Economics 11th Edition Arnold Test Bank
Economics 11th Edition Arnold Test Bank
Economics 11th Edition Arnold Test Bank
eu/Economics-11th-Edition-Arnold-Test-Bank
Chapter 2—Production Possibilities Frontier Framework
MULTIPLE CHOICE
3. 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
ANS: B PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application
4. The economy moves from point A, where it produces 100X and 200Y, to point B, where it produces
200X and 150Y. 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
ANS: E PTS: 1 DIF: Difficulty: Challenging
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or posted to a publicly accessible website, in whole or in part.
5. Both country 1 and country 2 are located on their respective production possibilities frontiers (PPFs), but
country 1 produces twice the output that country 2 produces. 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
ANS: A PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application
6. 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.
ANS: C PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Comprehension
8. 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.
ANS: D PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Comprehension
9. 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.
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or posted to a publicly accessible website, in whole or in part.
12. 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.
ANS: C PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application
13. 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.
ANS: B PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application
14. The point where the PPF intersects the vertical axis is
a. unattainable.
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or posted to a publicly accessible website, in whole or in part.
15. 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.
ANS: B PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Efficiency and equity
KEY: Bloom's: Comprehension
16. 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.
ANS: B PTS: 1 DIF: Difficulty: Challenging
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application
17. 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.
ANS: A PTS: 1 DIF: Difficulty: Challenging
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application
18. 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.
ANS: D PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Efficiency and equity
KEY: Bloom's: Application NOT: New
19. 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
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
22. The increased production of lamps comes at constant opportunity costs 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.
ANS: C PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application
23. 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.
ANS: A PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
25. 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.
ANS: A PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Comprehension
32. 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.
ANS: D PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Analytic LOC: DISC: Efficiency and equity
KEY: Bloom's: Application
Exhibit 2-1
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
34. 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.
ANS: C PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Analytic LOC: DISC: Efficiency and equity
KEY: Bloom's: Comprehension
37. 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.
ANS: B PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application
39. 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.
ANS: C PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application NOT: New
40. 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
ANS: C PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Productivity and growth
KEY: Bloom's: Knowledge
41. Technological __________ in American agriculture has __________ other types of employment.
a. improvement; drawn labor away from
b. improvement; released labor to go to
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
42. 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.
ANS: B PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Analytic LOC: DISC: Productivity and growth
KEY: Bloom's: Comprehension
Exhibit 2-2
43. 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
ANS: E PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Efficiency and equity
KEY: Bloom's: Comprehension NOT: New
44. 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
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
45. 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
ANS: E PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Efficiency and equity
KEY: Bloom's: Comprehension
46. 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.
ANS: B PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Comprehension
47. 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.
ANS: B PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Comprehension
Exhibit 2-3
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
48. 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
ANS: D PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Productivity and growth
KEY: Bloom's: Comprehension
49. 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
ANS: B PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Comprehension
50. 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
ANS: E PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Productivity and growth
KEY: Bloom's: Comprehension
52. If resources are better suited toward the production of one good than toward the other good, then the PPF
for those two goods is
a. a straight line.
b. bowed outward.
c. upward sloping.
d. any of the above
ANS: B PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Comprehension
54. 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.
ANS: A PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Comprehension
55. 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.
ANS: C PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Comprehension
56. 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.
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or posted to a publicly accessible website, in whole or in part.
59. In an eight-hour day, Andy can produce either 24 loaves of bread or 8 pounds of butter. In an eight-hour
day, John can produce either 8 loaves of bread or 8 pounds of butter. The opportunity cost of producing
1 pound of butter is
a. 1/3 hour for Andy and 1 hour for John.
b. 1 hour for Andy and 1 hour for John.
c. 3 loaves of bread for Andy and 1 loaf of bread for John.
d. 1/3 loaves of bread for Andy and 1 loaf of bread for John.
e. none of the above
ANS: C PTS: 1 DIF: Difficulty: Challenging
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application
Exhibit 2-4
61. Refer to Exhibit 2-4. The line joining points A and D is called the
a. production function frontier.
b. utility function.
c. production possibilities frontier.
d. demand curve.
