Deck 3: The Economic Problem

Question 1

Production efficiency is represented by ________ a production possibilities frontier.

A)a movement along
B)all points on
C)only one point on
D)all points inside
E)all points outside

Answer 1

B

Question 2

While moving along a production possibilities frontier,the amount of labour ________,the amount of capital ________,and the level of technology ________.

A)varies;is fixed;is fixed
B)varies;varies;varies
C)is fixed;is fixed;is fixed
D)is fixed;is fixed;varies
E)varies;is fixed;varies

Answer 2

C

Question 3

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?

A)Allocative efficiency
B)PPF efficiency
C)Maximum marginal benefit
D)Minimum marginal cost
E)Production efficiency

Answer 3

E

Question 4

A major earthquake occurs in the central part of the United States.What impact would this have on the nation's production possibilities frontier and why?

A)A tradeoff would occur to replace the resources and goods destroyed.
B)It would shift outward because unemployment would be reduced.
C)It would not shift because people would get to work to replace any capital that was destroyed.
D)Nothing would happen because the nation would still have the same capabilities.
E)It would shift inward because some of the nation's resources,such as capital and labour,would be destroyed.

Question 5

Australia produced approximately ________ worth of goods and services in 2011.

A)$100 billion
B)$1 trillion
C)$10 trillion
D)$10 billion
E)$100 trillion

Question 6

The production possibilities frontier illustrates the

A)goods and services people want.
B)limits to people's wants.
C)amount of each good that people want to buy.
D)resources the economy possesses,but not its level of technology.
E)maximum combinations of goods and services that can be produced.

Question 7

Which of the following is an assumption used when drawing a production possibilities frontier?
I)Human wants and desires are limited to what is available.
Ii)Only two goods are considered.
Iii)The level of technology is fixed and unchanging.

A)i only
B)ii only
C)i and iii
D)ii and iii
E)i,ii,and iii

Question 8

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

A)The quantity of the goods and services that are produced
B)The amount of money in the economy
C)The available factors of production and the state of technology
D)The prices of goods and services
E)None of the above because nothing is held constant when drawing the production possibilities frontier.

Question 9

The production possibilities frontier is the boundary between the

A)rational and irrational choices facing a society.
B)wanted and unwanted combinations of goods and services.
C)affordable and unaffordable combinations of production.
D)goods and services the economy can produce.
E)attainable and unattainable combinations of goods and services.

Question 10

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

A)All
B)None
C)Few
D)Most
E)It is impossible to tell without more information about the prices of aeroplanes and cruise ships.

Question 11

Moving from one point to another on a production possibilities frontier implies

A)changing the amount of factors of production that are employed.
B)holding the production levels of both goods constant.
C)decreasing the production of both goods.
D)increasing the production of both goods.
E)increasing the production of one good and decreasing the production of another.

Question 12

In the production possibilities frontier model,an unattainable point lies

A)both on and outside the production possibilities frontier.
B)only on the production possibilities frontier itself.
C)There are no unattainable points in the production possibilities model.
D)only inside the production possibilities frontier.
E)only outside the production possibilities frontier.

Question 13

A production possibilities frontier shows

A)that if price of one good decreases,the price of the other has to increase.
B)the limits to future growth of a nation.
C)how money can be allocated among two kinds of goods.
D)that it is impossible to produce inefficiently.
E)the various combinations of output a nation can produce at a certain time,given its available resources and technology.

Question 14

Assume that an association of young workers has lobbied the federal government 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?

A)No impact at all.
B)The level of unemployment would decrease so the production possibilities frontier would shift outward.
C)The nation would move to a new position on its production possibilities frontier but the frontier itself would not shift.
D)The number of young workers would increase so the production possibilities frontier would shift outward.
E)The production possibilities frontier would shift inward.

Question 15

Consider a production possibility frontier with jeans on the vertical axis and shoes on the horizontal axis.As the country moves along the frontier closer to the horizontal axis,

A)more tradeoffs occur.
B)more shoes are produced.
C)more jeans are produced.
D)the country eventually chooses an unattainable point.
E)free lunches occur.

Question 16

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

A)All
B)None
C)Most
D)Few
E)It is impossible to tell without more information about the prices of airplanes and cruise ships.

Question 17

The production possibilities frontier is the

A)boundary between the combinations of goods and services that can be produced and the combinations that cannot be produced,given the available factors of production and the state of technology.
B)minimum output that can be produced when resources are used inefficiently.
C)maximum output that can be produced at an opportunity cost of zero.
D)boundary between the combinations of goods and services that can be produced and the combinations that cannot be produced when technology is changing.
E)maximum opportunity cost combinations of goods and services.

