Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
True / False
1. A decrease in unemployment causes the PPF to shift outward (to the right).
a.
True
b.
False
2. The law of increasing opportunity cost results from the varying ability of resources to adapt to the production of
different goods and it helps to explain why production possibilities curves are typically bowed outward.
a.
True
b.
False
3. Production possibilities curves can shift outward but they do not shift inward.
a.
True
b.
False
4. With respect to a PPF for goods X and Y, productive efficiency implies that in order to produce more of good X there
will be a reduction in production of good Y.
a.
True
b.
False
5. If the PPF for two goods is a downward-sloping straight line, the resources used to produce those goods are equally
well suited to the production of both goods.
a.
True
b.
False
6. In a situation where two goods can be produced by two different people, it is possible for one person to have a
comparative advantage in the production of both goods and the other person to have the comparative advantage in the
production of neither good.
a.
True
b.
False
7. A decrease in the quantity of resources available causes a movement down along a given PPF.
a.
True
b.
False
8. The law of increasing opportunity cost helps to explain why PPF’s are typically bowed-outward.
a.
True
b.
False
9. In a PPF graph of goods X and Y, points that lie beyond (to the right of) the PPF represent combinations of the two
goods that are currently unattainable.
a.
True
b.
False
10. A production possibilities frontier separates an attainable region from an unattainable region.
a.
True
b.
False
11. It is possible through trade for a country to consume a combination of goods that lies beyond its production
possibilities frontier.
a.
True
b.
False
12. When an economy is not using all of its resources, it is producing at a point below its production possibilities frontier.
a.
True
b.
False
Multiple Choice
13. Points that lie outside (or beyond) the PPF are
a.
attainable.
b.
unattainable.
c.
efficient.
d.
inefficient.
14. Which of the following statements is true?
a.
In a world of efficiently used scarce resources, more of one good necessarily means less of some other good.
b.
The law of increasing opportunity costs assumes that all people have the same ability to produce goods.
c.
Efficiency implies that it is impossible to get more of one good without getting less of another.
d.
Even if a country has unemployed resources, it can still be operating on its production possibilities frontier
(PPF).
e.
a and c
15. Through war, many of the factories in country 1 are destroyed and many of its people are killed. As a result, the
country's
a.
production possibilities frontier (PPF) after the war has probably shifted to the right compared to its PPF prior
to the war.
b.
PPF after the war has probably shifted to the left compared to its PPF prior to the war.
c.
PPF after the war is probably the same PPF as before the war.
d.
ability to produce goods and services has increased.
e.
b and d
16. The economy moves from point A, where it produces 100 units of X and 200 units of Y, to point B, where it produces
200 units of X and 150 units of Y. It follows that
a.
point A is a productive inefficient point.
b.
point A may be a productive inefficient point.
c.
point A may be a productive efficient point.
d.
point B is a productive efficient point.
e.
b and c
17. Both country 1 and country 2 are located on their respective production possibilities frontiers (PPFs) for consumer
goods and capital goods, but country 1 produces twice the output of both types of goods compared to country 2. It follows
that
a.
country 1's PPF lies further to the right than country 2's PPF.
b.
country 1 has a smaller population than country 2.
c.
country 1 has a bigger population than country 2.
d.
country 1 is efficient and country 2 is inefficient.
e.
none of the above
18. If there is always a three-for-one tradeoff between goods X and Y, then the PPF between X and Y is
a.
a downward-sloping curve that is bowed outward.
b.
a downward-sloping curve that is bowed inward.
c.
a downward-sloping straight line.
d.
an upward-sloping straight line.
19. Points that lie inside (or below) the PPF are
a.
unattainable.
b.
attainable and productive efficient.
c.
attainable but productive inefficient.
d.
attainable and neither productive efficient nor productive inefficient.
20. If increasingly more units of good Y must be given up as each successive unit of good X is produced, then the PPF for
these two goods is
a.
a downward-sloping straight line.
b.
circular.
c.
an upward-sloping curve.
d.
a downward-sloping curve that is bowed outward.
e.
a downward-sloping curve that is bowed inward.
