Question 1

The economy is currently on its production possibilities frontier (PPF).A politician says that it is possible to get more of everything---more infrastructure,more schools,more national defense,more spending on social programs,and so on.The politician is
A) correct if he is assuming a rightward-shifting PPF.
B) incorrect if he is assuming a rightward-shifting PPF.
C) incorrect if he is assuming a PPF that does not change.
D) correct if he is assuming a PPF that does not change.
E) a and c

Accepted Answer

The politician is correct if assuming a rightward-shifting PPF because this implies economic growth, allowing for more of everything. However, if the PPF does not change, the statement is incorrect because the economy is already at its maximum productive efficiency, and increasing production of one good would require decreasing production of another.

Question 2

The law of increasing opportunity costs states that as
A) less of a good is produced,the higher the opportunity costs of producing that good.
B) more of a good is produced,the lower the opportunity costs of producing that good.
C) more of a good is produced,the higher the opportunity costs of producing that good.
D) more of a good is produced,the opportunity cost of producing the good remains the same.
E) a and b

Accepted Answer

The law of increasing opportunity costs states that as a society produces more of a certain good, the opportunity cost of producing each additional unit increases. This is because resources that are well-suited for producing the good will already be in use, so less productive resources will need to be utilized, increasing the opportunity cost. Therefore, choice C is the correct answer.

Question 3

An economy can produce the following combinations of goods: 50X and 0Y,40X and 10Y,30X and 20Y,20X and 30Y,10X and 40Y,and 0X and 50Y.The production possibilities frontier (PPF)for the economy is
A) concave downward because the opportunity cost of producing the 10th unit of Y is greater than the opportunity cost of producing the first unit of Y.
B) a straight (downward-sloping)line because the opportunity cost of producing the two goods is constant.
C) concave downward because the opportunity cost of producing the 40th unit of Y is less than the opportunity cost of producing the 10th unit of Y.
D) a straight (downward-sloping)line because the opportunity cost of producing the 10th unit of X is greater than the opportunity cost of producing the 40th unit of X.
E) a straight (downward-sloping)line because the opportunity cost of producing the 30th unit of Y is greater than the opportunity cost of producing the 30th unit of X.

Accepted Answer

The PPF is a straight (downward-sloping) line because the opportunity cost of producing the two goods is constant. This is because resources are assumed to be perfectly adaptable between the two goods in this scenario. There is no sacrifice in the production of one good for the other, and as a result, the opportunity cost is constant.

Question 4

If the law of increasing opportunity costs is operable,and currently the opportunity cost of producing the 1,000th unit of good X is 0.5Y,then the opportunity cost of producing the 2,001st unit of good is X is most likely to be
A) less than 0.5Y.
B) more than 0.5Y but less than 2Y.
C) more than 0.5Y.
D) less than 0.5Y but more than zero.
E) none of the above

Accepted Answer

The law of increasing opportunity costs states that as production of one good increases, the opportunity cost of producing additional units (measured in terms of the foregone opportunity to produce another good) also increases. Therefore, as we move from producing the 1,000th unit of X to the 2,001st unit, the opportunity cost of producing that additional unit of X is likely to be greater than 0.5Y. This is because as we produce more units of X, we will have to give up increasingly larger amounts of good Y, leading to a higher opportunity cost. Option C is the only choice that suggests a higher opportunity cost than 0.5Y.

Question 5

An economy can produce either of these two combinations of goods X and Y: 1,000X and 0Y or 400Y and 0X.Furthermore,the opportunity cost between the two goods is always constant.Which of the following combinations of the two goods,X and Y,lies on the economy's production possibilities frontier?
A) 700 units of X and 280 units of Y
B) 600 units of X and 250 units of Y
C) 400 units of X and 150 units of Y
D) 90 units of X and 360 units of Y
E) 300 units of X and 280 units of Y

Accepted Answer

The answer of An economy can produce either of these...

Question 6

If there is always a 4-for-1 tradeoff between producing good X and good Y,it follows that the opportunity cost of X (in terms of Y)____________________ and the PPF for these two goods is ______________________.
A) decreases at low levels of X; a straight line
B) rises at high levels of Y; bowed-outward
C) decreases at high levels of X; bowed-outward
D) is always the same; a straight line

Accepted Answer

The 4-for-1 tradeoff indicates a constant opportunity cost, which results in a straight-line production possibilities frontier (PPF).

Question 7

-Refer to Exhibit 2-7.For which of the following is the statement "In order to get more military goods,we have to forfeit some civilian goods" true?
A) a movement from A to C
B) a movement from B to D
C) a movement from F to D
D) a movement from B to A
E) none of the above

Accepted Answer

The answer of 
-Refer to Exhibit 2-7.For which of the...