Question 18

In a production possibilities frontier diagram,the attainable production points are shown as

A)only the points inside the production possibilities frontier.
B)the points inside and the points on the production possibilities frontier.
C)only the points on the production possibilities frontier.
D)only the points beyond the production possibilities frontier.
E)any of the production points.

Question 19

When all of the available factors of production are being efficiently employed,the

A)economy is producing at a point beyond its PPF.
B)economy is producing at a point on its PPF.
C)PPF disappears.
D)economy is producing at a point within its PPF.
E)opportunity cost of changing production is infinite.

Question 20

In the production possibilities model,the vertical axis measures ________ and the horizontal axis measures ________.

A)the quantity of a good or service;the quantity of another good or service
B)people's wants;the quantity of a good or service
C)the quantity of a good or service;time
D)the price of a good or service;the price of another good or service
E)the price of a good or service;the quantity of the good or service

Question 21

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

A)country would need to determine that station wagons and SUVs are equally important to it.
B)country would need to use its resources more efficiently.
C)production of SUVs would need to decrease.
D)production of station wagons would need to decrease.
E)country would need to acquire more resources and/or more advanced technology.

Question 22

Point D in the above PPF figure is

A)an unattainable production combination.
B)an attainable production combination with unemployed resources.
C)More information is needed to determine which of the above answers is correct.
D)a production combination that can be attained once resources are fully employed.
E)a tradeoff.

Question 23

Which of the following correctly describes the relationship between productivity growth,unemployment,and the economy's production possibilities frontier?

A)An increase in productivity moves the economy from inside the production possibilities set to its frontier.
B)An increase in productivity shifts the economy from the production possibilities frontier to a point outside the production possibilities set.
C)A reduction in unemployment shifts the entire production possibilities frontier outward.
D)An increase in unemployment shifts the economy further inside its production possibilities set.
E)An increase in unemployment shifts the economy from a point outside the production set back to the production possibilities frontier.

Question 24

If there is unemployment in an economy,then the

A)economy is operating at an unattainable point.
B)production possibilities frontier must be bowed inward.
C)production possibilities frontier will shift outwards.
D)production possibilities frontier will shift inwards.
E)economy is producing at a point inside the production possibilities frontier.

Question 25

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

A)resources are being used efficiently.
B)technology associated with producing SUVs and station wagons is advancing.
C)production of SUVs and station wagons is maximised.
D)resources are not being used efficiently and/or are unemployed.
E)None of the above answers is correct because it is not possible to produce at point D.

Question 26

The figure above shows the production possibilities frontier for a country.A combination of 4 million litres of milk and 4 million litres of ice cream is

A)unattainable.
B)attainable and production efficient.
C)attainable and production inefficient.
D)unattainable and production efficient.
E)More information is needed to determine if the point is attainable or not.

Question 27

If a society moves from a period of time with significant unemployment to a time with full employment,its production possibilities frontier will

A)shift leftward.
B)shift rightward.
C)not shift because the society moves from one point on the frontier to a point inside the frontier.
D)not shift because the society moves from one point on the frontier to a point outside the frontier.
E)not shift because the society moves from a point inside the frontier to a point on the frontier.

Question 28

Consider a production possibility frontier with books and tables.A combination of 1,000 books and 500 tables is on the frontier.Which of the following is (are)true?
I)Production of 700 books and 400 tables is attainable but inefficient.
Ii)Production of 1,000 books and 600 tables is unattainable.
Iii)Production of 500 books and 1,000 tables is inside the frontier.

A)ii and iii
B)i,ii and iii
C)i only
D)i and ii
E)i and iii

Question 29

The figure above shows a nation's production possibilities frontier.In the figure,point A shows

A)the minimum quantity of pizza that the society must produce.
B)an attainable point with unemployed resources.
C)More information is needed to determine which of the above answers is correct.
D)the maximum quantity of pizza that can be produced.
E)an unattainable point.

Question 30

Suppose a country operates on its production possibility frontier when it produces 1,000 books and 1,000 tables.The combination of ________ reflects ________.

A)1,000 books and 1,000 tables;a free lunch.
B)500 books and 500 tables;an attainable and efficient point.
C)500 books and 1,000 tables;an inefficient but attainable point.
D)1,000 books and 500 tables;an efficient point.
E)1,000 books and 1,500 tables;a free lunch.

Question 31

The figure above shows the production possibilities frontier for a country.A combination of 3 million litres of milk and 3 million litres of ice cream is

A)unattainable.
B)attainable and production efficient.
C)attainable and production inefficient.
D)unattainable and production efficient.
E)More information is needed to determine if the point is attainable or not.