21. Consider the following combinations of guns and butter that can be produced: 0 guns, 20,000 units of butter; 5,000
guns, 15,000 units of butter; 10,000 guns, 10,000 units of butter; 15,000 guns, 5,000 units of butter; 20,000 guns, 0 units
of butter. The PPF between guns and butter is
a.
a downward-sloping bowed-out curve.
b.
a downward-sloping straight line.
c.
an upward-sloping straight line.
d.
It is impossible to answer this question without knowing which good would be plotted on the vertical axis.
22. Which of the following statements is true?
a.
The concept of opportunity costs cannot be illustrated within a PPF framework.
b.
If scarcity did not exist, neither would a PPF.
c.
All PPFs are downward-sloping straight lines.
d.
There are more attainable points than unattainable points in every PPF diagram.
23. A PPF can
a.
shift outward but not inward.
b.
shift inward but not outward.
c.
shift inward or outward.
d.
shift neither inward nor outward.
24. Consider two points on the PPF: point A, at which there are 10 apples and 20 pears, and point B, at which there are 7
apples and 21 pears. If the economy is currently at point A, the opportunity cost of moving to point B is
a.
1 pear.
b.
7 apples.
c.
3 apples.
d.
21 pears.
25. Consider two points on the PPF: point A, at which there are 50 oranges and 100 apricots, and point B, at which there
are 51 oranges and 98 apricots. If the economy is currently at point B, the opportunity cost of moving to point A is
a.
2 apricots.
b.
1 orange.
c.
98 apricots.
d.
3 oranges.
26. The point where the PPF intersects the vertical axis is
a.
unattainable.
b.
attainable and productive efficient.
c.
attainable but productive inefficient.
d.
attainable and neither productive efficient nor productive inefficient.
27. The point where the PPF intersects the horizontal axis is
a.
unattainable.
b.
attainable and productive efficient.
c.
attainable but productive inefficient.
d.
attainable and neither productive efficient nor productive inefficient.
28. Consider two straight-line PPFs. They have the same vertical intercept, but curve I is flatter than curve II. The
opportunity cost of producing the good on the horizontal axis
a.
is greater along curve I.
b.
is greater along curve II.
c.
is the same along both curves.
d.
cannot be compared for the two curves without more information.
29. Consider two straight-line PPFs. They have the same vertical intercept, but curve I is flatter than curve II. The
opportunity cost of producing the good on the vertical axis
a.
is greater along curve I.
b.
is greater along curve II.
c.
is the same along both curves.
d.
cannot be compared for the two curves without more information.
30. Suppose the economy goes from a point on its production possibilities frontier (PPF) to a point below that PPF.
Assuming that the PPF has not shifted, this could be due to
a.
a gain of resources.
b.
a loss of resources.
c.
technological improvement in the production of both goods.
d.
a new law that interferes with economic efficiency.
31. Suppose the economy goes from a point on its production possibilities frontier (PPF) to a point below that PPF.
Assuming that the PPF has not shifted, this could be due to
a.
a gain of resources.
b.
a loss of resources.
c.
technological improvement in the production of both goods.
d.
an increase in unemployment of some resources.
32. An increase in the quantity of resources available
a.
shifts the PPF leftward.
b.
shifts the PPF rightward.
c.
moves the economy to a new point up along a given PPF.
d.
moves the economy to a new point down along a given PPF.
33. A decrease in the quantity of resources
a.
shifts the PPF leftward.
b.
shifts the PPF rightward.
c.
moves the economy up a given PPF.
d.
moves the economy down a given PPF.
34. For each additional lamp produced, a constant opportunity cost is incurred in terms of bookshelves. This means
a.
that it takes more resources to produce a lamp than a bookshelf.
b.
that it takes fewer resources to produce a lamp than a bookshelf.
c.
that for every lamp produced, a constant number of bookshelves is forfeited.
d.
that for every lamp produced, a different number of bookshelves is forfeited.
35. Which of the following is an illustration of the law of increasing opportunity costs?
a.
As more cars are produced, the opportunity cost of each additional car is greater than for the preceding unit.
b.
As more cars are produced, the opportunity cost of each additional car is less than for the preceding unit.
c.
