Microecon CH 3

The production possibilities frontier is the boundary between the

rational and irrational choices facing a society.

wanted and unwanted combinations of goods and services.

attainable and unattainable combinations of goods and services.

goods and services that the economy can produce.

affordable and unaffordable combinations of production.

attainable and unattainable combinations of goods and services.

When drawing a production possibilities frontier, which of the following is held constant?

the amount of money in the economy

the prices of goods and services

the available factors of production and the state of technology

the quantity of the goods and services that are produced

None of the above because nothing is held constant when drawing the production possibilities frontier.

the available factors of production and the state of technology

The table above gives four production possibilities for airplanes and cruise ships. In possibility A, how many resources are devoted to the production of airplanes?

most

few

0

all

It is impossible to tell without more information about the prices of airplanes and cruise ships.

all

The table above gives four production possibilities for airplanes and cruise ships. In possibility A, how many resources are devoted to the production of cruise ships?

0

most

all

few

It is impossible to tell without more information about the prices of airplanes and cruise ships.

0

Assume that an association of young workers has lobbied Congress to require that all workers retire once they reach the age of fifty. What impact would this law have on the nation's production possibilities frontier?

no impact at all

The number of young workers would increase so the production possibilities frontier would shift outward.

The production possibilities frontier would shift inward.

The level of unemployment would decrease so the production possibilities frontier would shift outward.

The nation would move to a new position on its production possibilities frontier but the frontier itself would not shift.

The production possibilities frontier would shift inward.

If there is unemployment in an economy, then the

production possibilities frontier must be bowed inward.

economy is producing at a point inside the production possibilities frontier.

economy is operating at an unattainable point.

production possibilities frontier will shift inwards.

production possibilities frontier will shift outwards.

economy is producing at a point inside the production possibilities frontier.

The table above shows a production possibilities frontier for an economy. Which of the following combinations is unattainable?

0 loaves of bread and 800 books

0 loaves of bread and 0 books

200 loaves of bread and 800 books

300 loaves of bread and 200 books

100 loaves of bread and 800 books

200 loaves of bread and 800 books

The table above shows a production possibilities frontier for an economy. If the economy tried to produce a combination of 250 loaves of bread and 800 books,

it is enjoying a free lunch.

the tradeoff between bread and books is inefficient.

there is some unemployment.

there is full employment.

it cannot produce this combination because it lacks enough resources or technology.

it cannot produce this combination because it lacks enough resources or technology.

The figure above shows the production possibilities frontier for a country. In order for it to produce at point E, the

production of compact cars would need to decrease.

production of SUVs would need to decrease.

country would need to acquire more resources and/or more advanced technology.

country would need to use its resources more efficiently.

country would need to determine that compact cars and SUVs are equally important to it.

 country would need to acquire more resources and/or more advanced technology.

The figure above shows the production possibilities frontier for a country. If the country is producing at point D, then the

technology associated with producing SUVs and compact cars is advancing.

resources are not being used efficiently and/or are unemployed.

production of SUVs and compact cars is maximized.

resources are being used efficiently

None of the above answers is correct because it is not possible to produce at point D.

resources are not being used efficiently and/or are unemployed.

On a production possibilities frontier, 500 pounds of apples and 1,200 pounds of bananas can be produced while at another point on the same frontier, 300 pounds of apples and 1,300 pounds of bananas can be produced. Between these points, what is the opportunity cost of producing a pound of bananas?

0.5 a pound of apples

2 pounds of apples

12/5 = 2.4 pounds of apples

200 pounds of apples

2 pounds of bananas

2 pounds of apples

he table above shows a nation's production possibilities frontier. If the nation wants to produce 4 robots and 34 pizzas,

the opportunity cost is 9 pizzas.

the nation will be producing inefficiently.

the nation will then be producing at a production efficient point.

it will be unable to do so because the production point is unattainable.

it will shift the production possibilities frontier.

it will be unable to do so because the production point is unattainable.

The table above shows a nation's production possibilities frontier. If the nation chooses to increase the production of robots from 2 to 3 and it is on its PPF, it will have to forgo ________ pizzas.

34

35.5

3

37

None of the above answers is correct.

