Production Possibilities Curve MCQ Quiz Questions And Answers

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Production Possibilities Curve MCQ Quiz Questions And Answers - Quiz

Do you know about the production possibility curve? To test your knowledge, take this MCQ on Production Possibilities Curve quiz. The PPC or production possibility curve/frontier is a presumptive depiction of the different conceivable combinations of two goods that can be produced within the given available resource.

In such a quiz, you may encounter questions covering various aspects of the PPC, including its shape, slope, factors that cause shifts in the curve, opportunity cost, efficiency, and points of allocative and productive efficiency. Each question presents different scenarios or diagrams related to the PPC, requiring participants to analyze and apply economic Read moreprinciples to select the correct answer from multiple options. This quiz has several informative questions on the same topic. Choose the correct answer to get the perfect score. All the best! Don't forget to share the quiz.


Production Possibilities Curve Questions and Answers

  • 1. 

    Which of the following best describes the three fundamental economic questions?

    • A.

      What to produce, when to produce, and where to produce

    • B.

      What time to produce, what place to produce, and how to produce

    • C.

      What to produce, when to produce, and for whom to produce

    • D.

      What to produce, how to produce, and for whom to produce

    Correct Answer
    D. What to produce, how to produce, and for whom to produce
    Explanation
    The three fundamental economic questions are concerned with the allocation of resources in an economy. "What to produce" refers to the decision of which goods and services should be produced based on consumer demand and resource availability. "How to produce" refers to the choice of production methods and techniques to use in order to efficiently produce the selected goods and services. "For whom to produce" refers to the decision of how the produced goods and services should be distributed among the members of society, taking into consideration factors such as income, wealth, and need.

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  • 2. 

    Opportunity cost represents the worst of the various alternatives that must be given up when a choice is made in the context of scarcity.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    The statement is incorrect. Opportunity cost represents the value of the next best alternative that is forgone when a choice is made. It is not necessarily the worst alternative, but rather the value of the alternative that is sacrificed.

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  • 3. 

    Suppose that the alternative uses of an hour of your time in the evening, ranked from best to worst, are (i) studying economics, (ii) watching two half-hour TV sitcoms, (iii) playing pool, and (iv) jogging around the town. You can only choose one activity. What is the opportunity cost of studying economics for one hour, given this information?

    • A.

      Jogging around town.

    • B.

      Watching two half-hour TV sitcoms.

    • C.

      Playing pool.

    • D.

      The sum of watching two half-hour TV sitcoms, playing pool, and doing your laundry.

    Correct Answer
    B. Watching two half-hour TV sitcoms.
    Explanation
    The opportunity cost of studying economics for one hour is the value of the next best alternative that is forgone, which is watching two half-hour TV sitcoms. This means that by choosing to study economics, you are giving up the enjoyment and entertainment of watching the sitcoms. The other options listed, such as jogging around town, playing pool, and doing laundry, are ranked lower in terms of preference and therefore have a lower opportunity cost compared to watching the sitcoms.

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  • 4. 

    A production possibilities curve shows the various combinations of the output of ___________

    • A.

      What consumers would like to consume?

    • B.

      What producers would like to produce?

    • C.

      What an economy can produce?

    • D.

      What should an economy produce?

    Correct Answer
    C. What an economy can produce?
    Explanation
    A production possibilities curve shows the various combinations of the output that an economy can produce. It represents the maximum amount of goods and services that can be produced given the available resources and technology. The curve illustrates the trade-offs that an economy faces when allocating its resources between different goods and services. It helps to determine the efficiency and productive capacity of an economy by showing the possible combinations of production.

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  • 5. 

    A production possibilities curve is drawn based on one of the following sets of assumptions?

    • A.

      Resources are fixed and fully employed, and technology advances at the rate of growth of the economy overall.

    • B.

      Resources such as nonrenewable resources will decline, but labor remains fully employed, and technology is unchanged.

    • C.

      Resources can vary. Most resources experience times of unemployment, and technological advances, particularly during wartime.

    • D.

      None of the above is correct.

    Correct Answer
    A. Resources are fixed and fully employed, and technology advances at the rate of growth of the economy overall.
    Explanation
    Resources are fixed and fully employed, and technology advances at the rate of growth of the economy overall.
    This assumption aligns with the typical conditions under which a production possibilities curve (PPC) is drawn. A PPC is a graphical representation of the maximum quantity of two goods that an economy can produce given its level of technology and resources. In this scenario, it assumes that resources are fixed and fully employed, and technological advances occur at a consistent rate, representing a stable and idealized economic situation for the purpose of analysis.

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  • 6. 

    If an economy can produce various combinations of food and shelter along a production possibilities curve (PPC), then if we increase the production of housing along the PPC, which of the following is correct?

    • A.

      We also increase the production of food.

    • B.

      We must decrease the production of food. This foregone food production represents the opportunity cost of the increase in the shelter.

    • C.

      We cannot change the production of food.

    • D.

      None of the above.

    Correct Answer
    B. We must decrease the production of food. This foregone food production represents the opportunity cost of the increase in the shelter.
    Explanation
    If an economy can produce various combinations of food and shelter along a production possibilities curve (PPC), then increasing the production of housing along the PPC will result in a decrease in the production of food. This is because resources are limited, and allocating more resources to housing means there are fewer resources available for food production. The decrease in food production represents the opportunity cost of increasing shelter production, as the economy has to give up the production of food to produce more shelter.

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  • 7. 

    Which of the following reasons might explain why an economy would be operating inside its production possibilities curve (PPC)?

    • A.

      Because the shrinking population has reduced the number of productive workers in the economy.

    • B.

      Because technological innovations have increased the productivity of labor and capital.

    • C.

      Because damage to natural resources might be caused, such as deforestation leading to erosion of topsoil has shrunk the land resource.

    • D.

      Because of unemployment or underemployment of labor, perhaps due to discrimination against employing workers of a certain race or gender.

    Correct Answer
    D. Because of unemployment or underemployment of labor, perhaps due to discrimination against employing workers of a certain race or gender.
    Explanation
    An economy operating inside its production possibilities curve (PPC) indicates that it is not utilizing all of its available resources efficiently. The given answer suggests that the reason for this could be unemployment or underemployment of labor, potentially due to discrimination against certain races or genders. This means that there are workers who are capable and willing to work but are not being given the opportunity, leading to a suboptimal use of resources and a lower level of output than what could be achieved.

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  • 8. 

    Which of the following characteristics do the combinations of goods outside the production possibilities curve (PPC) have?

    • A.

      They are only attainable today if we employ all unemployed or underemployed resources.

    • B.

      They are not attainable, given our existing stock of resources and technology.

    • C.

      They imply that some resources, such as labor, are unemployed or underemployed.

    • D.

      None of the above.

    Correct Answer
    B. They are not attainable, given our existing stock of resources and technology.
    Explanation
    The correct answer suggests that combinations of goods outside the production possibilities curve (PPC) are not attainable with the current stock of resources and technology. This means that the economy is not able to produce these combinations of goods efficiently or effectively. It implies that there is a limit to the production capacity and that the economy would need to improve its resources and technology in order to reach these combinations.

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  • 9. 

    Which point represents underutilization?

    • A.

      B

    • B.

      C

    • C.

      A and D

    • D.

      E

    Correct Answer
    B. C
    Explanation
    Point C represents underutilization because it is below the production possibilities curve, indicating that resources are not being fully utilized to produce goods and services.

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  • 10. 

    Which of the following points is not attainable under the current situation?

    • A.

      A

    • B.

      D

    • C.

      F

    • D.

      E

    Correct Answer
    D. E

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