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What does the production possibility frontier illustrate?
What does the production possibility frontier illustrate?
If all resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced.
What is a simplified representation used to study a real situation?
What is a simplified representation used to study a real situation?
a model
What does it mean if an economy is producing on its production possibility frontier?
What does it mean if an economy is producing on its production possibility frontier?
The economy has no idle resources and is using resources efficiently.
If the economy produces 2 units of consumer goods per period, it can produce at most ________ units of capital goods per period.
If the economy produces 2 units of consumer goods per period, it can produce at most ________ units of capital goods per period.
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If the economy produces 10 units of capital goods per period, it can produce at most ________ units of consumer goods per period.
If the economy produces 10 units of capital goods per period, it can produce at most ________ units of consumer goods per period.
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The opportunity cost of producing the fourth unit of consumer goods is ________ units of capital goods.
The opportunity cost of producing the fourth unit of consumer goods is ________ units of capital goods.
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What are all points outside the production possibility frontier?
What are all points outside the production possibility frontier?
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Why is the production possibility frontier bowed out from the origin?
Why is the production possibility frontier bowed out from the origin?
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How can a tremendous natural disaster be depicted in terms of production possibilities?
How can a tremendous natural disaster be depicted in terms of production possibilities?
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In Tom's Production Possibilities, which point represents an efficient combination of coconuts and fish?
In Tom's Production Possibilities, which point represents an efficient combination of coconuts and fish?
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In Tom's Production Possibilities, which point represents an inefficient combination of coconuts and fish?
In Tom's Production Possibilities, which point represents an inefficient combination of coconuts and fish?
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In Tom's Production Possibilities, which point represents a combination not feasible for Tom to produce at this time?
In Tom's Production Possibilities, which point represents a combination not feasible for Tom to produce at this time?
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In Tom's Production Possibilities, which points represent combinations feasible for production?
In Tom's Production Possibilities, which points represent combinations feasible for production?
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The opportunity cost for Tom to move from point A to point B is ________.
The opportunity cost for Tom to move from point A to point B is ________.
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Because of trade, a country may:
Because of trade, a country may:
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If the opportunity cost of manufacturing automobiles is lower in the United States than in Britain, what will the U.S. do?
If the opportunity cost of manufacturing automobiles is lower in the United States than in Britain, what will the U.S. do?
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What does Eastland have an absolute advantage in producing?
What does Eastland have an absolute advantage in producing?
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What does Westland have an absolute advantage in producing?
What does Westland have an absolute advantage in producing?
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The opportunity cost of producing 1 box of oranges for Eastland is ________.
The opportunity cost of producing 1 box of oranges for Eastland is ________.
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The opportunity cost of producing 1 box of oranges for Westland is ________.
The opportunity cost of producing 1 box of oranges for Westland is ________.
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The opportunity cost of producing 1 box of peaches for Eastland is ________.
The opportunity cost of producing 1 box of peaches for Eastland is ________.
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The opportunity cost of producing 1 box of peaches for Westland is ________.
The opportunity cost of producing 1 box of peaches for Westland is ________.
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What does Eastland have a comparative advantage in producing?
What does Eastland have a comparative advantage in producing?
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What does Westland have a comparative advantage in producing?
What does Westland have a comparative advantage in producing?
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In the scenario with Tom and Hank, what is the incorrect statement regarding their trade?
In the scenario with Tom and Hank, what is the incorrect statement regarding their trade?
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Which of the following is a positive economic statement?
Which of the following is a positive economic statement?
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What is an example of a positive statement?
What is an example of a positive statement?
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Which of the following is an example of a normative statement?
Which of the following is an example of a normative statement?
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Study Notes
Production Possibility Frontier (PPF)
- The PPF illustrates the trade-off between the production of two goods; more of one good results in less of another if resources are used efficiently.
- Points outside the PPF represent infeasible production scenarios.
- The curve is bowed outward due to the unequal suitability of resources for producing various goods.
Economic Models
- A model simplifies real-world situations for study, helping understand economic behaviors and choices.
Resource Efficiency
- An economy on its PPF is fully utilizing its resources, with no idle resources present.
Opportunity Cost
- Opportunity costs arise when producing additional units of a good; they indicate the amount of another good that must be forgone.
- Specific examples include:
- Producing 2 consumer goods incurs an opportunity cost of 24 capital goods.
- The cost of the fourth consumer good is 8 capital goods.
Production Possibilities Schedules and Figures
- Analyzing schedules and figures provides concrete examples of production scenarios:
- Tom's production possibility figure identifies point D as efficient and point C as inefficient.
Trade and Specialization
- Trade allows countries to consume beyond their PPF.
- Comparative advantage determines the specialization of countries:
- The United States exports automobiles and imports airplanes based on opportunity costs.
Absolute and Comparative Advantage
- Eastland has absolute advantages in oranges, while Westland dominates in peaches.
- The opportunity cost varies between the two:
- For Eastland: 1 box of oranges = 1 box of peaches.
- For Westland: 1 box of oranges = 4 boxes of peaches.
- Specialization based on comparative advantages leads to enhanced production efficiency.
Economic Statements
- Positive statements describe factual scenarios (e.g., inflation rates).
- Normative statements convey opinions or beliefs about what ought to be (e.g., national health insurance for all).
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Description
This quiz explores the concepts surrounding the Production Possibility Frontier (PPF) and economic models. Understand trade-offs, resource efficiency, and opportunity costs in the context of economic decision-making. Dive into the implications of these concepts with practical examples and applications.
