Unit 3 Economic Models and Production Possibilities

As you move from left to right along a production possibilities frontier (PPF) that is bowed out from the origin, the opportunity cost of producing the product on the horizontal axis increases. As you move from right to left along a PPF that is bowed out from the origin, the opportunity cost of producing the product on the vertical axis: a) also increases. b) decreases. c) does not change. d) cannot be determined.

a) also increases.

An outward parallel shift of the production possibility frontier signals: a) an expansion of the productive capacity of the economy. b) a shrinkage of the economy due to rising opportunity costs. c) the employment of previously unused resources into production. d) an ability to produce more of one but not both goods represented by the PPF.

a) an expansion of the productive capacity of the economy.

Suppose you have a very efficient study system. Then, as you increase the hours that you study for an economics exam, the opportunity cost of studying for the exam: a) increases. b) decreases. c) stays the same. d) may increase or decrease.

a) increases.

Assume that the population of Lauronia decreased and as a result, its total production did as well. How would this be shown on the production possibilities frontier? a) A new curve that is to the right of the original curve. b) A new curve that is to the left of the original curve. c) A point to the outside of the curve. d) A point to the inside of the curve.

b) A new curve that is to the left of the original curve.

A production possibilities frontier that illustrates increasing opportunity costs would be: a) downward sloping and convex. b) downward sloping and concave. c) upward sloping and convex. d) upward sloping and concave.

b) downward sloping and concave.

Economic growth in Lauronia occurred because of an increase in the amount of machines and other equipment that many of the firms there possessed, as having more equipment made the workers more productive. This is an example of which cause of economic growth? a) Increased labor. b) Increased human capital. c) Increased capital accumulation. d) Increased technology. Submit

c) Increased capital accumulation.

The country of Lauronia is currently at full production of sweatshirts and applesauce. If production of one of these products dropped while the production level of the other product stayed the same, how would this be shown on the production possibilities frontier? a) The point would move from the bottom half of the curve to the top half of the curve. b) The point would move from the top half of the curve to the bottom half of the curve. c) The point would move from the curve to the inside of the curve. d) The point would move from the inside of the curve to the curve.

c) The point would move from the curve to the inside of the curve.

Suppose you want to make a model that describes how you get to class to your parents. Given your motivation, of the following assumptions which one is not practical. a) All buildings are grey b) You will use straight lines to connect your turns on your route c) The relative size of buildings must be exact d) Only draw landmarks that are important to your route Submit

c) The relative size of buildings must be exact

As you move from left to right along a production possibilities frontier that is bowed out from the origin, the opportunity cost of producing the product on the horizontal axis: a) decreases. b) does not change. c) increases. d) cannot be determined.

c) increases.

When an economic model is used, it tends to: a) start with many details and then become simpler over time. b) include many caveats to ensure that the model is realistic. c) start with very few details in order to simplify the model. d) use a case study approach by focusing on one specific real-life example.

c) start with very few details in order to simplify the model.

As you move left to right on a linear production possibilities frontier (PPF), the opportunity cost of producing the good on the vertical axis: a) decreases. b) increases. c) stays the same. d) increases and then decreases.

c) stays the same.

Which of the following points on the production possibilities frontier would represent a combination of goods that would not be feasible to produce? a) A point on the top half of the curve. b) A point on the bottom half of the curve. c) A point to the left of the curve. d) A point to the right of the curve. Submit

d) A point to the right of the curve. Submit

Suppose economic growth in Lauronia was caused by an increase in the skills of its current workers, as it made them more productive. This is an example of which cause of economic growth? a) Increased labor. b) Increased technology. c) Increased capital accumulation. d) Increased human capital.

d) Increased human capital.

Which of the following points would be considered attainable on a production possibilities frontier? a) Only points on the curve. b) Only points under the curve. c) Only points outside the curve. d) Points on the curve and those under the curve.

d) Points on the curve and those under the curve.

If an economy moves from a point on a production possibility frontier to a point to the right of the same production possibility frontier, what event might have occurred? a) A tornado that has caused tremendous damage. b) The government has placed new restrictions on energy production. c) The economy has recovered from a downtown and unemployment is dropping. d) There has been a discovery of new technology that expands production possibilities.

d) There has been a discovery of new technology that expands production possibilities. Submit

Can a production possibility frontier ever shrink inwards? a) No, economic growth is always a positive value. b) No, but an economy can produce at a point inside of its PPF. c) Yes, if it has underutilized resources. d) Yes, if new regulations restrict a country's capacity to produce goods. Submit

d) Yes, if new regulations restrict a country's capacity to produce goods. Submit