3

The table above shows a nation's production possibilities frontier. The opportunity cost of a robot between combination D and E is

1/4 of a pizza.

34 pizzas.

30 pizzas.

4 pizzas.

undefined because neither point is production efficient.

4 pizzas.

The figure above shows the production possibilities frontier for a country. The opportunity cost of a gallon of milk between combination point A and B is

1/3 of a gallon of ice cream for a gallon of milk.

1 gallon of ice cream for a gallon of milk.

4 gallons of ice cream for a gallon of milk.

3 gallons of ice cream for a gallon of milk.

zero because at point A, zero milk is being produced.

1/3 of a gallon of ice cream for a gallon of milk.

The figure above shows the production possibilities frontier for a country. If the economy is operating at point B, then the opportunity cost of another million gallons of milk is

1 gallon of ice cream for a gallon of milk.

3 gallons of ice cream for a gallon of milk.

1/3 of a gallon of ice cream for a gallon of milk.

4 gallons of ice cream for a gallon of milk.

zero because after producing another million gallons of milk, then zero gallons of ice cream are produced.

1/3 of a gallon of ice cream for a gallon of milk.

Suppose India and France have the same PPF, shown in the figure above. Based on their current production points, which is India's most likely future PPF?

PPF₂

PPF₀

PPF₁

either PPF₀ or PPF₁

None of the above because economic growth will not happen in India.

PPF₂

In the table above, how many jackets must Mary forgo for every dress she makes?

3/4 of a jacket

2/3 of a jacket

1 1/2 jackets

12 jackets

8 jackets

1 1/2 jackets

In the table above, how many jackets must Mark forgo for every dress he makes?

2/3 of a jacket

16 jackets

24 dresses

1 1/2 jackets

1 jacket

2/3 of a jacket

In the above table, for Mary the opportunity cost of producing a dress is ________ and the opportunity cost for Mark of producing a dress is ________.

1 1/2 jackets; 2 1/2 jackets

1 jacket; 1 jacket

1 dress; 1 dress

1 1/4 jackets; 1/2 of a jacket

1 1/2 jackets; 2/3 of a jacket

1 1/2 jackets; 2/3 of a jacket

Deb and Pete have volunteered to help their favorite charity mail out fundraiser information. The figure above shows their production possibilities frontiers for assembling packets and stuffing envelopes. If Deb spends all her time assembling packets, how many can she assemble?

64

32

40

160

22

40

Deb and Pete have volunteered to help their favorite charity mail out fundraiser information. The figure above shows their production possibilities frontiers for assembling packets and stuffing envelopes. What is Deb's opportunity cost of assembling 1 packet?

 

4 packets

 

160 envelopes

 

40 envelopes

 

1/4 of an envelope

 

4 envelopes

4 envelopes

Deb and Pete have volunteered to help their favorite charity mail out fundraiser information. The figure above shows their production possibilities frontiers for assembling packets and stuffing envelopes. Which of the following statements is correct?

Deb has an absolute advantage in both assembling packets and stuffing envelopes.

Pete has an absolute advantage in both assembling packets and stuffing envelopes.

Deb has a comparative advantage in both assembling packets and stuffing envelopes.

Deb has a comparative advantage in stuffing envelopes.

Deb has a comparative advantage in assembling packets.

Deb has a comparative advantage in stuffing envelopes.

Deb and Pete have volunteered to help their favorite charity mail out fundraiser information. The figure above shows their production possibilities frontiers for assembling packets and stuffing envelopes. If Deb and Pete specialize and trade, how many packets will be assembled?

more than 80 and less than 160

40

160

more than 40 and less than 80

80

160

By specializing and trading, a country is able to

produce but not to consume combinations of goods that lie beyond its production possibilities frontier.

obtain the absolute advantage in the goods it produces.

consume but not to produce combinations of goods that lie beyond its production possibilities frontier.

both produce and consume combinations of goods that lie beyond its production possibilities frontier.

neither produce nor consume combinations of goods that lie beyond its production possibilities frontier.

consume but not to produce combinations of goods that lie beyond its production possibilities frontier.

