Question 1

Suppose Choiceland is currently producing 45 units of Good X and 900 units of Good Y. If production of Good X increases to 60 units, what is the opportunity cost of this increase?

Accepted Answer

$$300$$ units of Good Y

Question 2

Why is the production possibilities boundary (PPB) typically concave to the origin?

Accepted Answer

Because resources are not equally productive in all uses, leading to increasing opportunity costs.

Question 3

If Choiceland increases its workforce from 250 to 300 workers, what happens to its PPB?

Accepted Answer

The PPB shifts outward, reflecting increased production capacity.

Question 4

Bert can make either 2 cabinets or 1 dresser per day. Over a 5-day week, what is Bert's opportunity cost of producing one dresser?

Accepted Answer

$$2$$ cabinets

Question 5

Jerry can make either 1 cabinet or 2 dressers per day. Over a 5-day week, what is Jerry's opportunity cost of producing one cabinet?

Accepted Answer

$$2$$ dressers

Question 6

If Bert and Jerry specialize according to comparative advantage and trade at a rate of 1 cabinet for 1 dresser, what is the maximum number of cabinets and dressers each can consume in a week?

Accepted Answer

$$5$$ cabinets and $$5$$ dressers

Question 7

Suppose Jerry improves his productivity and can now make either 2 cabinets or 3 dressers per day. Does specialization and trade with Bert still provide gains?

Accepted Answer

Yes, because Jerry's opportunity cost of producing a dresser is still lower than Bert's.

Question 8

At point b on a PPB, an economy produces 2.5 units of clothing and 7 units of food. What is the opportunity cost of producing one more unit of food at this point?

Accepted Answer

$$2.5$$ units of clothing

Question 9

If a country is producing at a point inside its PPB, what does this indicate?

Accepted Answer

Not all resources are fully employed.

Question 10

If a civil war destroys most of a country's infrastructure, what happens to its PPB?

Accepted Answer

The PPB shifts inward, reflecting a loss of productive capacity.

Question 11

If a new technology doubles the ability to produce food but does not affect clothing, how does the PPB change?

Accepted Answer

The PPB shifts outward only along the food (horizontal) axis.

Question 12

If an earthquake destroys many clothing factories, what is the effect on the PPB?

Accepted Answer

The PPB shifts inward only along the clothing (vertical) axis.

Question 13

Given the following production combinations: 1000 windows and 250 doors, what is the opportunity cost of producing one door?

Accepted Answer

$$4$$ windows

Question 14

If the opportunity cost of producing one more unit of Good X increases as more of Good X is produced, what economic principle does this illustrate?

Accepted Answer

The Law of Increasing Opportunity Cost

Question 15

Suppose an economy is at a point outside its PPB. What does this indicate?

Accepted Answer

The combination of goods is unattainable with current resources.

Question 16

If Bert's opportunity cost of producing a cabinet is lower than Jerry's, and Jerry's opportunity cost of producing a dresser is lower than Bert's, what should they do to maximize their consumption?

Accepted Answer

Bert should specialize in cabinets and Jerry in dressers, then trade.

Question 17

If the opportunity cost of producing one more unit of Good Y is $$0.75$$ units of Good X, what does this imply about the trade-off between the two goods?

Accepted Answer

Producing one more unit of Good Y requires giving up $$0.75$$ units of Good X.

Question 18

If an economy moves from a point inside the PPB to a point on the PPB, what does this represent?

Accepted Answer

An increase in efficiency and full employment of resources.

Question 19

If the PPB for an economy is a straight line, what does this indicate about opportunity costs?

Accepted Answer

Opportunity costs are constant.

Question 20

Suppose at point b on a PPB, the opportunity cost of one more unit of cloth is one unit of food. What does this mean?

Accepted Answer

To produce one more unit of cloth, the economy must give up one unit of food.

Production Possibilities Frontier (PPF) & Opportunity Cost – Step-by-Step Microeconomics Guidance

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