24-02-25: Production Possibility Curve

The Production Possibility Curve shows:

• the maximum possible output combinations of two goods or services an economy can achieve when all resources are fully and efficiently utilized.

• the minimum output levels required to sustain an economy.

• the average production levels of an economy over a period of time.

• the potential growth rate of an economy.

Which of the following points on the Production Possibility Curve represents the maximum output of consumer goods?

• A

• B

• C

• D

What does any point inside the curve represent in terms of resource use?

• Efficient use of resources

• Inefficient use of resources

• Optimal use of resources

• Excessive use of resources

Which of the following statements is true about a point on the curve?

• A) It represents inefficient use of resources.

• B) It represents maximum use of resources.

• C) It represents no use of resources.

• D) It represents partial use of resources.

If a country is producing at point X, what is its output of capital goods and consumer goods?

• The output is 100 units of capital goods and 200 units of consumer goods.

• The output is 150 units of capital goods and 150 units of consumer goods.

• The output is 200 units of capital goods and 100 units of consumer goods.

• None of these

If a country’s output moves from point X to point Y, how many more capital goods and how many more consumer goods will it produce?

• 10 more capital goods and 100 more consumer goods

• 15 more capital goods and 25 more consumer goods

• 20 more capital goods and 30 more consumer goods

• 25 more capital goods and 35 more consumer goods

What is the maximum number of capital goods that can be produced if all resources are devoted to capital goods?

• 100 units

• 200 units

• 150 units

• 400 units

What does the graph of the Production Possibility Curve (PPC) illustrate?

• The trade-off between manufactured goods and agricultural goods

• The increase in production of manufactured goods only

• The decrease in production of agricultural goods only

• The equilibrium point of supply and demand

State the maximum number of capital goods the country can produce if it devotes all of its resources to making capital goods.

• 10 units

• 20 units

• 50 units

• 120 units

Calculate the opportunity cost of increasing the output of consumer goods from 80 to 90 units.

• 10 units of capital goods

• 5 units of capital goods

• 15 units of capital goods

• 20 units of capital goods