One of the tools or models economists use is the production possibilities frontier. Using the production possibilities frontier:
1.explain the law of increasing opportunity cost and its relationship to the shape of the production possibilities frontier
2.using the concept of comparative advantage and the production possibilities frontier explain why nations trade even when they could produce the product on their own
3.explain what would happen to the USA's production possibilities frontier if all illegal immigrants holding jobs in the USA were deported.
One of the tools or models economists use is the production possibilities frontier. Using the production possibilities frontier:
1.explain the law of increasing opportunity cost and its relationship to the shape of the production possibilities frontier
2.using the concept of comparative advantage and the production possibilities frontier explain why nations trade even when they could produce the product on their own
3.explain what would happen to the USA's production possibilities frontier if all illegal immigrants holding jobs in the USA were deported.
For unlimited access to Homework Help, a Homework+ subscription is required.
Related textbook solutions
Related questions
A bowed out PPF reflects which of the following ideas?
i.increasing opportunity cost
ii. resources are not equally productive in all activities
iii. prices of goods increase over time
Ā | Ā |
I only |
Ā | Ā |
I and iii |
Ā | Ā |
ii and iii |
Ā | Ā |
I and ii |
1 point
QUESTION 2
With no international trade, a country ________ consume at a point outside of its PPF; with international trade, a country ________ consume at a point outside of its PPF.
Ā | Ā |
can; cannot |
Ā | Ā |
cannot; can |
Ā | Ā |
cannot; cannot |
Ā | Ā |
can; can |
1 point
QUESTION 3
If the production possibilities frontier between two goods is a straight line, then the
Ā | Ā |
the line does not qualify as a production possibilities frontier because the unattainable production points are too close to the inefficient production points. |
Ā | Ā |
opportunity cost is not a ratio. |
Ā | Ā |
increasing opportunity costs. |
Ā | Ā |
resources are equally productive in both goods. |
1 point
QUESTION 4
As an economy produces more of one of the goods on a bowed out production possibilities frontier, what happens to the opportunity cost of producing the good?
Ā | Ā |
It might increase, decrease, or remain constant depending on how much people value the additional units of the good. |
Ā | Ā |
It decreases. |
Ā | Ā |
It increases. |
Ā | Ā |
It remains constant. |
1 point
QUESTION 5
"Comparative advantage" is defined as a situation in which one person can produce
Ā | Ā |
more of a good than another person. |
Ā | Ā |
a good for a lower dollar cost than another person. |
Ā | Ā |
a good for a lower opportunity cost than another person. |
Ā | Ā |
more of all goods than another person. |
1 point
QUESTION 6
When a production possibilities frontier is bowed outward, as more of one good is produced, its opportunity cost
Ā | Ā |
increases. |
Ā | Ā |
decreases. |
Ā | Ā |
might increase, decrease, or remain constant depending on how much people value the additional units of the good. |
Ā | Ā |
remains constant. |
1 point
QUESTION 7
A bowed out production possibility frontier shows that the
Ā | Ā |
opportunity cost relationship is linear. |
Ā | Ā |
the opportunity cost of a good is constant as more of the good is produced. |
Ā | Ā |
the opportunity cost of a good increase as more of the good is produced. |
Ā | Ā |
the opportunity cost of a good decrease as more of the good is produced. |
1 point
QUESTION 8
Which of the following statements is correct?
Ā | Ā |
The production possibilities frontier shows that there are no limits to production. |
Ā | Ā |
Any point on or within the PPF is production efficient. |
Ā | Ā |
If capital is idle, the economy is producing at its full potential. |
Ā | Ā |
A tradeoff is a limit that forces an exchange or a substitution of one thing for something else. |
1 point
QUESTION 9
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?