Question 8

Currently an economy is producing at a point on its production possibilities frontier for goods X and Y.It is producing 100 units of good X and the opportunity cost of producing 1X is 3Y.If good X is produced at increasing opportunity costs,then when the economy produces 120 units of good X (on the same PPF)the opportunity cost of producing 1X could be ______Y.
A) 4
B) 2.5
C) 2
D) 1
E) all of the above

Accepted Answer

Given the economy is producing at increasing opportunity costs, producing more of good X (moving from 100 to 120 units) would mean sacrificing more of good Y per unit of X produced. Therefore, the opportunity cost of producing 1 additional unit of X would increase, making 4Y a possible higher opportunity cost.

Question 9

Productive efficiency implies
A) the possibility of gains in one area without losses in another.
B) that more output has been produced.
C) the impossibility of gains in one area without losses in another.
D) that prices are stable.
E) c and d

Accepted Answer

Productive efficiency occurs when an economy or entity cannot produce more of one good without reducing the output of another good, hence the impossibility of gains in one area without losses in another.

Question 10

What is the reason for the law of increasing opportunity costs?
A) There is no reason: it is just one of the laws of economics.
B) Resources have varying abilities and those with lower opportunity costs of producing a good will be used to produce it before resources with higher opportunity costs produce it.
C) The price of a good rises as more of it is demanded.
D) As more of a good is produced,the taxes applied to the production of the good rise.
E) c and d

Accepted Answer

The law of increasing opportunity costs states that as the production of one good increases, the opportunity cost of producing an additional unit (measured in terms of what must be given up of other goods) will also increase. This is because resources are not equally efficient in producing all goods, and as more units of a good are produced, the resources with the lowest opportunity cost of producing that good will be used up, and the resources with higher opportunity costs will have to be used, leading to a higher opportunity cost.

Question 11

If a production possibilities frontier (PPF)is concave outward,it follows that
A) opportunity costs are constant between two goods.
B) the opportunity cost (of producing the good on the horizontal axis)rises as more of the good is produced.
C) the opportunity cost (of producing the good on the horizontal axis)falls as more of the good is produced.
D) the opportunity cost (of producing the good on the horizontal axis)first rises and then falls as more of the good is produced.
E) none of the above

Accepted Answer

A concave outward (to the origin) PPF indicates increasing opportunity costs. As more of the good on the horizontal axis is produced, more of the other good must be given up, meaning the opportunity cost rises.

Question 12

Which scenario below most accurately describes the process by which a technological change can affect employment patterns across industries?
A) A technological advance makes it possible to produce more of good X with less labor.As a result,labor is released from producing good X.Some of this labor ends up producing goods Y and Z.
B) A technological advance makes it possible to produce less of good X with less labor.As a result,labor is released from producing good X.Some of this labor ends up producing good Y.
C) A technological advance makes it possible to produce more of good X with more labor.As a result,more labor is needed to produce good X.There is less labor available to produce goods Y and Z.
D) A technological advance makes it possible to produce more of good X with less labor.As a result,labor becomes more important to the production of good X.More labor ends up producing good X.
E) none of the above

Accepted Answer

This scenario accurately describes the process by which a technological change can affect employment patterns across industries. As technology advances, it is common for labor to be released from one industry and enter another. In this case, labor originally involved in producing good X can shift to producing goods Y and Z, which may require different skills and knowledge. This can lead to shifts in employment patterns across industries.

Question 13

Along its production possibilities frontier (PPF)an economy can produce 0X and 15Y,10X and 10Y,20X and 5Y,or 30X and 0Y.It follows that the PPF is
A) a downward-sloping straight line.
B) an upward-sloping straight line.
C) a downward-sloping bowed-outward curve.
D) a downward-sloping bowed-inward curve.

Accepted Answer

The production possibilities frontier (PPF) described shows a constant trade-off between producing X and Y (for every increase in X, there is a proportional decrease in Y), indicating a linear relationship. This is characteristic of a downward-sloping straight line, where the slope represents the constant opportunity cost of moving from one good to another.

Question 14

The economy can produce 15X and 15Y,10X and 20Y,5X and 25Y,or 0X and 30Y.It follows that opportunity cost of 1X is ___Y.
A) 4.0
B) 5.0
C) 2.5
D) 1.0
E) none of the above

Accepted Answer

The answer of The economy can produce 15X and 15Y,10X...

Question 15

If the economy is currently producing at a point on its production possibilities frontier (PPF),the economy is
A) productive inefficient.
B) operating with no unemployed resources.
C) productive efficient.
D) b and c
E) none of the above

Accepted Answer

If the economy is currently producing at a point on its production possibilities frontier (PPF), it is both productive efficient and operating with no unemployed resources. Therefore, choices B and C are both correct, making D the best answer. Choice A is incorrect because if the economy is on the PPF, it is not experiencing any inefficiencies. Additionally, choice E is incorrect because at least one of the choices must be correct.

Question 16

If an economy can produce a maximum of 100 units of good X and the opportunity cost of 1X is always 5Y,then what is the maximum number of units of good Y the economy can produce?
A) 250
B) 100
C) 20
D) 500
E) none of the above

Accepted Answer

If the opportunity cost of 1 unit of X is 5 units of Y, then producing 100 units of X would mean sacrificing 500 units of Y. Therefore, the maximum number of units of good Y the economy can produce is 500.

