Production Possibilities Frontier Questions Honors Economics

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Production Possibilities Frontier Questions
Honors Economics
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REFER TO THE ABOVE DIAGRAM WHEN ANSWERING THE FOLLOWING QUESTIONS.
1. Which statements about the Production Possibilities Frontier are true?
a) The frontier reflects constant costs of production.
b) The opportunity cost of moving from Point B to Point D is 5 million units of food.
c) The opportunity cost of moving from Point D to Point B is 5 million units of food.
d) At Point D, all resources are allocated to food production.
2. What statement about the PPF is not true?
a) The PPF shows the trade-off between two alternative uses of resources.
b) The PPF is an example of an economic model.
c) The PPF is usually shown by a straight line indicating constant costs of production.
d) The PPF is based on the premise of scarcity.
3. A PPF would be most useful in:
a) determining the price of scarce resources.
b) evaluating the constraints that apply to land-use decisions.
c) analyzing the trade-off between unemployment and inflation.
d) analyzing the trade-off between resources allocated to the automobile and resources allocated to
mass transit systems.
4. Which of the following is not represented by the PPF?
a) trade-offs b) scarcity
c) price levels d) increasing opportunity costs
5. In the case of a constant trade-off, the resulting PPF would resemble?
a) curve
b) asymptote c) straight line
d) spiral
6. Which of the following statements about the PPF is true?
a) It shows the maximum combinations of two outputs that can be produced with available resources.
b) It shows the minimum combinations of two outputs that can be produced with available resources.
c) It shows the relative prices of two outputs that can be produced with available resources.
d) It shows the equitable mix of products that can be produced with available resources.
7. Between what two points is the opportunity cost per unit the greatest in terms of giving up arms for food?
8. Between what two points is the opportunity cost per unit the least in terms of giving up arms for food?
9. At what point on the graph is the economy producing the greatest amount of output possible?
During World War II, auto production was cut drastically. The resources available could be used
to produce Jeeps or passenger cars. The resources could be used in the following ways.
Number of Jeeps (1000’s)
Number of Cars (1000’s)
A. 0
500
B. 125
375
C. 250
250
D. 375
125
E. 500
0
10. Graph the above information on a PPF over to the right.
11. Why could you not increase the production of cars without decreasing the production of jeeps?
12. At what point would you produce during 1942?
13. At what point would you produce during peacetime auto production.
14. What is the opportunity cost of producing one more jeep?
15. What is the opportunity cost of producing 125 more cars?
Same example, but now we have to make tanks instead of jeeps.
Number of Tanks (1000’s) Number of Cars (1000’s)
A. 0
150
B. 10
145
C. 20
130
D. 30
100
E. 40
60
F. 50
0
16. Graph again over to the right.
17. If we are operating at point C, what is the opportunity cost of moving to point D?
18. If we are operating at point E, what is the opportunity cost of moving to point D?
19. Where is the opportunity cost greater when giving up cars for tanks - moving from point B to C or from E to
F? State the numbers.
20. Where is the opportunity cost greater when giving up tanks for cars - moving from Point E to D or from
point C to B? State the numbers.
21. Explain your answer to question 21 - why is the opportunity cost greater for one set of points over the other.
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