Production Possibilities & Opportunity Cost
Topic: Production Possibilities & Opportunity Cost
1. The slope of the production possibility frontier shows
A. the technically efficient combinations of the two goods
B. how factor inputs must be changed to keep them fully employed
C. the opportunity cost of one good in terms of the other
D. how consumers are willing to trade one good for another
3. Which of the following will not shift a country's production possibilities frontier outward?
A. a reduction in the rate of unemployment
B. an increase in the size of the available labour force
C. an advance in technology
D. an increase in the capital stock
4. Indonesia was one of the countries most affected by a tsunami (tidal wave) in the Indian Ocean on 26 December 2004. The most likely economic impact is
A. an outward shift of its production possibility frontier
B. a movement from inside its production possibility frontier to the boundary
C. an inward shift of its production possibility frontier
D. a decrease in prices of most goods because scarcity has increased
E. a fall in the rate of unemployment
6. When an economy operates along its production possibility frontier it is
A. Producing all of the goods and services that the government thinks is necessary
B. Satisfying all the economic needs and wants of consumers
C. Maximising the profits of producers
D. Allocatively efficient
7. Which of the following would cause an outward-shift of a country's production possibilities curve?
A. A decrease in unemployment.
B. A decrease in natural resource prices
C. An increase in consumer demand
D. An increase in immigration
E. Negative net capital investment spending
8. Which of the following would lead to an inward movement of a county's production possibility frontier?
A. A decrease in the size of the active labour force.
B. A slower growth of spending on new capital equipment
C. A slower rate