Which of the following best describes comparative advantage?

having the largest number of resources compared to other countries

using the fewest number of resources to produce a given amount of output

being able to produce more output than any other country

forgoing the fewest units of one product to produce a unit of another product

It is the same as absolute advantage.

forgoing the fewest units of one product to produce a unit of another product

The table above presents the production possibilities frontier for a nation. Using the information in the table, when moving from possibility A to B to C to ultimately E, the cost of a unit of capital goods in terms of consumption goods

remains the same.

increases.

decreases.

decreases from possibility A to C, and then increases from possibility C to D.

cannot be calculated.

increases.

If the production possibilities frontier between bottled water and water in a jug is a straight line, which of the following statements would be correct?

A large amount of unemployment must exist.

There is no tradeoff between the two goods.

Resources are equally productive at producing either product.

There is no decrease in the production of one good when the production of the other is increased.

Producing more of one good gives the economy a free lunch.

Resources are equally productive at producing either product.

The fact of increasing opportunity cost when moving on the PPF means that

the PPF will be a negatively sloped straight line.

when the government forces a movement from one point on the PPF to another point, no production is lost.

to increase the production of one product requires smaller and smaller sacrifices of the other good.

to increase the production of one product requires larger and larger sacrifices of the other good.

to decrease the production of one product requires smaller and smaller sacrifices of the other good.

to increase the production of one product requires larger and larger sacrifices of the other good.

A point on the production possibilities frontier reflects an

attainable point without full employment of all resources.

unattainable point with full employment of all resources.

unattainable point without full employment of all resources.

attainable point with full employment of all resources.

None of the above answers is correct.

attainable point with full employment of all resources.

The figure above shows the production possibilities frontiers for the United Kingdom and France. If the United Kingdom and France specialize and engage in trade, the United Kingdom will produce ________ and France will produce ________.

wheat; wheat

fish; wheat

wheat; fish

fish; fish

both wheat and fish; both wheat and fish

fish; wheat

For country Gamma the opportunity cost for producing 1 computer is 10 tons of steel. For country Beta the opportunity cost for producing 1 computer is 6 tons of steel. Which country has the comparative advantage in the production of steel?

Gamma

Beta

Both have the comparative advantage in the production of steel.

Neither country has the comparative advantage in the production of steel.

More information is needed to determine which of the two nations has the comparative advantage.

Gamma

If an economy cannot produce more of one good without producing less of another good, this implies that which of the following has been achieved?

production efficiency

allocative efficiency

minimum marginal cost

maximum marginal benefit

PPF efficiency

production efficiency

The bowed out (concave) shape of the production possibilities curve implies that as production of one good

increases, society must forgo increasing amounts of another good.

increases, production of other goods increases as well.

increases, society must forgo decreasing amounts of another good.

increases, society can obtain a free lunch.

decreases, production of other goods decreases as well.

increases, society must forgo increasing amounts of another good.

Scott and Cindy both produce only pizza and tacos. In one hour, Scott can produce 20 pizzas or 40 tacos. In one hour, Cindy can produce 30 pizzas or 40 tacos. Based on these data

Cindy has a comparative advantage at producing tacos.

Scott has a comparative advantage at producing tacos.

Cindy and Scott have the same comparative advantage in producing tacos.

neither Cindy nor Scott has a comparative advantage in producing tacos.

Cindy and Scott have the same comparative advantage in producing pizzas.

Scott has a comparative advantage at producing tacos.

A country produces only cans of soup and ink pens. If the country produces on its bowed outward PPF and increases the production of cans of soup, the opportunity cost of additional

cans of soup is decreasing.

cans of soup remains unchanged.

cans of soup is increasing.

ink pens is increasing.

More information is needed to determine what happens to the opportunity cost.

cans of soup is increasing.

Robinson Crusoe divides his time between catching fish and gathering fruit. Part of his production possibilities frontier is given in the above table. Mr. Crusoe, while lonesome, is efficient and always stays on his PPF. Mr. Crusoe is consuming 20 pounds of fish. Then he decides to slowly become a vegetarian and decrease his consumption of fish to 9 pounds. This decision means that Mr. Crusoe will

 

incur an opportunity cost of 99 pounds of fruit.

incur an opportunity cost of 9 pounds of fish.

incur an opportunity cost of 9 pounds of fruit.

be able to enjoy a gain of 9 pounds of fruit.

incur an opportunity cost of 20 pounds of fish.

be able to enjoy a gain of 9 pounds of fruit.