ANS: C PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Knowledge
63. Refer to Exhibit 2-4. The opportunity cost of moving from point A to point B is
a. 60,000 copiers.
b. 40,000 copiers.
c. 20,000 copiers.
d. 20,000 fax machines.
e. 40,000 fax machines.
ANS: C PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application
64. Refer to Exhibit 2-4. As more fax machines are produced, the opportunity cost of producing them
a. increases.
b. decreases.
c. remains constant.
d. first decreases and then increases.
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or posted to a publicly accessible website, in whole or in part.
Exhibit 2-5
65. Refer to Exhibit 2-5. The economy is currently operating at point F. The opportunity cost of moving to
point E is approximately
a. 35 fax machines.
b. 55 fax machines.
c. zero fax machines.
d. 40 fax machines.
ANS: C PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application
66. Refer to Exhibit 2-5. As more fax machines are produced, the opportunity cost of producing them
a. increases.
b. decreases.
c. remains constant.
d. first decreases and then increases.
ANS: A PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application
67. Refer to Exhibit 2-5. The opportunity cost of moving from point A to point B is approximately
a. 5,000 televisions.
b. 5,000 fax machines.
c. 10,000 televisions.
d. 10,000 fax machines.
ANS: A PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
69. Refer to Exhibit 2-5. The opportunity cost of moving from point C to point B is
a. 15,000 televisions.
b. 15,000 fax machines.
c. 10,000 televisions.
d. 20,000 fax machines.
ANS: D PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application
70. Refer to Exhibit 2-5. "In order to produce one more television set, we must forfeit the production of one
fax machine." This statement describes a movement from
a. point C to point D.
b. point D to point E.
c. point E to point F.
d. point E to point D.
e. point D to point C.
ANS: E PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application
71. Refer to Exhibit 2-5. Which of the following labeled points are productive efficient?
a. A, B, C, D, and E
b. B, C and D only
c. C only
d. All of the points are productive efficient.
e. None of the points are productive efficient.
ANS: A PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Efficiency and equity
KEY: Bloom's: Application
72. Refer to Exhibit 2-5. Given available resources and technology, this economy can produce 50,000
television sets and 50,000 fax machines only if it chooses to
a. have an equal distribution of goods.
b. operate at both points C and D.
c. combine points C and D.
d. none of the above
ANS: D PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
73. Some of our farm fields are being left unused. Does this have any implications for the economy's PPF
diagram (with agricultural products on one axis and all other products on the other axis)?
a. No implications, because the PPF deals only with resources in use.
b. The PPF cannot be drawn if some resources are idle.
c. With unemployed resources, we are at a point below the PPF.
d. The PPF would be upward sloping.
ANS: C PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Analysis
75. Jose has one evening in which to prepare for two exams and can employ two possible strategies:
The opportunity cost of receiving a 94 on the Economics exam in terms of the number of points on the
Statistics exam is
a. 79.
b. 17.
c. 11.
d. 90.
ANS: C PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application MSC: Economics 24/7
76. Jose has one evening in which to prepare for two exams and can employ two possible strategies:
The opportunity cost of receiving a 90 on the Statistics exam in terms of the number of points on the
Economics exam is
a. 79.
b. 17.
c. 11.
d. 90.
