of hectares of valuable Canadian forest.The effect on the Canadian economy would be best illustrated by ________ the production possibilities boundary.
A)a movement inside
B)a movement along
C)a movement to a point beyond
D)a shift outward of
E)an inward shift of

Accepted Answer

An inward shift of the production possibilities boundary reflects a decrease in the economy's ability to produce goods and services, which would occur after the destruction of valuable resources such as forests.

Question 10

The downward-sloping line in the diagram below shows the combinations of health care and education expenditures that the government can afford with a given amount of tax revenue.  FIGURE 1-6
-Refer to Figure 1-6.The levels of health and education expenditures at point C
A)are less than at point D.
B)are equal to those of point A and point B.
C)are more cost-effective than those at points A,B,and D.
D)could be achieved if the prices of health and/or education increased.
E)are not attainable with the government's current budget.

Accepted Answer

Point C represents a level of expenditure that exceeds the government's current budget, making it unattainable without additional resources.

Question 11

FIGURE 1-5
-Refer to Figure 1-5.Which production possibilities boundaries exhibit decreasing opportunity costs?
A)boundary B only
B)boundaries A and C
C)boundaries A and B
D)boundary A only
E)boundary C only

Accepted Answer

Boundary A only exhibits decreasing opportunity costs, as it is typically represented by a concave curve, indicating that as more of one good is produced, the opportunity cost of producing additional units decreases.

Question 12

FIGURE 1-5
-Refer to Figure 1-5.Which production possibilities boundaries are consistent with increasing opportunity costs?
A)boundary A only
B)boundaries A and B
C)boundary C only
D)boundaries B and C
E)boundaries A,B,and C

Accepted Answer

A production possibilities boundary that is bowed outwards from the origin indicates increasing opportunity costs, which is typically represented by a curve rather than a straight line. Boundary C, being curved, is consistent with increasing opportunity costs.

Question 13

The diagram below shows two production possibilities boundaries for Country X. FIGURE 1-4 -Refer to Figure 1-4.Growth in the country's productive capacity is illustrated by A)a point like D outside the boundary. B)a movement from a point inside the boundary such as C to the boundary. C)the movement between points on a given boundary. D)a single point such as A on the boundary. E)an outward shift of the boundary,for example from PPB₁ to PPB₂.

Accepted Answer

As the diagram shows two production possibility boundaries for Country X, the growth in the country's productive capacity would only be illustrated by an outward shift of the boundary, such as from PPB₁ to PPB₂. Therefore, Option E is the correct choice. Points A, C, and D do not necessarily represent growth in the country's productive capacity.

Question 14

The diagram below shows two production possibilities boundaries for Country X.  FIGURE 1-4
-Refer to Figure 1-4.An outward shift of the production possibilities boundary from  to  indicates which of the following?
A)an increase in the price of raw materials for consumer goods
B)growth in the country's productive capacity
C)an increase in the price of raw material for capital goods
D)more of the country's resources are being used
E)the country's resources are being used less efficiently

Accepted Answer

An outward shift of the production possibilities boundary indicates growth in the country's productive capacity, meaning that the country is able to produce more goods and services with its available resources. This could be a result of various factors such as technological advancements, an increase in labor productivity, or an increase in capital investment.

Question 15

FIGURE 1-5
-Refer to Figure 1-5.Suppose that the relevant production possibilities boundary is the one labelled B.This boundary implies that
A)the concept of opportunity cost is not at work in this economy.
B)the opportunity cost of producing either capital goods or consumer goods does not depend on how much of each good is produced.
C)consumer goods are preferred to capital goods.
D)in this society the resources are not efficiently employed.
E)capital goods are preferred to consumer goods.

Accepted Answer

The production possibilities boundary (PPB) labelled B implies constant opportunity costs, meaning the opportunity cost of producing either capital goods or consumer goods does not change regardless of the quantity produced.

Question 16

Consider Canada's production possibilities boundary.During the nineteenth and early twentieth centuries,millions of people immigrated to western Canada.The effect on the Canadian economy was to
A)move it to a point beyond its new production possibilities boundary.
B)move it inside its new production possibilities boundary.
C)shift its production possibilities boundary inward.
D)shift its production possibilities boundary outward.
E)move it along an unchanged production possibilities boundary.

Accepted Answer

The influx of immigrants would increase the labor force and resources available for production, which would shift the production possibilities boundary outward. This would allow for the production of more goods and services than before the immigration, indicating an expansion in the economy.

Question 17

A straight-line production possibilities boundary differs from a concave boundary in which of the following ways?
A)The straight-line boundary illustrates constant opportunity costs,whereas the concave boundary illustrates increasing opportunity costs.
B)The concave boundary illustrates constant opportunity costs,whereas the straight-line boundary illustrates decreasing opportunity costs.
C)The straight-line boundary does not show scarcity,whereas the concave boundary does.
D)The straight-line boundary shows opportunity cost,whereas the concave boundary does not.
E)A straight-line boundary is associated with a command economy,whereas a concave boundary is associated with a free-market economy.

