Question 1

Which of the following best describes the production possibilities frontier (PPF)?

Accepted Answer

A curve showing all combinations of two goods that can be produced using all available resources efficiently.

Question 2

Suppose Brazil increases food production from 2 tonnes per day to 3 tonnes per day, and the opportunity cost is 14 barrels of ethanol per day. What does this illustrate about the PPF?

Accepted Answer

The opportunity cost of food increases as more food is produced, indicating a bowed-outward PPF.

Question 3

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

Accepted Answer

Resources are not being used efficiently.

Question 4

Given the following PPF data for food (kg/month) and sunscreen (litres/month): (300,0), (200,50), (100,100), (0,150), what is the opportunity cost of producing 50 more litres of sunscreen?

Accepted Answer

$$100$$ 	ext{ kg of food}$

Question 5

Which of the following statements about opportunity cost is correct?

Accepted Answer

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

Question 6

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

Accepted Answer

$$20$$ 	ext{ units of Y}$

Question 7

At what point on the PPF is allocative efficiency achieved?

Accepted Answer

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

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

Accepted Answer

Resources are not equally productive in all uses, leading to increasing opportunity costs.

Question 10

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

Accepted Answer

The PPF will shift outward more rapidly in the future.

Question 11

Refer to the graph where marginal benefit (MB) and marginal cost (MC) intersect at 2.5 million pizzas and a cost of 3 colas per pizza. What does this intersection represent?

Accepted Answer

The efficient quantity of pizzas, where MB = MC.

Question 12

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 13

Which of the following is NOT a source of economic growth?

Accepted Answer

Increasing current consumption at the expense of capital accumulation.

Question 14

The opportunity cost of economic growth, as illustrated in the PPF graph with two countries, is:

Accepted Answer

Forgone current consumption.

Question 15

If a country is operating on its PPF, which of the following statements is true?

Accepted Answer

The country is using all its resources efficiently.

Question 16

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

Accepted Answer

An increase in production efficiency.

Question 17

Which of the following real-world scenarios best illustrates the concept of increasing opportunity cost?

Accepted Answer

A farmer reallocates land from wheat to corn, and each additional acre produces less corn and loses more wheat.

Production Possibilities Frontier and the Economic Problem: Study Notes

Study Guide - Practice Questions

Study Guide - Flashcards