AP Macro 1.2 & 1.3 Review

If a certain combination of goods or services lies outside the production possibilities curve of an economy, which of the following is true?

• Effective trade barriers have reduced foreign imports into the economy

• New technology is being used in production

• Resources are not available to achieve that combination of goods or services

• Resources are not being used efficiently to achieve that combination of goods or services

If 20 bushels of corn are being produced, the opportunity cost of producing 35 bushels of corn is

• 10 Robots

• 20 Robots

• 30 Robots

• 15 Robots

The diagram above shows the production possibilities curve for Country Y. Which of the following statements is true?

• If Country Y us producing at point D, it is using all its resources efficiently

• The opportunity cost of producing more machines is constant

• Producing at Point D is most preferable, because butter is a nondurable good

• Country Y cannot produce at point B

Which factor can shift the PPC curve to the left?

• Natural Disasters

• Increase in Resources

• Technological Advancement

• Improvement in Efficiency

With the Production Possibilities Curve, what assumption is made?

• Resources are unlimited

• The Curve is linear

• Technology is flexible

• Only two goods can be produced

Why is there an opportunity cost associated with the production of one good over the other?

• Government Regulations

• Consumer Preferences

• Scarcity of Resources

• Technological Advancement

Which type of opportunity cost remains constant as the production of one good increases?

• Decreasing Opportunity Cost

• Zero Opportunity Cost

• Increasing Opportuity Cost

• Constant Opportunity Cost

What does it mean to have increasing opportunity cost?

• When you produce more of one good, you have to give up more and more of the other

• When you produce more of one good, you give up the same amount of the other.

• When you produce more of one good, you have to give up less of the other

• This cannot happen.

If resources were perfectly substitutable in all activities, which of the following would be true?

• Output of all goods could be increased at zero opportunity cost

• The production possibilities curve would be a straight line

• Scarcity of resources would be eliminated

• Specialization and mutually beneficial trade would be impossible

The diagram above shows the production possibilities curve for an economy that produces only consumption and capital goods. All of the following statements about this economy are true except:

• Producing at point Z results in underutilization of resources

• The combination represented by point Y is unattainable, given the scarcity of resources

• Resources are fully utilized at points W and X

• Point X represents the most efficient combination of the two goods that can be produced by this economy