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Study Questions Set 1 - Production Possibility Curve - Macroeconomics | SS 141, Study notes of Introduction to Macroeconomics

Material Type: Notes; Class: MACROECONOMICS; Subject: Social Sciences; University: Fashion Institute of Technology; Term: Unknown 1989;

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SS141 Macro-Economics Professor Patrick Yanez
Study Questions – “Production Possibility Curve” - Set 1
These questions are to facilitate your discussion groups and/or tutoring sessions. Answers are listed at the end of this
file. Since our class time is limited to introducing new topics, we do not have time to review these questions in class;
please use your discussion group and/or tutoring session to review these questions.
1. The production possibilities curve illustrates the basic principle that:
a) the production of more of any one good will in time require smaller and smaller sacrifices
of other goods.
b) an economy will automatically obtain full employment of its resources.
c) if all the resources of an economy are in use, more of one good can be produced only if
less of another good is produced.
d) an economy's capacity to produce increases in proportion to its population size.
2. Which of the following will not produce an outward shift of the production possibilities
curve?
a) an upgrading of the quality of a nation's human resources
b) the reduction of unemployment
c) an increase in the quantity of a society's labor force
d) the improvement of a society's technological knowledge
3. Unemployment and/or productive inefficiencies:
a) cause the production possibilities curve to shift outward.
b) can exist at any point on a production possibilities curve.
c) are both illustrated by a point outside the production possibilities curve.
d) are both illustrated by a point inside the production possibilities curve.
4. If the production possibilities curve is a straight line:
a) the two products will sell at the same market prices.
b) economic resources are perfectly shiftable between the production of the two products.
c) the two products are equally important to consumers.
d) equal quantities of the two products will be produced at each possible point on the curve.
5. A production possibilities curve illustrates:
a) scarcity.
b) market prices.
c) consumer preferences.
d) the distribution of income.
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Download Study Questions Set 1 - Production Possibility Curve - Macroeconomics | SS 141 and more Study notes Introduction to Macroeconomics in PDF only on Docsity!

SS141 Macro-Economics Professor Patrick Yanez

Study Questions – “Production Possibility Curve” - Set 1

These questions are to facilitate your discussion groups and/or tutoring sessions. Answers are listed at the end of this file. Since our class time is limited to introducing new topics, we do not have time to review these questions in class; please use your discussion group and/or tutoring session to review these questions.

  1. The production possibilities curve illustrates the basic principle that: a) the production of more of any one good will in time require smaller and smaller sacrifices of other goods. b) an economy will automatically obtain full employment of its resources. c) if all the resources of an economy are in use, more of one good can be produced only if less of another good is produced. d) an economy's capacity to produce increases in proportion to its population size.
  2. Which of the following will not produce an outward shift of the production possibilities curve? a) an upgrading of the quality of a nation's human resources b) the reduction of unemployment c) an increase in the quantity of a society's labor force d) the improvement of a society's technological knowledge
  3. Unemployment and/or productive inefficiencies: a) cause the production possibilities curve to shift outward. b) can exist at any point on a production possibilities curve. c) are both illustrated by a point outside the production possibilities curve. d) are both illustrated by a point inside the production possibilities curve.
  4. If the production possibilities curve is a straight line: a) the two products will sell at the same market prices. b) economic resources are perfectly shiftable between the production of the two products. c) the two products are equally important to consumers. d) equal quantities of the two products will be produced at each possible point on the curve.
  5. A production possibilities curve illustrates: a) scarcity. b) market prices. c) consumer preferences. d) the distribution of income.
  1. A production possibilities curve shows: a) that resources are unlimited. b) that people prefer one of the goods more than the other. c) the maximum amounts of two goods that can be produced assuming the full and efficient use of available resources. d) combinations of capital and labor necessary to produce specific levels of output.
  2. A nation's production possibilities curve is bowed out from the origin because: a) resources are not equally efficient in producing every good. b) the originator of the idea drew it this way and modern economists follow this convention. c) resources are scarce. d) wants are virtually unlimited.

