Question 1

Suppose the graph on the left shows a production possibilities frontier (PPF) that shifts 2 units to the right. What does this shift most likely represent in economic terms?

Accepted Answer

An improvement in technology or an increase in resources.

Question 2

If a point moves from inside the PPF to a point on the PPF after a shift to the right, what does this indicate about the economy?

Accepted Answer

The economy has achieved previously unattainable production levels due to growth.

Question 3

Which of the following best describes the relationship between two variables when the curve shifts outward in all directions, as shown in the 'Shifting Curves (Outward)' diagram?

Accepted Answer

There is an increase in the maximum attainable combinations of goods.

Question 4

If the PPF shifts inward, what is the most likely cause?

Accepted Answer

A natural disaster reducing available resources.

Question 5

Given a PPF that shifts to the right by 2 units, which of the following equations best represents the new curve if the original was $$y = 10 - x$$?

Accepted Answer

$$y = 10 - (x + 2)$$

Question 6

If the opportunity cost increases as you move along the PPF, what does the shape of the curve most likely look like?

Accepted Answer

A bowed-outward (concave) curve.

Question 7

Which of the following scenarios would NOT cause a shift in the PPF?

Accepted Answer

A change in consumer preferences.

Question 8

If the PPF shifts outward only along one axis, what does this indicate?

Accepted Answer

There is a technological improvement specific to the good on that axis.

Question 9

Suppose the PPF shifts inward due to a war destroying capital. What happens to the attainable combinations of goods?

Accepted Answer

They decrease.

Question 10

If a country is producing at a point inside its PPF, what does this imply?

Accepted Answer

The country is experiencing unemployment or inefficiency.

Question 11

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

Accepted Answer

Resources are not equally suited to producing all goods, leading to increasing opportunity costs.

Question 12

If the PPF shifts to the right, but the economy continues to produce at the same point as before, what is the opportunity cost of not moving to the new frontier?

Accepted Answer

The forgone increase in potential output.

Understanding Relationships Between Variables and Shifting Curves in Microeconomics

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