113. A production possibilities frontier shows the A) the maximum attainable com
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Question
113. A production possibilities frontier shows the
A) the maximum attainable combinations of two goods that can be produced with the available resources.
B) combinations of two goods that consumers desire most.
C) maximum output of two goods that can be produced with an unlimited quantity of resources.
D) demand for two goods.
114. Being on the production possibilities frontier implies that more of one good can be produced only by
A) decreasing the quantity of the other good produced.
B) increasing the quantity of the other good produced.
C) lowering the price of the good.
D) raising the price of the good.
E) None Of The Above
116. An output combination is technically efficient if
A) it is possible to produce more of all goods.
B) it is possible to produce more of one good without producing less of another.
C) it is not possible to produce more of one good without producing less of another.
D) it is not possible to produce more of one good at any cost.
117. Suppose in an economy some resources are not utilized in their most productive use. If society decides that it wants more of one good,
A) it will have to increase the quantity of resources in the economy.
B) it will have to give up production and consumption of some other good.
C) it can only do so if technology advances.
D) it can achieve this without giving up another good by employing the under-utilized resources. E) None Of The Above
118. In the production possibilities frontier framework, unemployment is represented by
A) an inward shift of the curve.
B) a point located inside the curve.
C) a point located outside the curve.
D) a point located on the curve
119. Which of the following would not shift a nation's production possibilities frontier?
A) a liberal immigration policy that welcomes foreign labor
B) an increase in a nation's capital stock
C) discovery of oil, a vital input in the production process
D) an increase in the general price level.
132. If the price of SUVs were to increase, we would expect:
A) the demand for gasoline to increase.
B) the demand for gasoline to decrease.
C) the supply of gasoline to increase.
D) the supply of gasoline to decrease.
E) both B and D to occur.
E) None Of The Above
Explanation / Answer
113. A production possibilities frontier shows the
A) the maximum attainable combinations of two goods that can be produced with the available resources.
B) combinations of two goods that consumers desire most.
C) maximum output of two goods that can be produced with an unlimited quantity of resources.
D) demand for two goods.
A production possibilities frontier is a curve that gives the combination of goods or services, which can be produced by using the available scarce or limited resources.
Therefore the correct option is A.
114. Being on the production possibilities frontier implies that more of one good can be produced only by
A) decreasing the quantity of the other good produced.
B) increasing the quantity of the other good produced.
C) lowering the price of the good.
D) raising the price of the good.
E) None Of The Above
As the available resources are scarce and fixed for producing the two goods (or services), we have to move the resources utilized for producing one good towards the production of other goods. Therefore, on the ppf curve, if we want more of one good we have to decrease the quantity of other good.
Therefore the correct option is A.
116. An output combination is technically efficient if
A) it is possible to produce more of all goods.
B) it is possible to produce more of one good without producing less of another.
C) it is not possible to produce more of one good without producing less of another.
D) it is not possible to produce more of one good at any cost.
On the PPF curve, every point or combination is technically efficient to give a maximum output combination by utilizing the given set of resources. Therefore, technically speaking the point or combination on the PPF gives the maximum possible output of both the goods. For instance, a point a on PPF may give 5 of x and 10 of y, and point b on PPF can give 10 of x and 5 of y; however, both gives the maximum possible output of x or y with the available scarce resources.
Therefore the correct option is A.
117. Suppose in an economy some resources are not utilized in their most productive use. If society decides that it wants more of one good,
A) it will have to increase the quantity of resources in the economy.
B) it will have to give up production and consumption of some other good.
C) it can only do so if technology advances.
D) it can achieve this without giving up another good by employing the under-utilized resources.
If some resources are not optimally utilized, then the production or output combination point will be inside the PPF curve. Therefore, to increase the production of one good, we can simply do it by optimum utilization of the underutilized resource. This pushes the output combination rightwards on to the PPF curve. Thus, this newly attained point gives more of a good without sacrificing other good.
Therefore, the correct option is D.
118. In the production possibilities frontier framework, unemployment is represented by
A) an inward shift of the curve.
B) a point located inside the curve.
C) a point located outside the curve.
D) a point located on the curve
Any output combination point inside the PPF curve is in efficiency as the resources are underutilized or unemployed.
Therefore, the correct option is B.
119. Which of the following would not shift a nation's production possibilities frontier?
A) a liberal immigration policy that welcomes foreign labor
B) an increase in a nation's capital stock
C) discovery of oil, a vital input in the production process
D) an increase in the general price level.
Immigration increases the labor resource, increase in capital stock also increase productivity and discovery of oil a vital input also increases the available resources; therefore, all these there option shifts the PPF curve rightwards.
However, an increase in price level does not have a direct impact on the PPF.
Therefore, the correct option is D.
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132. If the price of SUVs were to increase, we would expect:
A) the demand for gasoline to increase.
B) the demand for gasoline to decrease.
C) the supply of gasoline to increase.
D) the supply of gasoline to decrease.
E) both B and D to occur.
E) None Of The Above
SUV and gas are compliments, an increase in the price of SUV decreases the demand of SUV; consequently, it decreases the demand of gas. However, it does not have a direct impact on the supply of gas.
Therefore, the correct option is B.
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