Economics Quiz: Production Possibilities Curve

What does the production possibilities curve (PPC) illustrate?

• Scarcity, trade-offs, opportunity costs, and efficiency

• Supply and demand dynamics

• Monetary policy and fiscal policy

• Labor market trends

What does an inward shift of the PPC indicate?

• Producing fewer combinations of goods

• Expanding the number of goods produced

• No change in production capabilities

• Increased efficiency in production

What can cause an outward shift of the PPC?

• Increase in population, improvements in technology, increased skills, discovery of natural resources, new methods of production

• Decrease in population, loss of technology, diminished skill levels, depletion of natural resources, decrease in productivity

• Specialization and trade

• Consuming more goods and services beyond the ability to produce them

What does a straight line production possibilities curve indicate?

• Decreasing opportunity cost

• No opportunity cost

• Constant opportunity cost

• Increasing opportunity cost

What is the primary reason for not always seeing constant opportunity costs as we shift from one good to another?

• All resources are fully interchangeable

• Not all resources are perfectly interchangeable

• No resources are available for production

• The economy is operating at full capacity

What is the concept behind economic growth in relation to the PPC?

• Expanding the ability to achieve greater combinations of goods and services

• Reducing the number of goods and services produced

• Shifting resources from one product to another

• Maintaining the status quo in production capabilities

What does a bowed out curve on the PPC indicate?

• Increasing opportunity cost

• Constant opportunity cost

• No opportunity cost

• Decreasing opportunity cost

What is the law of increasing opportunity cost?

• As production increases, the opportunity cost to produce it decreases

• As production increases, the opportunity cost to produce it gets bigger

• As production increases, there is no opportunity cost

• As production increases, the opportunity cost remains constant

What is the effect of specialization and trade on the PPC?

• It can result in consuming more goods and services beyond the ability to produce them

• It can result in an expansion of the PPC

• It has no effect on the PPC

• It can result in an inward shift of the PPC