Econ 1.3

A country produces computers and rice. If resources are fully employed and there is technological progress only in the production of rice, the opportunity costs of producing computers and rice will change in which of the following ways?

• Opportunity Cost of Computers: Increase, Opportunity Cost of Rice: Increase

• Opportunity Cost of Computers: Increase, Opportunity Cost of Rice: Decrease

• Opportunity Cost of Computers: No change, Opportunity Cost of Rice: Decrease

• Opportunity Cost of Computers: Decrease, Opportunity Cost of Rice: Increase

• Opportunity Cost of Computers: Decrease, Opportunity Cost of Rice: Decrease

Of the feasible and efficient points on the production possibilities curve (PPC) above, producing at which point will lead to the most economic growth in the future?

• Point M

• Point N

• Point R

• Point J

• Point S

The table above shows the maximum possible output combinations of good X and good Y that Microland can produce by using all of its available resources and technology. As the production of good X increases, what happens to the opportunity cost of producing good X?

• It decreases, because the production of good Y decreases by greater amounts.

• It decreases, because the production of good Y increases by smaller amounts.

• It remains constant, because the production of good X increases by the same amount.

• It increases, because the production of good Y decreases by greater amounts.

• It increases, because the production of good Y increases by smaller amounts.

Where on a graph of a production possibilities curve would a point showing that an economy is using its resources efficiently be located?

• On the production possibilities curve

• Inside the production possibilities curve

• Beyond the production possibilities curve

• On the y-axis and below the production possibilities curve

• On the x-axis and below the production possibilities curve

Assume that an economy produces televisions and shoes. Which of the following would cause the production possibilities curve for this economy to shift outward?

• An increase in the labor force

• An increase in the prices of both goods

• An increase in the prices of resources used to produce both goods

• A decrease in the demand for shoes

• A change in consumers’ tastes in favor of televisions

The opportunity cost of increasing the production of good Y from 0 to 200 is

• 1,000 units of X

• 980 units of X

• 200 units of X

• 20 units of X

• 5 units of X