Accepted Answer

A straight-line production possibilities boundary illustrates constant opportunity costs, meaning that the opportunity cost of producing one good does not change as more of it is produced. In contrast, a concave boundary illustrates increasing opportunity costs, meaning that the opportunity cost of producing one good increases as more of it is produced. This is because resources are not perfectly adaptable to producing both goods, so as more of one good is produced, increasingly scarce resources must be diverted from producing the other good, resulting in higher opportunity costs.

Question 18

The diagram below shows two production possibilities boundaries for Country X.  FIGURE 1-4
-Refer to Figure 1-4.Suppose that Country X is currently producing at point E.Country X could achieve production at point D if
A)the given resources were fully employed.
B)the given resources were more efficiently employed.
C)sufficient improvements in technology occurred in either the capital goods industry or the consumer goods industries.
D)firms reduced output of capital goods.
E)the prices of capital goods and consumption goods fell.

Accepted Answer

Point D represents a level of production that is beyond the current production possibilities frontier, which can only be achieved through technological advancements that increase the efficiency of resource use.

Question 19

The downward-sloping line in the diagram below shows the combinations of health care and education expenditures that the government can afford with a given amount of tax revenue.  FIGURE 1-6
-Refer to Figure 1-6.If the government's spending on health and education is given by point B,a move to point A must involve
A)less spending on health.
B)zero opportunity cost.
C)less spending on education.
D)less spending in total.
E)more spending on education.

Accepted Answer

Moving from point B to point A involves less spending on education, as the downward-sloping line represents the tradeoff between spending on health care and education given a fixed budget. Moving to point A means spending more on health care and less on education.

Question 20

The diagram below shows two production possibilities boundaries for Country X. FIGURE 1-4 -Refer to Figure 1-4.A shift of the production possibilities boundary from PPB₁ to PPB₂ implies A)a movement from full employment to some unemployment. B)that if point E is the new choice of outputs,productivity has increased in the consumer goods industry. C)that technology in the capital goods industries has improved. D)an inevitable decrease in total output. E)that technology in the consumer goods industry has improved.

Accepted Answer

A shift of the production possibilities boundary outward from PPB1 to PPB2 indicates an improvement in technology or an increase in resources, allowing for more production of both goods. In this case, it suggests that technology in the capital goods industries has improved, enabling more efficient production.

Quiz 1: Economic Issues and Concepts

Consider Canada's production possibilities boundary.Suppose a scientific breakthrough leads to a lower-cost method of producing battery-operated cars in Canada.The likely effect would be to move Canada's current production

A move from inside the production possibilities boundary to the boundary itself could be caused by

Consider a production possibilities boundary showing the quantity of military goods and the quantity of civilian goods on the two axes.A movement along the production possibilities boundary could be caused by

In recent years,several large Canadian-owned mining and resource companies have been sold to foreign owners.The immediate effect on Canada's production possibilities boundary is

If there is always a three-for-one trade-off between the production of goods X and Y,then the production possibilities boundary for X and Y is

The world price of oil fell in 2014-2015 from over $100 per barrel to less than $50.As a producer of oil,what effect did this change have on Canada's production possibilities boundary?

On a diagram of a production possibilities boundary,the concept of opportunity cost is illustrated by the

On a diagram of a production possibilities boundary,the concept of scarcity is illustrated by the

Consider Canada's production possibilities boundary.Suppose fire destroys many millions of hectares of valuable Canadian forest.The effect on the Canadian economy would be best illustrated by ________ the production possibilities boundary.

The downward-sloping line in the diagram below shows the combinations of health care and education expenditures that the government can afford with a given amount of tax revenue. FIGURE 1-6 -Refer to Figure 1-6.The levels of health and education expenditures at point C

FIGURE 1-5 -Refer to Figure 1-5.Which production possibilities boundaries exhibit decreasing opportunity costs?

FIGURE 1-5 -Refer to Figure 1-5.Which production possibilities boundaries are consistent with increasing opportunity costs?

The diagram below shows two production possibilities boundaries for Country X. FIGURE 1-4 -Refer to Figure 1-4.Growth in the country's productive capacity is illustrated by

The diagram below shows two production possibilities boundaries for Country X. FIGURE 1-4 -Refer to Figure 1-4.An outward shift of the production possibilities boundary from to indicates which of the following?

FIGURE 1-5 -Refer to Figure 1-5.Suppose that the relevant production possibilities boundary is the one labelled B.This boundary implies that

Consider Canada's production possibilities boundary.During the nineteenth and early twentieth centuries,millions of people immigrated to western Canada.The effect on the Canadian economy was to

A straight-line production possibilities boundary differs from a concave boundary in which of the following ways?

The diagram below shows two production possibilities boundaries for Country X. FIGURE 1-4 -Refer to Figure 1-4.Suppose that Country X is currently producing at point E.Country X could achieve production at point D if

The diagram below shows two production possibilities boundaries for Country X. FIGURE 1-4 -Refer to Figure 1-4.A shift of the production possibilities boundary from PPB1 to PPB2 implies

The diagram below shows two production possibilities boundaries for Country X. FIGURE 1-4 -Refer to Figure 1-4.A shift of the production possibilities boundary from PPB₁ to PPB₂ implies