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
Exhibit 2-6
77. Refer to Exhibit 2-6. Which graph depicts a technological breakthrough in the production of good Y
only?
a. (1)
b. (2)
c. (3)
d. (4)
e. none of the above
ANS: D PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Productivity and growth
KEY: Bloom's: Application
78. Refer to Exhibit 2-6. Which graph depicts a discovery of a new cheap source of energy that assists in the
production of both good X and good Y?
a. (1)
b. (2)
c. (3)
d. (4)
e. none of the above
ANS: A PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Productivity and growth
KEY: Bloom's: Application
79. Refer to Exhibit 2-6. Which graph best depicts the consequence of a large-scale natural disaster?
a. (1)
b. (2)
c. (3)
d. (4)
e. none of the above
ANS: B PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
81. Refer to Exhibit 2-6. Which graph depicts a technological breakthrough in the production of good X
only?
a. (1)
b. (2)
c. (3)
d. (4)
e. none of the above
ANS: C PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Productivity and growth
KEY: Bloom's: Application
82. Refer to Exhibit 2-6. Which graph depicts the result of a decrease in the unemployment rate?
a. (1)
b. (2)
c. (3)
d. (4)
e. none of the above
ANS: E PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Productivity and growth
KEY: Bloom's: Application
83. Refer to Exhibit 2-6. Which graph depicts the result of an increase in the number of illegal immigrants
entering the country?
a. (1)
b. (2)
c. (3)
d. (4)
e. none of the above
ANS: A PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Productivity and growth
KEY: Bloom's: Application
84. Refer to Exhibit 2-6. Which graph depicts the result of an increase in the unemployment rate?
a. (1)
b. (2)
c. (3)
d. (4)
e. none of the above
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
Exhibit 2-7
86. Refer to Exhibit 2-7. For which of the following is the statement "In order to get more civilian goods, we
have to forfeit some military goods" true?
a. a movement from A to C
b. a movement from B to D
c. a movement from C to D
d. a movement from F to D
e. none of the above
ANS: C PTS: 1 DIF: Difficulty: Challenging
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application
88. 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
ANS: D PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application
89. The economy can produce 15X and 15Y, 10X and 20Y, 5X and 25Y, or OX and 30Y. It follows that the
production possibility frontier (PPF) is
a. a downward-sloping straight line.
b. an upward-sloping straight line.
c. a downward-sloping convex curve.
d. a downward-sloping concave curve.
ANS: A PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application
90. If the economy is on the 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
ANS: D PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Comprehension
91. Points inside (below) the production possibilities frontier (PPF) are
a. unattainable.
b. attainable, but productive inefficient.
c. preferable to points that lie on the PPF.
d. attainable and productive efficient.
ANS: B PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Comprehension
92. 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
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
93. 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
ANS: D PTS: 1 DIF: Difficulty: Challenging
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application
94. If an economy can produce a maximum of 10 units of good X and the opportunity cost of 1X is always
2Y, then what is the maximum units of good Y the economy can produce?
a. 5
b. 200
c. 20
d. 500
e. none of the above
ANS: C PTS: 1 DIF: Difficulty: Challenging
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application NOT: New
95. 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, is it possible for the economy to produce?
a. 700X, 280Y
b. 600X, 250Y
c. 400X, 150Y
d. 100X, 600Y
e. 300X, 280Y
ANS: A PTS: 1 DIF: Difficulty: Challenging
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application
96. 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
ANS: D PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application NOT: New
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
99. Currently an economy is producing (at a point on its production possibilities frontier) 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 1Y (not 1X) could be
a. 1/4X.
b. 1/3X.
c. 1/2X.
d. 1X.
e. none of the above
ANS: A PTS: 1 DIF: Difficulty: Challenging
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application
100. 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
ANS: B PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Comprehension
102. 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 most
likely to be
a. less than 5Y.
b. more than 1/5Y but less than 5Y.
c. more than 5Y
d. less than 1/5Y but more than zero.
ANS: C PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application
103. 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
ANS: C PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application
104. 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
ANS: A PTS: 1 DIF: Difficulty: Challenging
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
105. 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
ANS: D PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application
106. If an economy is operating on its production possibilities frontier (PPF), are there any unemployed
resources in the economy?
a. Yes, because if there weren't any unemployed resources the economy would be producing
beyond its PPF.
b. No, because if there were any unemployed resources the economy would be producing
below its PPF.
c. It depends on whether the economy's PPF is a concave (downward-sloping) curve or a
straight line.
d. Yes, because there are always some natural resources that are unemployed.
e. The answer is "yes," but not for any of the reasons specified in answers a through d.
