Introductory Microeconomics Lecture 2 Quiz

What is the production possibilities frontier (PPF)?

• The boundary between combinations of goods that can be produced and those that cannot.

• A method to achieve production efficiency.

• A diagram that illustrates economic growth.

• A representation of gains from trade.

What does production efficiency mean?

• Producing goods at the lowest possible cost.

• Producing goods at the highest possible cost.

• Producing goods only inside the PPF.

• Producing goods without any tradeoffs.

What is economic growth?

• The expansion of production possibilities.

• The reduction of opportunity costs.

• The increase in scarcity.

• The decrease in capital resources.

What is specialization in the context of trade?

• Producing only one good or a few goods.

• Producing all goods for oneself.

• Trading goods with no production.

• Focusing on producing goods with the highest cost.

What do households do in the circular-flow diagram?

• Own the factors of production and consume goods.

• Produce goods and services.

• Sell goods and services to firms.

• Buy factors of production.

What is the role of firms in the circular-flow diagram?

• Buy factors of production and sell goods.

• Consume goods and services.

• Own the factors of production.

• Collect taxes.

What are factors of production?

• Inputs like labor, land, capital, and natural resources.

• Payments made to workers.

• Goods and services produced.

• The total output of an economy.