module 2

Assume that we have a production possibility frontier (PPF). Point A lies inside (to the left of) the frontier. Points B and C are located along the frontier, and Point D is located outside (to the right of) the frontier. Which points represent efficient production points? a. All points (A, B, C, and D) are efficient. b. Points A, B, and C are efficient. c. Points B and C are efficient. d. Points B, C, and D are efficient.

c.

factors of production

resources used to produce goods and services

technology

the technical means for the production of goods and services

production possibility frontier (PPF)

a model that illustrates the trade-offs facing an economy that produces only two goods; shows the maximum quantity for each possible quantity of the other good produced

Economists typically depict the production possibility frontier as a bowed-out curve rather than as a straight line in order to show that: a. the opportunity cost of producing a good rises as more is produced. b. the opportunity cost of producing a good declines as more is produced. c. resources used in the production of one good can be used in the production of another good. d. cost is always present.

a.

If an economy is operating at a point on its production possibilities frontier, it is: a. efficient in production and may be efficient in allocation. b. always efficient in both production and allocation. c. inefficient in both production and allocation. d. efficient in allocation but not always efficient in production.

a.

Improvements in technology will: a. shift the production possibility curve (PPF) out away from the origin. b. make the production possibility curve flat. c. make points that were feasible to produce now infeasible to produce. d. shift the production possibility curve in toward the origin.

a.

Assume that there is a production possibility frontier (PPF). Point A lies inside (to the left) of the frontier. Points B and C are located along the frontier and Point D is located outside (to the right of) the frontier. Which of the following points represent feasible (attainable) production points? a. All points (A, B, C, and D) are feasible. b. Points A, B, and C are feasible. c. Points B and C are feasible. d. None of the points is feasible.

b.

A model that helps economists think about the trade-offs that every economy faces is called: a. the circular flow diagram. b. factors of production. c. the production possibility frontier. d. comparative advantage.

c.

As an economy moves from point to point along its production possibility frontier, what is changing? a. the amount of resources available in the economy b. the productivity of the resources available in the economy c. the allocation of resources within the economy d. the size of the labor force

c.

Suppose that Macronesia is producing at point A on its production possibility curve and this represents 4 fish and 9 coconuts. If Macronesia moves to another point on its production possibility curve such that it now produces 5 fish and 6 coconuts, the opportunity cost of the extra fish is: a. 6 coconuts. b. 9 coconuts. c. 3 coconuts. d. 1 coconut.

c.

Suppose that the country of Ologolia has a linear production possibility frontier in the production of boats and smartphones. It can produce 3 smartphones per hour of labor time, or 4 boats per hour of labor time. What is the opportunity cost of producing 1 boat in Ologolia? a. 3 smartphones b. 4 boats c. 0.75 smartphone d. 1.33 smartphones

c.

Those points lying beyond the production possibility frontier: a. are inefficient. b. represent outcomes in which resources would be unemployed. c. represent outcomes unattainable with the current level of technology and resources. d. represent outcomes that are attainable with the current level of technology and resources, but are less desirable than those on the frontier.

c.

What is measured along the horizontal axis in a graph of the production possibility frontier? a. the amount of labor input b. the amount of capital input c. the quantity of one good produced d. the quantity of one good exported

c.

t/f: The production possibility frontier is useful because it illustrates how much of one good an economy must give up to get more of another good regardless of whether resources are being used efficiently.

false

trade-off

the giving up of something in order to have something else

t/f: A technological change that allows Tom to catch more fish for any amount of coconuts gathered results in a change in his production possibility frontier.

true

t/f: An increase in the amount of resources available to Tom for use in producing coconuts and fish does not change his production possibility frontier.

true

Suppose an economy is capable of producing, at point A, a combination of 10 bananas and 40 pounds of fish. If this economy can also produce a combination of 11 bananas and 45 pounds of fish at point B, we know point A is: a. efficient in production. b. infeasible. c. on the production possibility curve. d. below the production possibility curve.

d.

What points are unattainable or not feasible on a production possibility curve? a. points along the production possibility curve b. points below the production possibility curve c. points that touch the x-axis and that are also on the production possibility curve d. points above the production possibility curve

d.

When economists want to describe how much an economy can produce with a given amount of resources, they use a model known as: a. the positive model. b. the normative model. c. comparative advantage. d. the production possibility frontier.

d.

efficient

describes a market or economy that takes all opportunities to make some people better off without making other people worse off