ANS: B PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application
108. 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
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
109. Which of the following is not true about production possibilities frontiers?
a. moving from one point to another on a PPF incurs a tradeoff
b. economic growth is shown by shifting the PPF outward
c. unemployment of resources is shown by shifting the PPF inward
d. a PPF can shift inward or outward
ANS: C PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Comprehension
110. Country X has a high unemployment rate. It follows that country X is operating
a. beyond its production possibilities frontier (PPF).
b. on its PPF.
c. inside (below) its PPF.
d. at a productive efficient point.
e. b and d
ANS: C PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Comprehension
111. Country 1 produces two goods, A and B. Country 2 produces the same two goods. Currently, country 1
produces 100A and 200B and country 2 produces 300A and 700B. Which of the following statements is
true?
a. If country 1 is on its production possibilities frontier, then country 2 must be on its PPF, too.
b. The PPF for country 1 is necessarily closer to the origin (or further to the left) than the PPF
for country 2.
c. If country 1 is productive inefficient, then so is country 2.
d. Country 2 is operating on its PPF, but country 1 is clearly not operating on its PPF.
e. none of the above
ANS: E PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application
112. If Sean can bake bread at a lower opportunity cost than Jason, and Jason can produce paintings at a lower
opportunity cost than Sean, it follows that
a. Sean has a comparative advantage in paintings and Jason has a comparative advantage in
baking bread.
b. Both Sean and Jason have a comparative advantage in baking bread.
c. Both Sean and Jason have a comparative disadvantage in producing paintings.
d. Sean has a comparative advantage in baking bread and Jason has a comparative advantage
in producing paintings.
e. There is not enough information to answer the question.
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
113. Carlos can produce the following combinations of X and Y: 10X and 10Y, 5X and 15Y, and 0X and
20Y. The opportunity cost of one unit of X for Carlos is
a. 1 unit of Y.
b. 2 units of Y.
c. 1/2 unit of Y.
d. 1/4 unit of Y.
e. none of the above
ANS: A PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application
114. Keisha can produce the following combinations of X and Y: 100X and 20Y, 50X and 30Y, or 0X and
40Y. The opportunity cost of one unit of Y for Keisha is
a. 5 units of X.
b. 0.2 units of X.
c. 3 units of X.
d. 1/2 unit of X.
e. none of the above
ANS: A PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application
115. Michael can produce the following combinations of X and Y: 10X and 10Y, 5X and 15Y, and 0X and
20Y. Vernon can produce the following combinations of X and Y: 100X and 20Y, 50X and 30Y, or 0X
and 40Y. It follows that
a. Michael has the comparative advantage in producing X and Vernon has the comparative
advantage in producing Y.
b. Michael has the comparative advantage in producing Y and Vernon has the comparative
advantage in producing X.
c. Neither Michael nor Vernon has a comparative advantage in producing X.
d. Neither Michael nor Vernon has a comparative advantage in producing Y.
e. There is not enough information to answer the question.
ANS: B PTS: 1 DIF: Difficulty: Challenging
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application
116. A person has a comparative advantage in the production of a good when they can produce the product at
a(n) ________ opportunity cost compared to another person.
a. higher
b. increasing
c. lower
d. equal
ANS: C PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Knowledge
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
117. Between 1910 and today, the number of farmers in the United States _____________ dramatically as a
result of ___________________ in farming in the twentieth century.
a. dropped; technological improvements
b. rose; technological improvements
c. dropped; technological declines
d. rose; technological declines
ANS: A PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Analytic LOC: DISC: Productivity and growth
KEY: Bloom's: Knowledge
118. Suppose Andrea is taking just two courses and is at a point on her PPF of grades for those two courses.
Now this PPF shifts inward and Andrea moves to a point on the new PPF. Then it is impossible for
a. both of her grades to fall.
b. both of her grades to rise.
c. one of her grades to rise and the other grade to fall.
d. one of her grades to fall while the other grade stays constant.
