Question 1

What does it mean when society is operating inside the production possibilities frontier PPF)?

Accepted Answer

The answer of What does it mean when society is...

Question 2

For what kind of society does a shift away from the production of capital goods and toward the production of consumer goods make sense?
A) a society with a scarcity of natural resources
B) a society with a high unemployment rate
C) a society with a low per-capita income
D) a society with a large per-capita stock of capital goods
E) a society with a large population

Accepted Answer

A society with a large per-capita stock of capital goods already has significant infrastructure and machinery to support production. Shifting towards consumer goods production can help in meeting the immediate needs and desires of its population, leveraging the existing capital goods for efficient production.

Question 3

The figure depicts a shift in a society’s production possibilities frontier (PPF) for the manufacture of trains and planes: train-manufacturing capacity expands while plane-manufacturing capacity shrinks.Refer to this figure to answer the next questions

-Which point represents an output that was efficient before the shift but is inefficient afterward?
A) point A
B) point B
C) point C
D) point D
E) point E

Accepted Answer

The answer of The figure depicts a shift in a...

Question 4

Ollie proposes that Kukla give Zola 1 table in exchange for 2 rugs. What are Kukla's and Zola's reactions?
A) Kukla likes the proposal, but Zola does not.
B) Zola likes the proposal, but Kukla does not.
C) Kukla and Zola both like the proposal.
D) Neither Kukla nor Zola likes the proposal.
E) Ollie's proposal is not feasible.

Accepted Answer

Kukla likes the proposal because they are getting a good deal (2 rugs for 1 table), but Zola does not because they might perceive it as not beneficial for them.

Question 5

Explain how scarcity is the root cause of the trade-offs and opportunity cost illustrated in the production possibilities frontier PPF).

Accepted Answer

The answer of Explain how scarcity is the root cause...

Question 6

Why has India's economy grown faster than the United States' in recent years?
A) India production has focused more on consumer goods.
B) India has lowered its population growth rate.
C) India has attained a higher standard of living than the United States.
D) India's production has focused more on capital goods.
E) India has placed more focus on its citizens' immediate needs.

Accepted Answer

India's production has focused more on capital goods, which are goods used to produce other goods, such as machinery and equipment. This has led to an increase in productivity and a boost in economic growth. Meanwhile, the US has focused more on producing consumer goods, which do not contribute as much to economic growth.

Question 7

A poker player wins some cash. Which use of the money would most naturally be considered an investment?
A) buying a round of drinks for everyone at a bar
B) using the money to play more poker
C) paying off debts owed to bookies
D) shopping for groceries
E) buying a book of tips for poker players

Accepted Answer

Buying a book of tips for poker players can be considered an investment because it has the potential to improve the player's skills and increase their chances of winning more money in future poker games.

Question 8

Comment on the role of models in economics. What are the strengths and weaknesses of using them to explore the world around us?

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Question 9

Draw a production possibilities frontier PPF) for good A and good B. Suppose that these goods are subject to increasing relative costs in production, and be sure that your graph reflects this fact.
Now suppose that a new and innovative technology enhances the production of good A but not good
B. Illustrate how this new innovation changes the production possibilities frontier PPF).

Accepted Answer

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Question 10

When an economy shifts away from production of consumer goods and toward production of capital goods, for the average worker this trade-off means
A) a higher standard of living.
B) longer work hours.
C) a lower savings rate as a percentage of income).
D) more leisure time.
E) more disposable income.

Accepted Answer

Shifting towards production of capital goods implies that the economy is investing in long-term growth and development. This requires more work hours from the average worker as capital goods are typically more complex and require more time to produce compared to consumer goods. Hence, the trade-off means longer work hours for the average worker.

Question 11

How can a person who is "better" or more efficient in that he or she has an absolute advantage in the production of various goods on the PPF) at producing several things be made even better off by specialization and trade?

Accepted Answer

The answer of How can a person who is "better"...

Question 12

The figure depicts a shift in a society’s production possibilities frontier (PPF) for the manufacture of trains and planes: train-manufacturing capacity expands while plane-manufacturing capacity shrinks.Refer to this figure to answer the next questions

-Which point represents an efficient level of output both before and after the shift?
A) point A
B) point B
C) point C
D) point D
E) point E

Accepted Answer

Point C represents an efficient level of output both before and after the shift because it is on the production possibility frontier (PPF) in both scenarios, indicating that resources are being used efficiently.

Question 13

Kristen is planning to add new mulch to all the landscaping beds around her house. She has determined the quantity of mulch she will need and identified these two options for getting the mulch to her house:
1. Kristen can have all the mulch delivered to her yard in one dump truck for $450.
2. Kristen can make four trips to the garden center with her pickup truck and haul it herself. It will cost her $75 per load for the mulch, plus $25 in fuel and truck wear per load. She estimates it will take about five hours to haul and unload all four loads.
What is the full cost of each method? Which method is cheaper? How is opportunity cost relevant?