As more cars are produced, the opportunity cost of each additional car is the same as for the preceding unit.
d.
People pay lower prices for cars the higher the costs of producing cars.
36. The PPF between goods X and Y will be a downward-sloping
a.
straight line if increasing opportunity costs exist.
b.
straight line if decreasing opportunity costs exist.
c.
curve that is bowed outward if increasing opportunity costs exist.
d.
curve that is bowed outward if constant opportunity costs exist.
37. A PPF is more likely to be a downward-sloping curve that is bowed outward than a downward-sloping straight line
because most resources are
a.
better suited for the production of some goods than others.
b.
used efficiently.
c.
relatively cheap at low levels of output.
d.
used to produce consumption goods.
38. Economic growth causes the PPF to
a.
shift leftward.
b.
shift rightward.
c.
remain constant.
d.
go from a straight line to a curve.
39. Which of the following statements is false?
a.
If there are only two goods, guns and butter, it is possible to produce more of both goods through economic
growth.
b.
If there are only two goods, guns and butter, it is possible to produce more of both goods if the economy is
currently operating at a productive inefficient point.
c.
If there are only two goods, guns and butter, it is possible to produce more of both goods if the economy is
currently operating at a productive efficient point.
d.
If there are only two goods, guns and butter, producing more of one means producing less of the other if the
economy is currently operating at a productive efficient point.
40. An economy is productive efficient if it produces
a.
more than enough food to feed everyone.
b.
more goods and services in each successive year.
c.
maximum output with given resources and technology.
d.
enough output so that no one lives in poverty.
41. Which of the following statements is true?
a.
Productive inefficiency implies that it is possible to produce more of one good and no less of another, but only
if additional resources are made available.
b.
Productive efficiency implies that it is possible to produce more of one good and no less of another, even
without additional resources.
c.
Productive inefficiency implies that it is impossible to produce more of one good and no less of another.
d.
Productive inefficiency implies that it is possible to produce more of one good and no less of another, even
without additional resources.
42. Productive inefficiency implies that
a.
it is possible to obtain gains in one area without losses in another.
b.
it is impossible to obtain gains in one area without losses in another.
c.
there are too many resources.
d.
there are too few resources.
e.
none of the above
43. Productive efficiency implies that
a.
it is impossible to obtain gains in one area without losses in another.
b.
it is possible to obtain gains in one area without losses in another.
c.
there are too many resources available.
d.
there are too few resources available.
44. Suppose the economy goes from a point on its production possibilities frontier (PPF) to a point directly to the left of it.
Assuming that the PPF has not shifted, this could be due to
a.
a gain of resources.
b.
a loss of resources.
c.
technological improvement in the production of both goods.
d.
a new law that interferes with productive efficiency.
Exhibit 2-1
45. Refer to Exhibit 2-1. The PPF illustrates
a.
constant opportunity costs between guns and butter.
b.
that guns are more important than butter.
c.
increasing opportunity costs between guns and butter.
d.
the opportunity cost of one unit of guns is four units of butter.
e.
none of the above
46. Refer to Exhibit 2-1. The movement from point A to point B is a movement from
a.
a productive efficient point to a productive inefficient point.
b.
a point with more guns and less butter to a point with more butter and even more guns.
c.
a productive efficient point to another productive efficient point.
d.
a productive inefficient point to a productive efficient point.
47. Refer to Exhibit 2-1. A movement from point B to point D
a.
could only happen through economic growth.
b.
is necessarily a movement from a productive efficient point to a productive inefficient point.
c.
is a movement from a productive efficient point to another productive efficient point.
d.
is necessarily a movement from a productive inefficient point to another productive inefficient point.
48. Refer to Exhibit 2-1. If the economy is at point C, it follows that
a.
more guns and more butter could be produced with available resources than are currently being produced.
b.
only more guns could be produced with available resources than are currently being produced.
c.
only more butter can be produced with available resources than are currently being produced.
d.
C is an unattainable point.
49. Refer to Exhibit 2-1. The opportunity cost of moving from point B to A is
a.
10,000 units of butter.
b.
20,000 units of butter.
c.
50,000 units of guns.
d.
the maximum amount of butter that can be produced with available resources.