ANS: B PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application MSC: Economics 24/7
119. Suppose Andrea is taking just two courses and is at a point inside her PPF of grades for those two
courses. If Andrea changes her work habits then it is impossible for
a. either one of her grades to rise.
b. both of her grades to rise.
c. both of her grades to fall.
d. either one of her grades to rise while the other grade remains constant.
e. none of the above is impossible in this situation
ANS: E PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application MSC: Economics 24/7
Exhibit 2-8
Maria Maya
Good X Good Y Good X Good Y
90 0 60 0
60 30 40 10
30 60 20 20
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
121. Refer to Exhibit 2-8. Who has the comparative advantage in the production of good X?
a. Maria
b. Maya
c. Both Maria and Maya
d. Neither Maria nor Maya
ANS: B PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application
122. Refer to Exhibit 2-8. Who has the comparative advantage in the production of good Y?
a. Maria
b. Maya
c. Both Maria and Maya
d. Neither Maria nor Maya
ANS: A PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application
123. Refer to Exhibit 2-8. If Maria and Maya each specialize in the good in which she has a comparative
advantage and then engage in trade, ____________________ can consume a combination of goods that
lies beyond her PPF.
a. Maria, but not Maya,
b. Maya, but not Maria,
c. both Maria and Maya
d. neither Maria nor Maya
ANS: C PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application NOT: New
124. Refer to Exhibit 2-8. For Maya, the opportunity cost of producing one unit of good X is ___________
unit(s) of good Y.
a. 2.00
b. 1.00
c. 10.00
d. 0.50
ANS: D PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application NOT: New
125. Refer to Exhibit 2-8. For Maria, the opportunity cost of producing one unit of good X is ___________
unit(s) of good Y.
a. 2.00
b. 1.00
c. 10.00
d. 0.50
ANS: B PTS: 1 DIF: Difficulty: Moderate
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
126. Refer to Exhibit 2-8. For Maya, the opportunity cost of producing one unit of good Y is ___________
unit(s) of good X.
a. 2.00
b. 1.00
c. 10.00
d. 0.50
ANS: A PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application NOT: New
127. Refer to Exhibit 2-8. For Maria, the opportunity cost of producing one unit of good Y is ___________
unit(s) of good X.
a. 2.00
b. 1.00
c. 10.00
d. 0.50
ANS: B PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application NOT: New
Exhibit 2-9
Alex Adam
Good A Good B Good A Good B
0 300 0 160
25 225 30 120
50 150 60 80
75 75 90 40
100 0 120 0
128. Refer to Exhibit 2-9. Who has the comparative advantage in the production of good A?
a. Alex
b. Adam
c. Both Alex and Adam
d. Neither Alex nor Adam
ANS: B PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application
129. Refer to Exhibit 2-9. Who has the comparative advantage in the production of good B?
a. Alex
b. Adam
c. Both Alex and Adam
d. Neither Alex nor Adam
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
130. Refer to Exhibit 2-9. If Alex and Adam each specialize in the good in which he has a comparative
advantage and then engage in trade, ____________________ can consume a combination of goods that
lies beyond his PPF.
a. Alex, but not Adam,
b. Adam, but not Alex
c. Alex and Adam
d. neither Alex nor Adam
ANS: C PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application NOT: New
131. Refer to Exhibit 2-9. For Alex, the opportunity cost of producing one unit of good A is ____________
unit(s) of good B.
a. 3.00
b. 0.33
c. 0.75
d. 1.33
ANS: A PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application NOT: New
132. Refer to Exhibit 2-9. For Alex, the opportunity cost of producing one unit of good B is ____________
unit(s) of good A.
a. 3.00
b. 0.33
c. 0.75
d. 1.33
ANS: B PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application NOT: New
133. Refer to Exhibit 2-9. For Adam, the opportunity cost of producing one unit of good B is ____________
unit(s) of good A.
a. 3.00
b. 0.33
c. 0.75
d. 1.33
ANS: C PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic LOC: DISC: Scarcity, tradeoffs, and opportunity cost
KEY: Bloom's: Application NOT: New
134. Refer to Exhibit 2-9. For Adam, the opportunity cost of producing one unit of good A is ____________
unit(s) of good B.
a. 3.00
b. 0.33
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
TRUE/FALSE
1. A decrease in unemployment causes the PPF to shift outward (to the right).
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.
