Economics Concepts Quiz

What does PPC show? Select Multiple options.

• Describes the production of only two products in economy.

• It explains the production when there is full and efficient utilisation all resources in economy

• It explains the consumption pattern in economy

• It is the combination of all possible output points of two goods given that technology and resources are fixed.

What does a point inside the PPC represent?

• Inefficient use of resources.
• Point of economic growth.
• Impossible production

• Optimal resource allocation.

1. If the economy moves from producing 4 shoes and 7 robots to 6 shoes and 4 robots, what is the opportunity cost in terms of robots?

• 7 robots

• 3 robots

• 4 robots

• 6 robots

If the PPC is linear, what does that indicate?

• It indicates no opportunity costs.

• It indicates variable opportunity costs.
• It indicates increasing returns to scale.
• It indicates constant opportunity costs.

The above production possibilities frontier shows the available tradeoffs between consumption goods and capital goods. Suppose two countries face this identical production possibilities frontier.

• Both countries will produce the same combination of goods

• One country will produce more capital goods

• Both countries will have different opportunity costs

• One country will produce more consumption goods

On a graph, what would the shift in the production possibilities frontier look like if there was an increase in technology that only affected the production of consumer goods.

• The curve shifts outward for consumer goods only.

• The curve shifts outward for both consumption and capital goods.

• The curve shifts inward for consumer goods only.

• The curve remains unchanged.

On the graph below, show the shift in the production possibilities frontier if there was an increase in technology that only affected the production of capital goods.

Hint: you are drawing the original + bump to show shift

On the graph below, draw the shift in the production possibilities frontier if there was an increase in capital goods that affected the entire economy's production possibilities.

(draw old curve + new and arrows to indicate which direction the shift is going)

Assuming that resources are limited, which of the following scenarios best demonstrates an economic trade-off?

• A government decides to build a new highway instead of a new hospital.

• A bakery decides to stay open for 24 hours without changing its menu or prices.

• A student decides to take a gap year without considering the cost.

• A company offers free shipping to all customers without changing its return policy.

If a farmer decides to plant wheat on his land instead of corn, knowing that the land can only support one crop at a time, what is the opportunity cost of this decision?

• The profit from selling the wheat.

• The cost of planting wheat.

• The profit that could have been made from planting corn.

• The cost of the land used for planting.