Ā | Ā |
A tradeoff would occur to replace the resources and goods destroyed. |
Ā | Ā |
It would shift inward because some of the nation's resources, such as capital and labor, would be destroyed. |
Ā | Ā |
It would shift outward because unemployment would be reduced. |
Ā | Ā |
Nothing would happen because the nation would still have the same capabilities. |
1 point
QUESTION 10
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
Ā | Ā |
must increase. |
Ā | Ā |
must decrease. |
Ā | Ā |
must remain the same. |
Ā | Ā |
must change but they might increase or decrease. |
1 point
QUESTION 11
Moving along a country's PPF, a reasonable opportunity costs increase is that
Ā | Ā |
unemployment increases as a country produce more and more of one good. |
Ā | Ā |
unemployment decreases as a country produces more and more of one good. |
Ā | Ā |
some resources are better suited for producing one good rather than the other. |
Ā | Ā |
technology declines as a country produce more and more of one good. |
1 point
QUESTION 12
A reason the production possibilities frontier exists is
Ā | Ā |
scarcity of resources and unlimited technology. |
Ā | Ā |
unemployment. |
Ā | Ā |
scarcity of resources. |
Ā | Ā |
unlimited resources and technology. |
1 point
QUESTION 13
Moving from one point to another on a production possibilities frontier implies
Ā | Ā |
increasing the production of one good and decreasing the production of another. |
Ā | Ā |
increasing the production of both goods. |
Ā | Ā |
decreasing the production of both goods. |
Ā | Ā |
holding the production levels of both goods constant. |
1 point
QUESTION 14
Specialization and trade make a country better off because with trade the country can consume at a point
Ā | Ā |
outside its production possibilities frontier. |
Ā | Ā |
on its trading partner's production possibilities frontier. |
Ā | Ā |
inside its production possibilities frontier. |
Ā | Ā |
on its production possibilities frontier. |
1 point
QUESTION 15
The production possibilities frontier is the
Ā | Ā |
the boundary between the combinations of goods and services that can be produced and the combinations that cannot be produced when technology is changing. |
Ā | Ā |
the minimum output that can be produced when resources are used inefficiently. |
Ā | Ā |
the 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. |
Ā | Ā |
maximum output that can be produced at an opportunity cost of zero. |
1 point
QUESTION 16
The opportunity cost of economic growth is ________ and the benefit of economic growth is ________.
Ā | Ā |
decreased current consumption; decreased future consumption |
Ā | Ā |
decreased current consumption; increased future consumption |
Ā | Ā |
increased current consumption; increased future consumption |
Ā | Ā |
increased current consumption; decreased future consumption |
1 point
QUESTION 17
In terms of a nation's production possibilities frontier, what impact does international trade have?
Ā | Ā |
International trade shifts the nation's production possibilities frontier outward. |
Ā | Ā |
International trade shifts the production possibilities frontier outward for the goods that are exported and inward for the goods that are imported. |
Ā | Ā |
International trade shifts the nation's production possibilities frontier inward. |
Ā | Ā |
International trade allows the nation to consume at a point outside its production possibilities frontier. |
1 point
QUESTION 18
The production possibilities frontier illustrates the
Ā | Ā |
goods and services that people want. |
Ā | Ā |
limits to people's wants. |
Ā | Ā |
resources the economy possesses, but not it is the level of technology. |
Ā | Ā |
maximum combinations of goods and services that can be produced. |
1 point
QUESTION 19
As we move along the production possibilities frontier,
Ā | Ā |
the possibilities of tradeoffs diminish. |
Ā | Ā |
the production of one good increases as the production of the other good decreases. |
Ā | Ā |
more of both goods can be produced. |
Ā | Ā |
a tradeoff is not possible because nations need all goods. |
1 point
QUESTION 20
What is the opportunity cost of economic growth?
Ā | Ā |
Eliminate scarcity |
Ā | Ā |
Land. |
Ā | Ā |
Capital goods. |
Ā | Ā |
Consumption of goods. |
1 point
QUESTION 21
Which of the following statements is correct?
i.As the economy grows, the opportunity costs of economic growth decrease.
ii. Economic growth has no opportunity cost.
iii. The opportunity cost of economic growth is current consumption forgone.
Ā | Ā |
ii only |
Ā | Ā |
iii only |
Ā | Ā |
I only |
Ā | Ā |
I and iii |
1 point
QUESTION 22
Does economic growth depend upon which of the following?
i. Increasing the quantity of labor.
ii. Lowering the prices of goods and services.
iii. Advancing technology.
Ā | Ā |
ii only. |
Ā | Ā |
I only. |
Ā | Ā |
I and iii. |
Ā | Ā |
iii only. |
1 point
QUESTION 23
When drawing a production possibilities frontier, which of the following is held constant?