3. Production possibilities curves can shift outward but they do not shift inward.
4. Productive efficiency implies that more of one good can not be produced without a loss of production of
the other good.
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.
6. It is possible for one person to have a comparative advantage in the production of both goods being
produced.
7. A decrease in the quantity of resources available causes a movement down along a given PPF.
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
8. The law of increasing opportunity cost helps to explain why PPF’s are typically bowed-outward.
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.
10. A production possibilities frontier separates an attainable region from an unattainable region.
11. It is possible through trade for a country to consume a combination of goods that lies beyond its
production possibilities frontier.
12. When an economy is not using all of its resources, it is producing at a point below its production
possibilities frontier.
ESSAY
1. Give a definition of an advance in technology. Suppose that you are drawing a PPF for civilian goods
and military goods, describe the effect on the PPF of an advance in technology in both civilian goods and
military goods. How would the impact on the PPF be different if the technological improvement only
helped in the production of military goods, but not civilian goods?
ANS:
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.
2. Why is the production possibilities frontier (PPF) typically bowed-outward? Under what circumstances
would the PPF be a straight line?
ANS:
The PPF is typically bowed-outward due to the law of increasing opportunity costs. As more of a product
is produced, it becomes increasingly more difficult to find resources that are well-suited to producing
that product. Therefore, the opportunity cost of producing more units grows and the PPF becomes
steeper and steeper. The PPF is a straight line when the resources used to produce the two products are
perfectly interchangeable, and thus the opportunity cost of producing more units is constant.
3. Using your own words, describe the law of increasing opportunity costs. Be sure to explain why this
phenomenon occurs and how it helps to contribute to the shape of the production possibilities frontier.
ANS:
People (and other resources) have varying abilities when it comes to producing a given product which
results in a non-constant opportunity cost. Those resources that are better suited at making the product
will have a lower opportunity cost than those who are less-suited. As more of a product is produced, it
becomes increasingly more difficult to find resources that are well-suited to producing that product.
Therefore, the opportunity cost of producing more units grows as additional units are produced. and the
PPF becomes steeper and steeper. The result is that the PPF is typically bowed-outward due to the law
of increasing opportunity costs.
4. Explain what productive efficiency means. Describe how productive efficiency is represented by a
PPF.
ANS:
An economy is producing efficiently if it is producing the maximum amount of output with a set amount
of resources and technology. Efficiency is represented by all of the points that lie along the PPF.
5. Explain how a technological advancement in one sector of the economy can lead to a change in the
number of people who work in another sector of the economy. Give an example to help support your
answer.
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or posted to a publicly accessible website, in whole or in part.
6. Assume that two products are being produced: benches and chairs. Create a table that illustrates
constant opportunity costs in the production of these two goods. Draw a production possibilities
frontier (PPF) based on the data in your table and explain the condition necessary for a PPF to exhibit
constant opportunity costs.
ANS:
The following table illustrates constant opportunity costs:
Benches Chairs
0 160
10 120
20 80
30 40
40 0
The PPF associated with this table would be a downward-sloping straight line with one axis labeled
“Benches” and the other axis labeled “Chairs”. The opportunity cost in this example is a constant rate
of 4 chairs forfeited for every one bench produced. In order for a PPF to exhibit constant opportunity
costs, the resources used to produce the products must be equally well-suited to the production of both
products.
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated,
or posted to a publicly accessible website, in whole or in part.