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

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

$$18$$ barrels of ethanol

Question 3

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

Accepted Answer

The country is not using all its resources efficiently.

Question 4

Which of the following statements about opportunity cost is correct?

Accepted Answer

Opportunity cost is the value of the next best alternative forgone.

Question 5

A linear PPF indicates that:

Accepted Answer

Opportunity cost is constant.

Question 6

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 7

Which of the following best describes allocative efficiency?

Accepted Answer

Producing at a point where marginal benefit equals marginal cost.

Question 8

If technological change increases the productivity of corn but not cars, how does the PPF shift?

Accepted Answer

The vertical intercept (corn) shifts upward, but the horizontal intercept (cars) does not change.

Question 9

What is the opportunity cost of economic growth, as illustrated by a shift in the PPF?

Accepted Answer

Forgone current consumption

Question 10

Suppose a country decides to produce more capital goods and fewer consumption goods this year. What is the likely long-term effect on its PPF?

Accepted Answer

The PPF will shift outward more rapidly in the future.

Question 11

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

Harry must give up 5 percentage points in his economics grade to play one more hour of tennis.

Question 12

Which of the following is true about points outside the PPF?

Accepted Answer

They are unattainable with current resources and technology.

Question 13

If the marginal benefit (MB) of a good decreases as more of it is consumed, this illustrates:

Accepted Answer

The law of diminishing marginal benefit.

Question 14

Which of the following scenarios best illustrates increasing opportunity cost?

Accepted Answer

The PPF is bowed outward.

Question 15

If a country moves from a point inside the PPF to a point on the PPF, what happens?

Accepted Answer

Production efficiency increases.

Question 16

Which of the following is NOT a reason for the PPF to shift outward?

Accepted Answer

A decrease in available resources.

Question 17

If the opportunity cost of producing good X in terms of good Y is increasing, what does the PPF look like?

Accepted Answer

It is bowed outward.

Question 18

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

Accepted Answer

Resources are not equally suited to producing all goods.

Question 19

At the point where the marginal benefit equals the marginal cost on the PPF, what is achieved?

Accepted Answer

Allocative efficiency

Question 20

If a country experiences unusually good weather for growing corn, what happens to its PPF if corn is on the vertical axis and cars on the horizontal axis?

Accepted Answer

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

Production Possibilities Frontier and the Economic Problem

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