Question 1

Suppose an economy can produce only two goods: pizzas and colas. If the production possibilities frontier (PPF) is bowed outward, what does this imply about the opportunity cost of producing pizzas as more pizzas are produced?

Accepted Answer

The opportunity cost of producing pizzas increases as more pizzas are produced.

Question 2

Which of the following points is unattainable for an economy, given its current resources and technology, according to the production possibilities frontier (PPF)?

Accepted Answer

A point outside the PPF.

Question 3

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

Accepted Answer

Resources are being used inefficiently.

Question 4

Suppose the opportunity cost of producing 1 cola is 2 pizzas. What is the opportunity cost of producing 1 pizza?

Accepted Answer

$$0.5$$

Question 5

Which of the following best describes allocative efficiency?

Accepted Answer

Producing the combination of goods and services most highly valued by society.

Question 6

If the marginal benefit of producing an additional unit of a good is greater than its marginal cost, what should the economy do to achieve allocative efficiency?

Accepted Answer

Increase production of the good.

Question 7

Economic growth is illustrated on a PPF diagram by:

Accepted Answer

A shift of the PPF outward.

Question 8

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

Accepted Answer

A student spends an hour studying for economics instead of working at a part-time job.

Question 9

Suppose Liz can produce 30 smoothies or 15 salads per hour, and Joe can produce 20 smoothies or 10 salads per hour. Who has the comparative advantage in producing salads?

Accepted Answer

Joe, because his opportunity cost of producing a salad is lower.

Question 10

If a country specializes in producing the good in which it has a comparative advantage and trades with another country, what is the result?

Accepted Answer

Both countries can consume outside their individual PPFs.

Question 11

Which of the following statements about absolute advantage is correct?

Accepted Answer

A person with an absolute advantage can produce more of a good with the same resources.

Question 12

The marginal cost of producing a good is calculated as:

Accepted Answer

The increase in total cost divided by the increase in quantity produced.

Question 13

Which of the following is NOT a function of markets in economic coordination?

Accepted Answer

Ensuring all resources are owned by the government.

Question 14

Property rights are important in a market economy because they:

Accepted Answer

Allow individuals to own and control resources.

Question 15

If the marginal benefit curve is downward sloping and the marginal cost curve is upward sloping, allocative efficiency occurs where:

Accepted Answer

Marginal benefit equals marginal cost.

Question 16

Which of the following best explains why the PPF is typically bowed outward?

Accepted Answer

Resources are not equally productive in all activities.

Question 17

Suppose a country moves from a point inside its PPF to a point on the PPF. What does this represent?

Accepted Answer

A more efficient use of resources.

Question 18

If the opportunity cost of producing an additional unit of a good increases as more is produced, this is an example of:

Accepted Answer

Increasing opportunity cost.

Question 19

Which of the following is a direct result of economic growth?

Accepted Answer

The PPF shifts outward.

Question 20

If two countries specialize according to their comparative advantage and trade, what happens to their combined production possibilities?

Accepted Answer

They can consume at points outside their individual PPFs.

Production Possibilities, Opportunity Cost, and Economic Coordination

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