Question 32

The figure above shows the production possibilities frontier for a country.A combination of 2 million litres of milk and 2 million litres of ice cream is

A)unattainable.
B)attainable and production efficient.
C)attainable and production inefficient.
D)attainable but more than production efficient.
E)More information is needed to determine if the point is attainable or not.

Question 33

Suppose that an economy is currently producing at a point that lies inside of its production possibilities set.Which of the following would best explain this circumstance?

A)The prevailing level of technology prevents the economy from producing at a point closer to the frontier of the production possibilities set.
B)The economy does not have enough resources to produce at a point closer to the frontier of the production possibilities set.
C)The economy is experiencing a high level of unemployment.
D)Any of the above statements could explain this situation.
E)None of the above statements could explain this situation.

Question 34

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,

A)it cannot produce this combination because it lacks enough resources or technology.
B)there is full employment.
C)the tradeoff between bread and books is inefficient.
D)it is enjoying a free lunch.
E)there is some unemployment.

Question 35

A point on the production possibilities frontier reflects an

A)unattainable point with full employment of all resources.
B)attainable point with full employment of all resources.
C)attainable point without full employment of all resources.
D)unattainable point without full employment of all resources.
E)None of the above answers is correct.

Question 36

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

A)300 loaves of bread and 200 books
B)200 loaves of bread and 800 books
C)100 loaves of bread and 800 books
D)0 loaves of bread and 800 books
E)0 loaves of bread and 0 books

Question 37

The figure above shows a nation's production possibilities frontier.In the figure,point B shows

A)an attainable point.
B)a point with a free lunch.
C)an unattainable point.
D)a point at which there are unemployed resources.
E)a point with no tradeoff.

Question 38

When production efficiency does NOT occur, i.an economy is producing at a point within its PPF.
Ii)there are unemployed resources.
Iii)allocative efficiency cannot occur.

A)i only
B)i and ii
C)iii only
D)i and iii
E)i,ii and iii

Question 39

Which point in the figure above is an attainable combination that would have unemployed resources?

A)Point A
B)Point B
C)Point C
D)Point D
E)Point A and point B

Question 40

Production efficiency occurs

A)anywhere inside or on the production possibilities frontier.
B)when the total cost of production is minimised.
C)at only one point on the production possibilities frontier.
D)at all points inside the production possibilities frontier.
E)at all points on the production possibilities frontier.

Question 41

The production possibilities frontier is a boundary that separates

A)the fair combinations of goods and services that can be consumed from unfair ones.
B)the combinations of goods that can be produced from the combinations of services.
C)the equitable combinations of goods and services that can be produced from inequitable ones.
D)the affordable production points from unaffordable points.
E)the attainable combinations of goods and services that can be produced from unattainable ones.

Question 42

A free lunch (the absence of a tradeoff)when the production of a good is increased is possible for the entire economy only if

A)prices are increased.
B)there is a movement along the PPF.
C)prices are decreased.
D)resources are used inefficiently.
E)less of some product is produced.

Question 43

As we move along the production possibilities frontier,

A)a tradeoff is not possible because nations need all goods.
B)less of both goods can be produced.
C)more of both goods can be produced.
D)the production of one good increases as the production of the other good decreases.
E)the possibility of tradeoffs diminishes.

Question 44

The saying "There's no such thing as a free lunch" applies

A)to unattainable combinations of goods and services.
B)on the production possibilities frontier.
C)when more of one good can be produced without decreasing production of another.
D)when there is some unemployment.
E)at all points inside the PPF.

Question 45

The production possibilities frontier illustrates which of the following economic ideas?

A)Tradeoffs
B)Efficiency
C)Opportunity cost
D)All of the above
E)None of the above

Question 46

Points on the PPF are all

A)free lunches.
B)attainable and have some unemployed resources.
C)unattainable and have fully employed resources.
D)inefficient.
E)production efficient.

Question 47

The above figure shows the production possibility frontier for an economy.The point or points that are attainable and production efficient is/are

A)points A and D.
B)points A,B,C and D.
C)points A,B and C.
D)points B and C.
E)point E.

Question 48

Points inside the PPF are all

A)attainable and have some unemployed resources.
B)unattainable and have some unemployed resources.
C)unaffordable.
D)unattainable and have fully employed resources.
E)attainable and have fully employed resources.

Question 49

A movement from a point inside the production possibilities frontier to a point on the production possibilities frontier represents

A)unemployment of labour but not capital.
B)an infinite opportunity cost.
C)a free lunch.
D)full employment of labour but not capital.
E)a tradeoff.

