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

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

Accepted Answer

Resources are not being used efficiently.

Question 3

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

$$\frac{54 - 40}{3 - 2} = 14$$ barrels of ethanol$

Question 4

A linear PPF implies which of the following about opportunity cost?

Accepted Answer

Opportunity cost is constant.

Question 5

If the marginal cost (MC) of producing one more unit of good X is 4 units of good Y, what is the opportunity cost of producing one more unit of X?

Accepted Answer

$$4$$ units of Y

Question 6

Which of the following statements about the PPF is correct?

Accepted Answer

Points outside the PPF are unattainable with current resources.

Question 7

What does the point where the marginal benefit (MB) curve intersects the marginal cost (MC) curve represent?

Accepted Answer

Allocative efficiency

Question 8

If a country invests more in capital goods today, what is the likely effect on its PPF in the future?

Accepted Answer

The PPF will shift outward.

Question 9

Which of the following is an example of economic growth?

Accepted Answer

An outward shift of the PPF due to technological improvement.

Question 10

If the opportunity cost of producing food increases as more food is produced, what does the PPF look like?

Accepted Answer

Bowed outward

Question 11

Suppose a country can produce either 100 units of food or 150 units of sunscreen per month. If the country is currently producing 100 units of food and 100 units of sunscreen, what is the opportunity cost of producing 50 more units of sunscreen?

Accepted Answer

$$100$$ units of food

Question 12

Which of the following best explains why the marginal benefit of a good decreases as more of it is consumed?

Accepted Answer

The more we have of any good, the less we are willing to pay for an additional unit.

Question 13

If unusually good weather increases corn production but does not affect car production, how does the PPF shift?

Accepted Answer

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

Question 14

What is the opportunity cost of economic growth as illustrated by the PPF?

Accepted Answer

Forgone current consumption

Question 15

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 16

Which of the following is true about allocative efficiency?

Accepted Answer

It occurs where marginal benefit equals marginal cost.

Question 17

If a country moves from a point inside its PPF to a point on the PPF, what does this represent?

Accepted Answer

An improvement in production efficiency.

Question 18

Which of the following would cause an outward shift of the PPF?

Accepted Answer

Technological advancement in production.

Question 19

If the opportunity cost of producing good X in terms of good Y is $$\frac{20}{3}$$ units of Y, what is the marginal cost of producing one more unit of X?

Accepted Answer

$$\frac{20}{3}$$ units of Y

Question 20

Which of the following best describes scarcity in economics?

Accepted Answer

Limited resources relative to unlimited wants.

Chapter 2 The Economic Problem: Production Possibilities, Opportunity Cost, and Economic Growth

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