Ā | Ā |
the amount of money in the economy |
Ā | Ā |
the prices of goods and services |
Ā | Ā |
the quantity of the goods and services that are produced |
Ā | Ā |
the available factors of production and the state of technology |
1 point
QUESTION 24
To increase its economic growth, a nation should
Ā | Ā |
encourage spending on goods and services. |
Ā | Ā |
increase in current consumption. |
Ā | Ā |
encourage education because that increases the quality of labor. |
Ā | Ā |
limit the number of people in college because they produce nothing. |
1 point
QUESTION 25
The opportunity cost of one more slice of pizza in terms of sodas is the
Ā | Ā |
some pizza slices we have to give up to get one extra soda. |
Ā | Ā |
the total number of sodas that we have divided by the total number of pizza slices that we have. |
Ā | Ā |
the total number of pizza slices that we have divided by the total number of sodas that we have. |
Ā | Ā |
the number of sodas we have to give up to get one extra pizza slice. |
Question 1
The law of demand states that there is a direct relationship between supply and demand.
True
False
4 points
Question 2
Equilibrium is a state of balance between supply and demand.
True
False
4 points
Question 3
Goods are scarce for both rich and poor.
True
False
4 points
Question 4
"The big corporations in this country, like ExxonMobil and GM, have deep pockets and need to be hiring more people." This is a positive statement about economic policy.
True
False
4 points
Question 5
The law of supply states that there is a direct relationship between price and quantity demanded.
True
False
4 points
Question 6
In the circular flow model, firms own economic resources, and householdsbuy the manufactured products and services.
True
False
4 points
Question 7
Households play a dual role of providing the factors of production whilepurchasing the goods and services of firms.
True
False
4 points
Question 8
Opportunity cost is the lowest valued benefit that must be sacrificed asthe result of choosing an alternative.
True
False
4 points
Question 9
Scarcity denotes that our desire for a good exceeds the amount that isfreely available from nature.
True
False
4 points
Question 10
Economics is a social science concerned with satisfying man's unlimitedwants with limited resources.
True
False
4 points
Question 11
Joint output of individuals or nations will be maximized when goods areexchanged between parties in accordance with the law of"comparative advantage".
True
False
4 points
Question 12
The production possibilities frontier assumes that the level of technologyvaries when applying the model.
True
False
4 points
Question 13
Excess demand in the market will cause the price of a product to decline.
True
False
4 points
Question 14
Demand is measured on the vertical axis and supply on the horizontalaxis.
True
False
4 points
Question 15
A change in quantity demanded is a movement along the same demandcurve.
True
False
4 points
Question 16
As globalization and world trade proliferates, individual markets withincountries' economies become more competitive.
True
False
4 points
Question 17
Which growth theory compares a subsistence real wage rate to the actual real wage rate?
Classical growth theory | ||
Inflation growth theory | ||
Neoclassical growth theory | ||
New growth theory |
4 points
Question 18
Suppose the working age population in Tiny Town is 100 people. If 25 of these people are NOT in the labor force, the ________ equals ________.
unemployment rate; 25/100 ĆĀ 100 | ||
employment rate; 25/75 ĆĀ 100 | ||
labor force; 75 | ||
labor force; 25/100 ĆĀ 100 |
4 points
Question 19
Suppose there is a rise in the real wage rate. As a result, the quantity of labor demanded:
increases. | ||
decreases. | ||
does not change because there is no change in the money wage rate. | ||
increases only if the price level also decreases. |
4 points
Question 20
GDP can be computed as the sum of:
all sales that have taken place in an economy over a period of time. | ||
the total expenditures of consumers and business over a period of time. | ||
the total expenditures of consumption, investment, and government expenditure on goods and services over a period of time. | ||
the total expenditures of consumption, investment, government expenditure on goods and services, and net exports over a period of time. |
4 points
Question 21
The real wage rate equals:
(100 x (money wage rate/price level) | ||
(100 x (price level/money wage rate) | ||
(money wage rate x (price level) | ||
(money wage + (number of hours worked/(price level) |
4 points
Question 22
If the CPI was 121.5 at the end of 2007 and 138.3 at the end of 2008, the inflation rate over these two years was:
10.2 percent. | ||
13.8 percent. | ||
12.2 percent. | ||
16.8 percent. |
4 points
Question 23
A movement along the production function is the result of a change in:
the quantity of labor. | ||
technology. | ||
capital. | ||
interest rates. |
4 points
Question 24
All of the following are part of fiscal policy EXCEPT:
setting tax rates. | ||
setting government spending. | ||
choosing the size of the government deficit. | ||
controlling the money supply. |
4 points
Question 25
Along a production possibilities frontier for real GDP and the quantity of leisure time, as leisure time increases, real GDP:
decreases. | ||
increases. | ||
stays the same. | ||
could increase, decrease or stay the same. |