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Production Possibilities Quiz

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Questions and Answers

Which of the following statements accurately describes an economy's production possibilities?

An economy can produce only on the production possibilities frontier.

An economy can produce at any point inside or outside a production possibilities frontier.

An economy can produce at any point on or inside the production possibilities frontier, but not outside the frontier. (correct)

An economy can produce at any point inside the production possibilities frontier, but not on or outside the frontier.

In economics, what is the opportunity cost to Toyland of increasing the production of fire trucks from 200 to 350, as per Table 1?

200 dolls

300 dolls (correct)

100 dolls

50 dolls

What do economists consider positive statements to be?

Descriptive, making a claim about how the world is (correct)

Affirmative, justifying existing economic policy

Prescriptive, making a claim about how the world ought to be

Optimistic, putting the best possible interpretation on things

Based on Figure 2, what points can the economy produce at?

Points A, B, C, E Signup and view all the answers

What is considered the primary determinant of a country's standard of living?

The ability to produce goods and services Signup and view all the answers

In economics, what is meant by the cost of something?

The opportunity given up in order to obtain that item Signup and view all the answers

What is the opportunity cost of Mallory working overtime rather than watching a video with her friends?

The $24 minus the enjoyment she would have received from watching the video Signup and view all the answers

In a market economy, what guides economic activity?

Prices Signup and view all the answers

What does a point on a country's production possibilities frontier represent?

A combination of two goods that an economy can produce using some of its resources and technology Signup and view all the answers

What happens when scientists make good assumptions?

They greatly simplify the problem without substantially affecting the answer Signup and view all the answers

In the simple circular-flow diagram, who are the decision makers?

Households, firms, and government Signup and view all the answers

When is an economic outcome said to be efficient?

If the economy is getting all it can from the scarce resources it has available Signup and view all the answers