Accepted Answer

The answer of Kristen is planning to add new mulch...

Question 14

Suppose that during Coco's afternoon shift working at the library, she could either reshelve books or process interlibrary loan ILL) requests. Draw a production possibilities frontier PPF) that describes Coco's production trade-offs. Her production of each of these goods is subject to increasing relative costs in production, so be sure that the graph reflects this fact.
Now suppose that a new online request system increases Coco's efficiency at processing ILL requests but does not affect her reshelving ability. Show, on the same graph, how this new innovation changes the PPF.

Accepted Answer

The answer of Suppose that during Coco's afternoon shift working...

Question 15

Suppose that, during an afternoon at Hambre's favorite ski resort, Hambre could either make additional runs down the slopes or produce and sip hot chocolate by the fire in the lodge. Draw a production possibilities frontier PPF) that describes his production trade-offs between runs skied by riding the chairlift to the top and skiing down the slope) versus cups of hot chocolate produced and sipped. Hambre's production of each of these goods is subject to constant marginal opportunity costs in production, so be sure that, in the graph, the opportunity cost of one activity in terms of the other is the same at any point on the PPF.
Now suppose that a new superfast ski lift reduces the time it takes to get to the top of the mountain. Show, on the same graph, how this changes the PPF.

Accepted Answer

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Question 16

Ollie proposes that Kukla give Zola 2 tables in exchange for 1 rug. What are Kukla's and Zola's reactions?
A) Kukla likes the proposal, but Zola does not.
B) Zola likes the proposal, but Kukla does not.
C) Kukla and Zola both like the proposal.
D) Neither Kukla nor Zola likes the proposal.
E) Ollie's proposal is not feasible.

Accepted Answer

Since Ollie proposes that Kukla give Zola 2 tables in exchange for 1 rug, Kukla would lose 2 tables, while Zola would gain a rug. Thus, it is likely that Kukla would not like the proposal, while Zola would.

Question 17

What assumptions do economists make when developing a production possibilities frontier PPF)?

Accepted Answer

The answer of What assumptions do economists make when developing...

Question 18

How will a reduction in the national unemployment rate affect a nation's production possibilities frontier PPF)?

Accepted Answer

The answer of How will a reduction in the national...

Question 19

Ollie proposes that Kukla give Zola 2 tables in exchange for 2 rugs. What are Kukla's and Zola's reactions?
A) Kukla likes the proposal, but Zola does not.
B) Zola likes the proposal, but Kukla does not.
C) Kukla and Zola both like the proposal.
D) Neither Kukla nor Zola likes the proposal.
E) Ollie's proposal is not feasible.

Accepted Answer

Both parties benefit from the proposal, as Kukla gets rid of tables they do not need in exchange for rugs that they can use, while Zola gets tables that they need in exchange for rugs that they may not have a use for. Therefore, both Kukla and Zola would like the proposal.

Question 20

Draw a production possibilities frontier PPF) that shows a pizza shop's production trade-offs
between producing pizzas and stromboli. Suppose the pizza shop upgrades to a larger, more automated oven. On the same graph, show how the PPF changes. The oven is used to bake both pizzas and stromboli.)

Accepted Answer

The answer of Draw a production possibilities frontier PPF) that...

Quiz 2: Model Building and Gains From Trade

What does it mean when society is operating inside the production possibilities frontier PPF)?

For what kind of society does a shift away from the production of capital goods and toward the production of consumer goods make sense?

Ollie proposes that Kukla give Zola 1 table in exchange for 2 rugs. What are Kukla's and Zola's reactions?

Explain how scarcity is the root cause of the trade-offs and opportunity cost illustrated in the production possibilities frontier PPF).

Why has India's economy grown faster than the United States' in recent years?

A poker player wins some cash. Which use of the money would most naturally be considered an investment?

Comment on the role of models in economics. What are the strengths and weaknesses of using them to explore the world around us?

When an economy shifts away from production of consumer goods and toward production of capital goods, for the average worker this trade-off means

How can a person who is "better" or more efficient in that he or she has an absolute advantage in the production of various goods on the PPF) at producing several things be made even better off by specialization and trade?

Ollie proposes that Kukla give Zola 2 tables in exchange for 1 rug. What are Kukla's and Zola's reactions?

What assumptions do economists make when developing a production possibilities frontier PPF)?

How will a reduction in the national unemployment rate affect a nation's production possibilities frontier PPF)?

Ollie proposes that Kukla give Zola 2 tables in exchange for 2 rugs. What are Kukla's and Zola's reactions?

Draw a production possibilities frontier PPF) that shows a pizza shop's production trade-offs between producing pizzas and stromboli. Suppose the pizza shop upgrades to a larger, more automated oven. On the same graph, show how the PPF changes. The oven is used to bake both pizzas and stromboli.)