Deck 2: The Production Possibility Frontier PPF

Question 1

The Production Possibility Frontier shows:

A) What customers want to buy.
B) What a firm can produce.
C) The maximum combinations of products an economy can produce with its available resources.
D) The minimum outputs of products that can be produced at any moment.

Answer 1

C

Question 2

The maximum an economy is able to produce of a product does not depend on:

A) The skills of the labour force
B) The demand
C) The level of capital
D) The level of investment

Answer 2

B

Question 3

Productive efficiency occurs when:

A) Everyone is very busy.
B) More of one product can only be produced if less of another is produced.
C) Customers are happy.
D) Costs are maximized.

Answer 3

B

Question 4

If an economy is producing within its Production Possibility Frontier:

A) It is productively inefficient.
B) Customers are spending too much.
C) The economy's resources are fully employed.
D) Firms are maximizing profits.

Question 5

An outward shift in the Production Possibility Frontier may be due to:

A) Better training of employees
B) An increase in unemployment
C) Productive inefficiency
D) A fall in demand for goods and services in the economy

Question 6

The resources of an economy at any moment:

A) Are limited.
B) Are infinite.
C) Are free.
D) Have no opportunity cost.

Question 7

An outward shift in the Production Possibility Frontier could be caused by:

A) A change in demand patterns
B) An increase in demand
C) An increase in the size of the workforce
D) A reallocation of resources between industries

Question 8

Any combination of products on the Production Possibility Frontier is productively efficient.

Question 9

An increase in demand will automatically shift the Production Possibility Frontier outwards.

Question 10

The fact that output has to be sacrificed if an economy is productively efficient as resources are switched from one industry to another highlights the concept of ___________ ____.

Question 11

If an economy is operating within its PPF:

A) It is productively efficient.
B) It can produce more of both goods with the given resources.
C) Resources are being fully utilised.
D) The economy should reduce its production.

Question 12

The opportunity cost of producing a good is:

A) The best foregone alternative
B) Its total cost
C) The cost of producing an additional unit
D) All the other potential alternatives

Question 13

Which of the following would not be an indication of productive inefficiency within an economy?

A) High levels of unemployment
B) No unemployment
C) Unused factory buildings
D) Idle machinery

Question 14

Increased investment in capital goods will likely lead to:

A) An inward shift in the PPF
B) No change in the PPF
C) An outward shift in the PPF
D) None of the above

Question 15

Which of the following is not associated with an outward shift in the PPF?

A) A reduction in the retirement age of working individuals.
B) An increase in the birth rate
C) Increased training
D) Technological progress