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Accounting & Financial Management
AFM 101
Jiahua Chen

Exercise 2: 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. Answer: A 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 Answer: B 3) Apoint 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. Answer: A 4) Wh
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