Question 1

Suppose an economy can produce only bikes and scooters. The production possibilities frontier (PPF) is bowed outward. What does this shape of the PPF indicate about opportunity costs?

Accepted Answer

Opportunity cost increases as more bikes are produced.

Question 2

If a point lies inside the PPF, what does this indicate about production efficiency?

Accepted Answer

Production is inefficient because some resources are not fully utilized.

Question 3

Given the following: Deangelo can produce 20 beanbags or 4 boards per hour. Christine can produce 6 beanbags or 3 boards per hour. Who has the absolute advantage in producing boards?

Accepted Answer

Deangelo, because he can produce more boards per hour.

Question 4

What is the opportunity cost for Deangelo to produce one board?

Accepted Answer

$$\frac{20}{4} = 5$$ beanbags

Question 5

If the marginal benefit of producing one more bike is greater than the marginal cost, what should the economy do?

Accepted Answer

Produce more bikes.

Question 6

Allocative efficiency is achieved when:

Accepted Answer

The marginal benefit equals the marginal cost and production is on the PPF.

Question 7

Christine’s opportunity cost of producing one board is:

Accepted Answer

$$\frac{6}{3} = 2$$ beanbags

Question 8

Which of the following best describes comparative advantage?

Accepted Answer

The ability to produce a good at a lower opportunity cost than another producer.

Question 9

If Deangelo and Christine specialize according to their comparative advantage and trade, what will happen?

Accepted Answer

Both can consume outside their individual PPFs.

Question 10

Economic growth can be illustrated on a PPF as:

Accepted Answer

An outward shift of the PPF.

Question 11

Which of the following is a cause of economic growth?

Accepted Answer

Technological change and capital accumulation.

Question 12

If the marginal benefit curve is downward sloping, what does this imply about people's preferences?

Accepted Answer

People are willing to pay less for each additional unit.

Question 13

Suppose a central planner tries to allocate resources in an economy. Which of the following is a major challenge they face?

Accepted Answer

Knowing everyone's preferences and production possibilities perfectly.

Question 14

If a country is producing at a point where marginal benefit is less than marginal cost, what should it do to achieve allocative efficiency?

Accepted Answer

Decrease production of the good.

Question 15

Which of the following statements about opportunity cost is correct?

Accepted Answer

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

Question 16

If Deangelo spends half an hour making beanbags and half an hour making boards, how many of each can he produce in one hour?

Accepted Answer

10 beanbags and 2 boards

Question 17

Which of the following is NOT a requirement for allocative efficiency?

Accepted Answer

All resources are used to produce only one good.

Question 18

If the opportunity cost of producing bikes increases as more bikes are produced, what does this imply about the resources?

Accepted Answer

Resources are not equally suited to producing both goods.

Question 19

Which of the following best describes the principle of decreasing marginal benefit?

Accepted Answer

The more people have of something, the less they are willing to pay for another unit.

Question 20

If a country’s PPF shifts outward, which of the following could be a reason?

Accepted Answer

An improvement in technology.

Production, Scarcity, and the Production Possibilities Frontier (PPF)

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