50. Refer to Exhibit 2-1. Scarcity exists
a.
at point C but not at point A.
b.
neither at point C nor at point A.
c.
at both point C and at point A.
d.
at point A but not at point C.
51. Refer to Exhibit 2-1. The opportunity cost of moving from point A to B is
a.
10,000 units of butter.
b.
20,000 units of butter.
c.
20,000 units of guns.
d.
10,000 units of guns.
52. According to the text, farming today in the U.S. is __________ productive compared to a century ago, resulting in
there being __________ farmers today than at the turn of the previous century.
a.
about as; fewer
b.
about as; more
c.
much more; fewer
d.
much more; more
53. Technological __________ in American agriculture has __________ other types of employment.
a.
improvement; drawn labor away from
b.
improvement; released labor to go to
c.
stagnation; drawn labor away from
d.
stagnation; released labor to go to
54. In the production possibilities framework, economic growth is depicted by the PPF
a.
shifting leftward (toward the origin).
b.
shifting rightward (away from the origin).
c.
becoming a straight line rather than a bowed outward curve.
d.
becoming bowed outward rather than a straight line.
Exhibit 2-2
55. Refer to Exhibit 2-2. If PPF2 is the relevant production possibilities frontier, then point __________ illustrates
productive inefficiency.
a.
A
b.
B
c.
C
d.
J
e.
a, b, or c
56. Refer to Exhibit 2-2. If PPF2 is the relevant production possibilities frontier, then point __________ is unattainable.
a.
A
b.
G
c.
D
d.
J
57. Refer to Exhibit 2-2. If PPF2 is the relevant production possibilities frontier, then point __________ is productive
efficient.
a.
B
b.
D
c.
I
d.
F
e.
both b and d
58. Refer to Exhibit 2-2. If PPF2 is the relevant production possibilities frontier, a significant loss of resources will
a.
move this society from point D to point G on PPF .
b.
move this society to PPF .
c.
move this society to PPF .
d.
not affect this society.
59. Refer to Exhibit 2-2. The production possibilities frontiers shown in this exhibit depict _______________ opportunity
costs.
a.
constant
b.
increasing
c.
decreasing
d.
There is not enough information provided to answer this question.
Exhibit 2-3
60. Refer to Exhibit 2-3. If PPF1 is the relevant production possibilities frontier, society may move to PPF2 as a result of
a.
an increase in resources.
b.
a decrease in resources.
c.
an increase in technology.
d.
both a and c
e.
both b and c
61. Refer to Exhibit 2-3. If PPF1 is the relevant production possibilities frontier, society can choose points that lie only
a.
below PPF1.
b.
below or on PPF1.
c.
on PPF2.
d.
none of the above
62. Refer to Exhibit 2-3. If PPF1 is the relevant production possibilities frontier, PPF2 may depict
a.
economic growth.
b.
an increase in resources.
c.
an increase in technology.
d.
both b and c
e.
all of the above
63. A productive efficient society
a.
produces at a point on its PPF.
b.
can produce more of one good only by giving up some of another good.
c.
cannot produce unlimited amounts of a good.
d.
still has to make choices.
e.
all of the above
64. If resources are better suited toward the production of one good than toward another good, then the PPF for those two
goods is
a.
a straight line.
b.
bowed outward.
c.
upward sloping.
d.
any of the above
65. A society is productive inefficient when
a.
it produces at a point inside (below) its PPF.
b.
it does not produce the maximum output with its given resources and technology.
c.
it can produce more of one good without giving up some of another good.
d.
both a and b
e.
all of the above
66. With a constant opportunity cost between goods A and B, the PPF for goods A and B would
a.
be a straight line.
b.
be a bowed-outward line.
c.
be a bowed-inward line.
d.
not exist.
67. Within the production possibilities frontier (PPF) framework, choice is depicted by the
a.
PPF itself.
b.
PPF being bowed outward.
c.
need to select among the points making up the PPF.
d.
straight-line PPF.
68. If there is an increase in the amount of good B foregone as every additional unit of good A is produced, the PPF
between goods A and B would
a.
be a straight line.
b.
be a bowed-outward curve.
