ap economics - module 3 review

If the economy entered into a recession, the country would move from point C to which point? Explain.

shift from on frontier to below it. A recession, which causes unemployment, is represented by a point below the PPC.

True or false? Explain your answer. A technological change that allows Tom to catch more fish relative to any amount of coconuts gathered results in a change in his production possibilities curve.

b. True. A technological change that allows Tom to catch more fish for any amount of coconuts gathered results in a change in his production possibilities curve. This is illustrated in the accompanying graph. The new production possibilities curve is represented by the line labeled "Tom's new PPC," and the original production possibilities curve is represented by the line labeled "Tom's original PPC." Since the maximum quantity of coconuts that Tom can gather is the same as before, the new production possibilities curve intersects the vertical axis at the same point as the old curve. But since the maximum possible quantity of fish is now greater than before, the new curve intersects the horizontal axis to the right of the old curve.

An increase in unemployment could be represented by a movement from point

from on the curve to under it

Which point(s) on the graph represent efficiency in production?

points on the line/ frontier

If this country were to go to war, the most likely move would be from point C to which point? Explain.

shift on frontier towards the more necessary good. STAYS ON FRONTIER. The country would choose an efficient point with more (but not all) military goods with which to fight the war. Point A would be an unlikely choice because at that point there is no production of any social goods, some of which are needed to maintain a minimal standard of living.

Does this country's production possibilities curve exhibit increasing opportunity costs? Explain.

yes. The PPC is concave (bowed outward), so with each additional unit of butter produced, the opportunity cost in terms of gun production (indicated by the slope of the line) increases. Likewise, as more guns are produced, the opportunity cost in terms of butter increases.

This production possibilities curve shows the trade-off between consumer goods and capital goods. Since capital goods are a resource, an increase in the production of capital goods today will increase the economy's production possibilities in the future. Therefore, all other things equal (ceteris paribus), producing at which point today will result in the largest outward shift of the PPC in the future?

A. produce only one good (specified) point is on axis

True or false? Explain your answer. a. An increase in the amount of resources available to Tom for use in producing coconuts and fish does not change his production possibilities curve.

a. False. An increase in the resources available to Tom for use in producing coconuts and fish changes his production possibilities curve by shifting it outward, because he can now produce more fish and coconuts than before. In the accompanying graph, the line labeled "Tom's original PPC" represents Tom's original production possibilities curve, and the line labeled "Tom's new PPC" represents the new production possibilities curve that results from an increase in resources available to Tom.

True or false? Explain your answer. c. Points inside a production possibilities curve are efficient and points outside a production possibilities curve are inefficient.

c. False. Production efficiency is achieved at points along a production possibilities curve, but every point inside a PPC is inefficient because more of either good could be produced without producing less of the other. Points outside the PPC are simply unobtainable.

2. For this economy, an increase in the quantity of capital goods produced without a corresponding decrease in the quantity of consumer goods produced

d. is represented by a movement from point E to point B. (a vertical or horizontal shift not diagonal)

Which of the following might allow this economy to move from point B to point F? (from on the curve to over extended) a. more workers b. discovery of new resources c. building new factories d. technological advances e. all of the above

e. all of the above