Use the following to answer questions 8-12. Answer the next question(s) on the basis of the data given in the following production possibilities table:

Production possibilities (alternatives) A B C D E F Capital goods 5 4 3 2 1 0 Consumer goods 0 5 9 12 14 15

  1. Refer to the above table. If the economy is producing at production alternative C, the opportunity cost of the tenth unit of consumer goods will be: a) 4 units of capital goods. b) 2 units of capital goods. c) 3 units of capital goods. d) 1 / 3 of a unit of capital goods.
  2. Refer to the above table. As compared to production alternative D, the choice of alternative C would: a) tend to generate a more rapid growth rate. b) be unattainable. c) entail unemployment. d) tend to generate a slower growth rate.
  3. Refer to the above table. A total output of 3 units of capital goods and 4 units of consumer goods: a) is irrelevant because the economy is capable of producing a larger total output. b) will result in the maximum rate of growth available to this economy. c) would involve an inefficient use of the economy's scarce resources. d) is unobtainable in this economy.
  1. Assume an economy is operating at some point on its production possibilities curve, which shows civilian and military goods. If the output of military goods is increased, the output of civilian goods: a) will remain unchanged. b) may be either increased or decreased. c) must be decreased. d) must also be increased.
  2. Any point inside the production possibilities curve indicates: a) the realization of allocative efficiency. b) that resources are imperfectly shiftable among alternative uses. c) the presence of inflationary pressures. d) that more output could be produced with available resources.

Use the following to answer questions 18-19:

  1. Refer to the above diagram. Other things equal, this economy will achieve the most rapid rate of growth if: a) the ratio of capital to consumer goods is minimized. b) it chooses point C. c) it chooses point B. d) it chooses point A.
  2. Refer to the above diagram. This economy will experience unemployment if it produces at point: a) A. b) B. c) (^) C. d) D.
  1. In drawing the production possibilities curve we assume that: a) technology is fixed. b) unemployment exists. c) economic resources are unlimited. d) wants are limited.
  2. Which of the following is assumed in constructing a typical production possibilities curve? a) the economy is using its resources inefficiently. b) resources are perfectly shiftable among alternative uses. c) production technology is fixed. d) the economy is engaging in international trade.
  3. If the production possibilities curve were a straight downsloping line, this would suggest that: a) resources are perfectly shiftable between the production of these two goods. b) it is possible to produce more of both products. c) both products are equally capable of satisfying consumer wants. d) the two products have identical prices.
  4. The typical production possibilities curve is: a) an upsloping line that is concave to the origin. b) a downsloping line that is convex to the origin. c) a downsloping line that is concave to the origin. d) a straight upsloping line.
  5. Deltonia produces both consumer and capital goods. Other things equal, if Deltonia reduces the percentage of its output devoted to capital goods, then: a) its rate of growth will decline. b) its production possibilities curve will shift to the left. c) it must also reduce the percentage of its output devoted to consumer goods. d) its rate of growth will increase.
  6. The slope of the typical production possibilities curve: a) is positive. b) increases as one moves southeast along the curve. c) is constant as one moves down the curve. d) decreases as one moves southeast along the curve.
  7. Assume an economy is incurring unemployment and failing to realize least-cost production. The effect of resolving these problems will be to: a) move the level of actual output to the economy's production possibilities curve. b) create a less equal distribution of income. c) shift its production possibilities curve to the left. d) shift its production possibilities curve to the right.

Answer for Study Questions – “Production Possibility Curve” - Set 1

  1. c
  2. b
  3. d
  4. b
  5. a
  6. c
  7. a
  8. d
  9. a
  10. c
  11. a
  12. b
  13. c
  14. a
  15. c
  16. c
  17. d
  18. d
  19. d
  20. a
  21. c
  22. a
  23. c
  24. a
  25. b
  26. a