Question 50

A reason the production possibilities frontier exists is

A)unemployment.
B)scarcity of resources and unlimited technology.
C)that people's wants are unlimited.
D)the scarcity of resources.
E)unlimited resources and technology.

Question 51

The negative slope of the production possibilities frontier represents the idea

A)that prices rise as less is produced.
B)of tradeoffs,that,in order to produce more of one good,the nation must produce less of another.
C)that free lunches are possible.
D)of unemployment.
E)of inefficient production.

Question 52

Moving along the production possibilities frontier itself illustrates

A)the existence of unemployment of some factors of production.
B)how tradeoffs need not occur if the economy is efficient.
C)how free lunches can be exploited through trade.
D)the benefits of free lunches.
E)the existence of tradeoffs.

Question 53

In order for Ireland to grow more potatoes,wool production must decrease.This situation is an example of

A)a free lunch.
B)opportunity benefit.
C)producing at a point that lies beyond the PPF.
D)a tradeoff.
E)zero opportunity cost.

Question 54

During a time of high unemployment,a country can increase the production of one good or service

A)but the opportunity cost is infinite.
B)by using resources in the production process twice.
C)but must decrease the production of something else.
D)and must increase the production of something else.
E)without decreasing the production of something else.

Question 55

A movement from one point on a production possibilities frontier to another represents

A)a tradeoff.
B)an advance in technology.
C)a free lunch.
D)full employment of labour but not capital.
E)unemployment.

Question 56

When a nation is producing on its production possibilities frontier,if more resources are used to produce one good,then the production of other goods

A)must decrease.
B)might increase if the nation can produce more efficiently.
C)must change,but it might increase or decrease.
D)must increase.
E)must remain the same.

Question 57

The above figure shows the production possibility frontier for an economy.The point or points that are attainable is/are

A)point E.
B)points A,B,C and D.
C)points A,B and C.
D)points B and C.
E)points A and D.

Question 58

The above figure shows the production possibility frontier for an economy.The point or points that are NOT attainable is/are

A)points A and D.
B)points A,B,C and D.
C)point E.
D)points B and C.
E)points A,B and C.

Question 59

Which of the following statements is correct?

A)A tradeoff is a limit that forces an exchange or a substitution of one thing for something else.
B)Any point on or within the PPF is production efficient.
C)If capital is idle,the economy is producing at its full potential.
D)The production possibilities frontier shows that there are no limits to production.
E)None of the above answers is correct.

Question 60

The production possibilities frontier is a graph showing the

A)minimum combinations of goods and services that can be produced.
B)maximum combinations of goods and services that can be produced.
C)tradeoff between free lunches.
D)exact point of greatest efficiency for producing goods and services.
E)resources available for the economy's production use.

Question 61

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

A)3 litres of ice cream for a litre of milk.
B)1/3 of a litre of ice cream for a litre of milk.
C)4 litres of ice cream for a litre of milk.
D)1 litre of ice cream for a litre of milk.
E)zero because at point A zero milk is being produced.

Question 62

The opportunity cost of producing one more unit of a good is calculated by dividing the

A)increase in the quantity of that good by the decrease in the quantity of other good.
B)price of the good whose opportunity cost we are calculating by the number of units of the other good that are forgone.
C)total quantity of the other good by the total quantity of the good whose opportunity cost we're calculating.
D)total quantity of that good by the total quantity of other good.
E)decrease in the quantity of the other good by the increase in the quantity of the good whose opportunity cost we're calculating.

Question 63

On a production possibilities frontier,500 kilograms of apples and 1200 kilograms of bananas can be produced while,at another point on the same frontier,300 kilograms of apples and 1300 kilograms of bananas can be produced.Between these points,what is the opportunity cost of producing a kilogram of apples?

A)0)5 of a kilogram of bananas
B)100 kilograms of bananas
C)2 kilograms of bananas
D)2 kilograms of apples
E)5/12 of a kilogram of bananas

Question 64

In a production possibilities frontier graph,the cost of producing more units of a good is measured by the

A)area in the arc between the PPF and a straight line drawn between the starting point and the ending point.
B)amount of the other good or service that must be forgone.
C)dollar value of the resources used to produce the good.
D)dollar value of the additional output.
E)None of the above answers is correct.

Question 65

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 tonnes?

A)12 tonnes of rice
B)9 thousand bottles of wine
C)6 thousand bottles of wine
D)15 thousand bottles of wine
E)Nothing,it is a free lunch.

Question 66

The above figure shows the production possibility frontier for a country.Suppose the country is producing at point D.What is the opportunity cost of increasing the production of rice to 15 tonnes?

