Question 1

Which of the following best describes the production possibilities frontier (PPF)?

Accepted Answer

A curve showing the maximum attainable combinations of two goods that can be produced with available resources and technology.

Question 2

If an economy is producing at a point inside its PPF, what does this indicate?

Accepted Answer

Resources are not being used efficiently.

Question 3

Suppose Brazil increases food production from 2 tonnes per day to 3 tonnes per day, and ethanol production falls from 54 barrels to 40 barrels per day. What is the opportunity cost of producing the additional tonne of food?

Accepted Answer

$$\frac{54 - 40}{3 - 2} = 14$$ barrels of ethanol

Question 4

A linear PPF implies which of the following about opportunity cost?

Accepted Answer

Opportunity cost is constant.

Question 5

If the marginal cost (MC) of producing one more unit of good X is $$\frac{20}{3}$$ units of good Y, what is the opportunity cost of producing 3 more units of X?

Accepted Answer

$$20$$ units of Y

Question 6

Which of the following statements about the marginal benefit (MB) of a good is correct?

Accepted Answer

The more we have of any good, the smaller is its marginal benefit.

Question 7

Allocative efficiency is achieved when:

Accepted Answer

Marginal benefit equals marginal cost.

Question 8

Which of the following would cause an outward shift of the PPF?

Accepted Answer

Technological improvement in the production of one or both goods.

Question 9

If unusually good weather increases corn yields but does not affect car production, how does the PPF shift?

Accepted Answer

The vertical intercept of the PPF shifts upward but the horizontal intercept does not shift.

Question 10

The opportunity cost of economic growth, as illustrated by a PPF, is:

Accepted Answer

Forgone current consumption

Question 11

Suppose a country decides to produce more capital goods and fewer consumption goods. In the long run, this will likely result in:

Accepted Answer

A greater outward shift of the PPF.

Question 12

If Harry’s marginal cost of playing tennis for 7 hours a week is 5 percentage points in economics, what does this mean?

Accepted Answer

For each additional hour spent playing tennis, Harry’s grade in economics falls by 5 percentage points.

Question 13

Which of the following is NOT a feature of the PPF?

Accepted Answer

Points outside the PPF are attainable with current resources.

Question 14

If the opportunity cost of producing good X increases as more of X is produced, the PPF is:

Accepted Answer

Bowed outward.

Question 15

Which of the following best explains why the marginal cost of production generally increases as more of a good is produced?

Accepted Answer

Resources are not equally suited to producing all goods.

Question 16

A point outside the PPF represents:

Accepted Answer

An unattainable combination of goods with current resources.

Question 17

If a country is currently producing at a point on its PPF, what must be true?

Accepted Answer

It is using all its resources efficiently.

Question 18

Which of the following would NOT cause the PPF to shift outward?

Accepted Answer

A decrease in the labor force.

Question 19

If the marginal benefit of a good is greater than its marginal cost, what should be done to achieve allocative efficiency?

Accepted Answer

Increase production of the good.

Question 20

Which of the following is an example of a real-world opportunity cost?

Accepted Answer

A farmer who plants wheat on a field cannot use the same field to plant corn.

Production Possibilities Frontier and the Economic Problem

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