2.1 Production Possibilities and Opportunity Cost
1) The production possibilities frontier
A) is the boundary between attainable and unattainable levels of production.
B) is the boundary between what we want to consume and what we want to produce.
C) shows how production increases as prices rise.
D) shows prices at which production is possible and impossible.
E) illustrates why there need not be any scarcity in the world.
2) Which one of the following concepts is not illustrated by a production possibilities frontier?
A) scarcity
B) monetary exchange
C) opportunity cost
D) attainable and unattainable points
E) the tradeoff between producing one good versus another
3) A point inside a production possibilities frontier
A) indicates some unused or misallocated resources.
B) is unattainable.
C) is preferred to a point on the production possibilities frontier.
D) indicates a point of production efficiency.
E) illustrates the idea of opportunity cost.
4) Which one of the following concepts is illustrated by a production possibilities frontier?
A) profit
B) consumption
C) investment
D) monetary exchange
E) the tradeoff between producing one good versus another
5) If Sam is producing at a point inside his production possibilities frontier, then he
A) can increase production of both goods with zero opportunity cost.
B) is fully using all his resources and allocating his resources to their best use.
C) must be doing the best he can with limited resources.
D) is unaffected by costs and technology.
E) has a high opportunity cost of moving from this point.
6) If Sam is producing at a point on his production possibilities frontier, then he
A) cannot produce any more of either good.
B) is unaffected by costs and technology.
C) can produce more of both goods.
D) is not subject to scarcity.
E) can increase the production of one good only by decreasing the production of the other.
Use the figure below to answer the following questions.
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Figure 2.1.1
7) Refer to the production possibilities frontier in Figure 2.1.1. Which one of the following is true about point A?
A) It is unattainable.
B) While no more of good Y can be produced, more of good X can be produced.
C) It is preferred to point B.
D) Resources are either unused or misallocated or both.
E) It is attainable only if the amount of capital goods is increased.
8) Complete the following sentence. In Figure 2.1.1,
A) movement from A to B would require a technological advance.
B) point B is a point of production efficiency.
C) some resources must be unused at point C.
D) the concept of decreasing opportunity cost is illustrated.
E) movement from C to B would require a technological improvement.