Gabriel operates a ranch in Idaho where he raises cattle and grows potatoes. The figure above illustrates his production possibilities frontier. What is Gabriel's opportunity cost of growing another ton of potatoes?

400 cows

80 cows

100 cows

1 ton of potatoes

0 cows

80 cows

The negative slope of the production possibilities frontier represents the idea

of inefficient production.

that prices rise as less is produced.

that free lunches are possible.

of tradeoffs, that in order to produce more of one good, the nation must produce less of another.

of unemployment.

of tradeoffs, that in order to produce more of one good, the nation must produce less of another.

Relative to Al, Joe has ________ if Joe can produce a good at a lower opportunity cost than Al.

more production efficiency

a comparative benefit

a free lunch

a comparative advantage

a marginal benefit

a comparative advantage

The table above gives four production possibilities for airplanes and cruise ships. In possibility A, how many resources are devoted to the production of airplanes?

few

most

all

0

It is impossible to tell without more information about the prices of airplanes and cruise ships.

all

The United States produced approximately ________ worth of goods and services in 2019.

$2,100 trillion

$210 billion

$210 trillion

$21 trillion

$21 billion

$21 trillion

The above figure shows the production possibility frontier for a country. Suppose the country is producing at point A. What would be the opportunity cost to increase the production of rice to 12 tons?

15 thousand bottles of wine

6 thousand bottles of wine

9 thousand bottles of wine

6 tons of rice

Nothing, it is a free lunch.

Nothing, it is a free lunch.

The above figure shows the production possibility frontier for a country. Suppose the country is producing at point A. What is the opportunity cost of increasing the production of rice to 12 tons?

9 thousand bottles of wine

6 thousand bottles of wine

12 tons of rice

15 thousand bottles of wine

Nothing, it is a free lunch.

6 thousand bottles of wine

Using the figure above, suppose with no trade Liz and Joe each produce at point A on their respective PPFs. Then, Joe suggests that they specialize and trade. He would produce only salads and Liz would produce only smoothies. Then, Joe says, he would buy 16 smoothies from Liz at a price of 1.5 salads per smoothie. Liz should

not accept Joe's offer, as the price he offers is too low for her to gain from trade.

accept Joe's offer since she will gain 4 smoothies and 4 salads.

accept Joe's offer since she will gain 4 salads.

accept Joe's offer, as she will be as well off as with no trade.

not accept Joe's offer since she would lose 2 smoothies and 2 salads.

accept Joe's offer since she will gain 4 smoothies and 4 salads.

The figure above shows a production possibilities frontier. In the figure, when the economy moves from point E to point D, what is the opportunity cost of a DVD?

0.25 cell phones

4 cell phones

0.5 cell phones

1 cell phone

zero

0.25 cell phones

The opportunity cost of a good increases as more of it is produced because

people want the good less as more is produced.

producing more of a good requires additional resources.

the number of forgone alternatives also increases.

there is no such thing as a free lunch.

resources are not equally productive in all activities.

resources are not equally productive in all activities.

As an economy produces more of one of the goods on a bowed out production possibilities frontier, what happens to the opportunity cost of producing the good?

It increases.

It decreases.

It remains constant.

It might increase, decrease, or remain constant depending on how much people value the additional units of the good.

None of these depicts what happens to opportunity cost.

It increases.

In terms of a nation's production possibilities frontier, what impact does international trade have?

International trade shifts the production possibilities frontier outward for the goods that are imported and inward for the goods that are exported.

International trade allows the nation to consume at a point outside its production possibilities frontier.

International trade shifts the production possibilities frontier outward for the goods that are exported and inward for the goods that are imported.

International trade shifts the nation's production possibilities frontier outward.

International trade shifts the nation's production possibilities frontier inward.

International trade allows the nation to consume at a point outside its production possibilities frontier.

If the production possibilities frontier between two goods is a straight line, then the

resources are equally productive in both goods.

opportunity cost is not a ratio.

line does not qualify as a production possibilities frontier because the unattainable production points are too close to the inefficient production points.

Both answers A and C are correct.

Both answers A and B are correct.

resources are equally productive in both goods.