Question 17

Points inside (below)the production possibilities frontier (PPF)are
A) unattainable.
B) attainable and productive inefficient.
C) preferable to points that lie on the PPF.
D) attainable and productive efficient.

Accepted Answer

Points inside (below) the PPF are attainable but not productive efficient because resources are not being utilized to their full potential, resulting in a lower output of goods and services. Points on the PPF represent maximum possible output with given resources and technology. Therefore, points inside the PPF are not preferable to points on the PPF.

Question 18

If the law of increasing opportunity costs is operable,and currently the opportunity cost of producing the 101st unit of good X is 5Y,then the opportunity cost of producing the 201st unit of good is X is
A) less than 5Y.
B) greater than 1/5Y but less than 5Y.
C) greater than 5Y.
D) less than 1/5Y but more than zero.

Accepted Answer

The law of increasing opportunity costs states that as production of a good increases, the opportunity cost of producing an additional unit of that good will increase. Therefore, the opportunity cost of producing the 201st unit of good X is greater than the opportunity cost of producing the 101st unit, which is 5Y.

Question 19

The economy was at point A producing 100X and 200Y.It moved to point B where it produces 200X and 300Y.It follows that
A) point A may have been a point below the economy's PPF,while point B may lie on the PPF.
B) the economy's PPF could have shifted outward and point A was a point on the economy's old PPF.
C) the economy has moved from one point on its PPF to another point on the same PPF.
D) a or b
E) a or c

Accepted Answer

The increase in production of both goods X and Y from point A to point B could be due to either the economy moving from a point below its Production Possibility Frontier (PPF) to a point on the PPF (indicating more efficient use of resources) or the PPF itself shifting outward (indicating an increase in the economy's capacity to produce), making both A and B correct explanations.

Question 20

Suppose an economy can produce a maximum of 10 units of good X and the opportunity cost of 1X is always 2Y.What is the maximum number of units of good Y the economy can produce?
A) 10
B) 200
C) 20
D) 500
E) none of the above

Accepted Answer

The opportunity cost of 1X is always 2Y, which means for every unit of X produced, 2 units of Y must be given up. Therefore, the economy can produce a maximum of (10X/1) x (2Y/1X) = 20Y. So, the maximum number of units of good Y the economy can produce is 20.

Quiz 2: Production Possibilities Frontier Framework

The economy is currently on its production possibilities frontier (PPF) .A politician says that it is possible to get more of everything---more infrastructure,more schools,more national defense,more spending on social programs,and so on.The politician is

The law of increasing opportunity costs states that as

An economy can produce the following combinations of goods: 50X and 0Y,40X and 10Y,30X and 20Y,20X and 30Y,10X and 40Y,and 0X and 50Y.The production possibilities frontier (PPF) for the economy is

If the law of increasing opportunity costs is operable,and currently the opportunity cost of producing the 1,000th unit of good X is 0.5Y,then the opportunity cost of producing the 2,001st unit of good is X is most likely to be

An economy can produce either of these two combinations of goods X and Y: 1,000X and 0Y or 400Y and 0X.Furthermore,the opportunity cost between the two goods is always constant.Which of the following combinations of the two goods,X and Y,lies on the economy's production possibilities frontier?

If there is always a 4-for-1 tradeoff between producing good X and good Y,it follows that the opportunity cost of X (in terms of Y) and the PPF for these two goods is __.

-Refer to Exhibit 2-7.For which of the following is the statement "In order to get more military goods,we have to forfeit some civilian goods" true?

Productive efficiency implies

What is the reason for the law of increasing opportunity costs?

If a production possibilities frontier (PPF) is concave outward,it follows that

Which scenario below most accurately describes the process by which a technological change can affect employment patterns across industries?

Along its production possibilities frontier (PPF) an economy can produce 0X and 15Y,10X and 10Y,20X and 5Y,or 30X and 0Y.It follows that the PPF is

The economy can produce 15X and 15Y,10X and 20Y,5X and 25Y,or 0X and 30Y.It follows that opportunity cost of 1X is ___Y.

If the economy is currently producing at a point on its production possibilities frontier (PPF) ,the economy is

If an economy can produce a maximum of 100 units of good X and the opportunity cost of 1X is always 5Y,then what is the maximum number of units of good Y the economy can produce?

Points inside (below) the production possibilities frontier (PPF) are

If the law of increasing opportunity costs is operable,and currently the opportunity cost of producing the 101st unit of good X is 5Y,then the opportunity cost of producing the 201st unit of good is X is

The economy was at point A producing 100X and 200Y.It moved to point B where it produces 200X and 300Y.It follows that

Suppose an economy can produce a maximum of 10 units of good X and the opportunity cost of 1X is always 2Y.What is the maximum number of units of good Y the economy can produce?