Managerial Economics Quiz: Test!

When there is a change in technology and availability of resources, the production possibilities curve (PPC) shifts to the right. This is because with new technology, more efficient methods of production are available, allowing for increased output. Additionally, the availability of more resources means that there are more inputs to use in the production process, further increasing the potential output. Therefore, both factors contribute to an expansion of the production possibilities and a shift of the PPC to the right.

The PPC curve shows increasing marginal opportunity cost because as more resources are allocated to the production of one good, the opportunity cost of producing an additional unit of that good increases. This is because resources are not equally suited for the production of both goods, so as more resources are shifted from one good to another, the production of the second good becomes less efficient and requires more input to produce the same output. Therefore, the PPC curve becomes steeper, indicating the increasing marginal opportunity cost.

The correct answer is scarcity because the PPC curve highlights the problem of scarcity. Scarcity refers to the limited availability of resources in relation to unlimited human wants and needs. The PPC curve shows the different combinations of two goods that can be produced given a fixed amount of resources and technology. It demonstrates the trade-off between producing one good over another due to scarcity.

Taste and preferences are not determinants of supply because they refer to the consumer's preferences and choices, which influence demand rather than supply. Supply is determined by factors such as the cost of inputs, technology, and prices of related goods. These factors directly impact the production and availability of goods and services in the market.

A price floor is a government-imposed minimum price that is set above the equilibrium price in a market. It is typically implemented to protect the interests of sellers by ensuring that they receive a fair and stable income for their goods or services. By setting a price floor, the government aims to prevent prices from falling too low and potentially harming sellers' profitability. This intervention can be particularly beneficial for industries with high production costs or when sellers face significant market competition.

In a capitalist system, consumer preferences are taken into account. This means that businesses produce goods and services based on what consumers want and are willing to pay for. In a capitalist economy, the market determines what is produced, how it is produced, and who gets to consume it. This is in contrast to socialism and communism, where the government has more control over the economy and the allocation of resources. A mixed economy combines elements of both capitalism and socialism, with some industries and sectors being privately owned and others being owned or controlled by the government.

A price floor is a government-imposed minimum price set above the equilibrium price. This means that the price cannot fall below this level. When a price floor is set, it creates a situation where the price is higher than what the market would naturally determine. This leads to excess supply because producers are willing to supply more at the higher price, but consumers are not willing to buy as much at the higher price. As a result, there is an imbalance in the market, with more goods being supplied than demanded, leading to excess supply.

Excess demand occurs when the quantity demanded exceeds the quantity supplied at a given price. Price ceiling and control refers to a government-imposed limit on the maximum price that can be charged for a particular good or service. This can lead to excess demand because the price is artificially kept below the equilibrium price, causing more consumers to demand the product than there is supply available.

The concept of "whom to produce" refers to the allocation of goods and services among different individuals or groups in society. It deals with the distribution of the national income, ensuring that resources are distributed in a fair and equitable manner. This involves determining how much of the national income should go to different sectors of the economy, such as wages for workers, profits for businesses, and taxes for the government. By addressing the question of "whom to produce," policymakers can strive to create a more inclusive and balanced economy.

The price of the good itself will not cause a shift in the demand curve. Changes in the price of the good will only cause a movement along the demand curve, resulting in a change in the quantity demanded. Shifts in the demand curve are caused by factors such as changes in the price of related goods, taste and preferences, and income of the consumer.