1) The production possibilities frontier shows: A) all levels of one output that
ID: 1099024 • Letter: 1
Question
1) The production possibilities frontier shows:
A) all levels of one output that can be produced with varying levels of inputs
B) an isoquant
C) all combinations of two inputs that can produce a constant level of output
D) all combinations of two outputs that can be produced with a constant level of inputs
2) A point located inside the PPF is:
A) efficient but not attainable
B) efficient and attainable
C) neither efficient nor attainable
D) not efficient but attainable
3) A point located outside the PPF is:
A) not efficient but attainable
B) efficient but not attainable
C) neither efficient nor attainable
D) efficient and attainable
4) The Marginal Rate of Product Substitution refers to:
A) the economic tradeoff between inputs
B) the physical tradeoff between inputs
C) the economic tradeoff between outputs
D) the physical tradeoff between outputs
5) The MRPS (the slope of the PPF):
A) gets flatter as we move to the right along the PPF
B) is constant along the PPF
C) is increasing or decreasing, depending on if there is increasing or decreasing returns
D) gets steeper as we move to the right along the PPF
6) The shape of the PPF is due to:
A) the isoquant
B) the cost of inputs
C) diminishing marginal productivity of inputs
D) relative prices
7) The isorevenue line is derived from:
A) the production functions of the two outputs
B) the isoquant
C) relative prices
D) the cost of inputs
8) The profit-maximizing combination of outputs can be found at the tangency of:
A) the isoquant and isorevenue lines
B) the PPF and the isocost line
C) the isocost and isoquant lines
D) the PPF and the isorevenue line
9) Profit maximizing producers:
A) strive to reach the highest possible isorevenue line that still touches the PPF:
B) minimize total costs
C) never consider relative prices
D) maximize the production of both outputs
10) Relative price changes:
A) always result in producing more Y2 and less Y1
B) would never change the optimal output choice
C) change the slope of the isorevenue line
D) change the shape of the PPF
Explanation / Answer
1. D) all combinations of two outputs that can be produced with a constant level of inputs
2. D) not efficient but attainable
3. C) neither efficient nor attainable
4. D) the physical tradeoff between outputs
5. D) gets steeper as we move to the right along the PPF
6. C) diminishing marginal productivity of inputs
7. C) relative prices
8. D) the PPF and the isorevenue line
9. A) strive to reach the highest possible isorevenue line that still touches the PPF
10. C) change the slope of the isorevenue line
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