A)6 thousand bottles of wine
B)15 thousand bottles of wine
C)12 tonnes of rice
D)9 thousand bottles of wine
E)Nothing,it is a free lunch.

Question 67

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

A)it will shift the production possibilities frontier.
B)the nation will be producing inefficiently.
C)the opportunity cost is 9 pizzas.
D)it will be unable to do so because the production point is unattainable.
E)the nation will then be producing at a production efficient point.

Question 68

A country produces only apples and bananas.Moving from point A to point B along its production possibilities frontier,5 apples are gained and 4 bananas are forgone.What is the opportunity cost of an apple?

A)1 apple
B)5/4 of a banana
C)4 bananas
D)4/5 of a banana
E)None of the above answers is correct.

Question 69

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 litres of milk is

A)1 litre of ice cream for a litre of milk.
B)3 litres of ice cream for a litre of milk.
C)4 litres of ice cream for a litre of milk.
D)1/3 of a litre of ice cream for a litre of milk.
E)zero because after producing another million litres of milk then zero litres of ice cream are produced.

Question 70

To calculate the opportunity cost per unit,you divide the decrease in the quantity of the forgone item by the

A)decrease in the quantity of the other item.
B)price of the item forgone.
C)price of the item obtained and then multiply by the price of the item forgone.
D)price of the item obtained.
E)increase in the quantity of the other item obtained.

Question 71

On a production possibilities frontier,500 kilograms of apples and 1200 kilograms of bananas can be produced while,at another point on the same frontier,300 kilograms of apples and 1300 kilograms of bananas can be produced.Between these points,what is the opportunity cost of producing a kilogram of bananas?

A)200 kilograms of apples
B)12/5 = 2.4 kilograms of apples
C)2 kilograms of apples
D)0)5 a kilogram of apples
E)2 kilograms of bananas

Question 72

Robinson Crusoe divides his time between catching fish and gathering fruit.Part of his production possibilities frontier is given in the above table.If Mr.Crusoe is on his PPF and he increases the amount of fruit he gathers from 56 to 90 kilograms,the opportunity cost is

A)90 kilograms of fruit.
B)34 kilograms of fruit.
C)37 kilograms of fish.
D)17 kilograms of fish.
E)31 kilograms of fish.

Question 73

The above figure shows the production possibility frontier for a country.Suppose the country is producing at point D.What would be the opportunity cost to move to point C?

A)15 thousand bottles of wine
B)12 tonnes of rice
C)6 thousand bottles of wine
D)Nothing,it is a free lunch.
E)This movement is not possible without economic growth.

Question 74

The above figure shows the production possibility frontier for a country.Suppose the country is producing at point E.What would be the opportunity cost to increase the production of wine to 9 thousand bottles?

A)9 thousand bottles of wine
B)3 tonnes of rice
C)12 tonnes of rice
D)15 thousand bottles of wine
E)Nothing,it is a free lunch.

Question 75

To find the opportunity cost of producing one more unit of any product while on the production possibilities frontier requires

A)setting the change in one product equal to the change in the other product.
B)dividing the amount of the product forgone by the amount of the product gained.
C)setting the amounts of the two products equal to each other.
D)subtracting the change in the product whose production increased from the change in the product whose production decreased.
E)None of these describe how to find opportunity cost.

Question 76

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 tonnes?

A)15 thousand bottles of wine
B)6 tonnes of rice
C)6 thousand bottles of wine
D)9 thousand bottles of wine
E)Nothing,it is a free lunch.

Question 77

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 kilograms of fish.Then he decides to slowly become a vegetarian and decreases his consumption of fish to 9 kilograms.This decision means that Mr.Crusoe will

A)be able to enjoy a gain of 9 kilograms of fruit.
B)incur an opportunity cost of 9 kilograms of fruit.
C)incur an opportunity cost of 99 kilograms of fruit.
D)incur an opportunity cost of 20 kilograms of fish.
E)incur an opportunity cost of 9 kilograms of fish.

Question 78

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.

A)35.5
B)34
C)3
D)37
E)None of the above answers is correct.

Question 79

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

A)1/4 of a pizza.
B)30 pizzas.
C)34 pizzas.
D)undefined because neither point is production efficient.
E)4 pizzas.

Question 80

A country produces only apples and bananas.Moving from point A to point B along its production possibilities frontier,5 apples are forgone and 4 bananas are gained.What is the opportunity cost of a banana?

A)4 apples
B)1 banana
C)4/5 of an apple
D)5/4 of an apple
E)None of the above answers is correct.