Production Possibility Curve Quiz

The diagram shows a production possibility curve (PPC). It indicates the combinations of consumer goods and capital goods produced by an economy using all its available resources. What does position X indicate?

• a lower ratio of capital to consumer goods is necessary to achieve economic growth

• increasing levels of unemployment

• insufficient factors of production are available

• too many consumer goods are causing a fall in economic growth

The diagram shows a production possibility curve for an economy that produces two goods, X and Y. When will the opportunity cost of producing more of good X be the largest?

• moving from point E to point F

• moving from point E to point G

• moving from point E to point H

• moving from point G to point H

Why does a production possibility curve exist for every economy?

• Resources are unlimited.

• Resources have alternative uses.

• Some resources can be imported.

• Some resources may be unemployed.

Country Z operates with a production possibility curve (PPC). Currently, output is at combination 1. Which movement has zero opportunity cost in terms of the goods produced?

• 1 to 2

• 1 to 3

• 2 to 3

• 3 to 4

PPC is the production possibility curve in country T. Which changes take place in country T’s opportunity costs of producing X as it increases production of X?

• Opportunity costs are constant between points 1 and 2, and between points 3 and 4.

• Opportunity costs decrease between points 1 and 2, and increase between points 3 and 4.

• Opportunity costs decrease between points 1 and 2, and between points 3 and 4.

• Opportunity costs increase between points 1 and 2, and between points 3 and 4.

The table shows different combinations of rings and bracelets that can be produced by Luke and Zoe in the same time period. Which statement is not correct?

• Luke has a larger opportunity cost than Zoe for making bracelets.

• The opportunity cost of producing rings is constant for both Luke and Zoe.

• Zoe should specialise in making rings.

• Zoe’s opportunity cost for each bracelet is 2 rings.

The diagram shows the change in a country’s production possibility curve from XX to YY. What would explain this change?

• Consumers chose to consume more food and less drink.

• Government taxed food production and subsidised drink production.

• Productivity rose in food production and fell in drink production.

• There were more imports of food and more exports of drink.

Assuming nothing else changes, which change in an economy’s labour market will cause the production possibility curve to shift to the left?

• an increase in worker immigration

• an increase in the retirement age

• an increase in labour productivity

• an increase in the school leaving age

The diagram shows an economy’s production possibility curve. The economy produces combinations of goods and services using all available resources. What does the production possibility curve indicate for goods and services?

• constant returns to scale in the production of both goods and services

• diminishing returns to scale in the production of both goods and services

• increasing returns to scale in the production of both goods and services

• infinite returns to scale in the production of both goods and services

The diagram shows the production possibility curve for wheat and corn. What can be deduced from the diagram?

• As the price of corn falls, more of it is demanded.

• Resources used in producing corn are more efficient than in producing wheat.

• The opportunity cost of producing corn falls when moving from M to N.

• The opportunity cost of producing corn is constant when moving from M to N.