Production Possibility Curve Quiz

The diagram shows a production possibility curve (PPC) for digital televisions and CD players. Which movement shows an increase in the use of existing resources to increase production for both digital televisions and CD players?

• X to W

• X to Z

• Z to W

• Z to Y

Answer explanation

The correct movement that shows an increase in the use of existing resources to increase production for both digital televisions and CD players is X to Z.

The diagram shows the production possibility curve (PPC) for an economy producing consumer goods and capital goods. The economy is currently producing OM consumer goods and OG capital goods. It decides to increase production of capital goods to OH. What is the opportunity cost of this decision in terms of consumer goods?

• JG

• ML

• MN

• NL

Answer explanation

The opportunity cost of increasing production of capital goods to OH in terms of consumer goods is ML. This is because ML represents the amount of consumer goods that must be given up to produce one more unit of capital goods.

The diagram below shows a country producing at point X. What is the opportunity cost of moving production to point Y?

• 34 basic goods

• 17 luxury goods

• 12 basic goods and 3 luxury goods

• zero goods

Answer explanation

Moving production from point X to point Y has a zero opportunity cost, meaning no goods are sacrificed in the process.

The diagram shows a production possibility curve (PPC) for a country. The country moved from position X to position Y on the PPC. What is the most likely reason for this change?

• Firms have decided to increase investment in technology.

• New economic resources have been discovered in the country.

• The government has encouraged long-term economic growth.

• The government has brought about an increase in living standards.

Answer explanation

The government has brought about an increase in living standards.

What does a point on a production possibility curve for an economy represent?

• maximum output possible with current technology

• economic growth is falling

• total demand for goods and services

• inefficient use of resources available

Answer explanation

A point on a production possibility curve represents the maximum output possible with current technology.

A country’s production possibility curve (PPC) moves from PPC1 to PPC2. What could cause this movement in the PPC?

• 
• 
• 
• 

The production possibility curve of a country has shifted from PPC1 to PPC2. What could have caused this shift?

• a decrease in the rate of unemployment

• a fall in the birth rate

• improved education

• outdated technology not being replaced

Answer explanation

The correct choice is 'improved education' because an increase in education can lead to a more skilled workforce, allowing the country to produce more efficiently and shift its production possibility curve.

The diagram shows the choices for an individual between leisure and earnings. The person decides to take a job that gives more leisure time. What is the opportunity cost to the individual of moving from position Y to position X?

• $20

• $80

• 4 hours of leisure per day

• 12 hours of leisure per day

Answer explanation

The opportunity cost of moving from position Y to position X is $20, as that is the value of the earnings sacrificed for more leisure time.

Which points in the diagram are attainable?

• R and S

• V and W

• R, S, T and U

• D T, U, V and W

Answer explanation

Points R, S, T, and U are attainable because they fall within the feasible region of the diagram where the constraints are satisfied.

What could have caused the change in the shape of the production possibility curve (PPC) shown below?

• advances in technology in the clothing industry

• an increase in the size of a country’s labour force

• a change in consumer preferences towards clothing

• more resources being devoted to producing clothing

Answer explanation

The change in the shape of the production possibility curve could be caused by advances in technology in the clothing industry, leading to increased efficiency and production capacity.