Question

Use the graph below to answer questions 6 through 9 Can Openers 14,000 12,000 10,000 8,000 6,000 4,000 2,000 HF 123 5678Drll Presses 6. Which of the following events would best explain a shift from PPFi to PPF2? a.An increase in rate of unemployment An increase in the size of the labor force C. Areduction in rate of unemployment d. A reduction in the size of the labor force 7.On PPF1, the opportunity cost of the th drill press is approximately can openers. a. 2,000 4.000 c. 6,000 d. 8,000 8. On PPFı, all of the following output combinations are currently attainable except a.12,000 can openers and 0 drill presses. 10,000 can openers and 6 drill presses. c. 4,000 d.0 can openers and 7 drill presses. can openers and 6 drill presses 9. An increase from PPFi to PPF2 makes it possible to produce approximately additional can openers i a. 2,000 ll presses are produced. 4 000 4,000 C. d. 7,000 10. In the production possibilities model, economic growth is illustrated by: a.an inward shift of the production possibilities frontier b. a outward shift of the production possibilities frontier c. the downward slope of the prođuction possibilities frontier. d.moving from a point inside the current production possibilities frontier to a point on the curent production possibilities frontier

Answer 1

6. The correct option is

• b. increase in the size of the labor force.

The reason being that, the points on the PPF are maximum potential of the nation. Thus, increase in unemployment refers to a point inside the PPF, and points on the PPF refers to maximum employment. An increase in labor force, which is a production input, would shift the PPF outwards, referring to the fact that for every can opener on PPF before, the nation may produce more drill pressers than before.

7. The correct option is

• c. 6000.

At PPF1, the nation may produce 6 drill presses with 6000 can openers or 7 drill presses with 0 can openers. Thus, supposing the nation is at 6 drill presses, to increase by one unit more, ie to produce 7th drill presses, the nation have to sacrifice 6000 can openers, which would be the opportunity cost of 7th drill presses.

8. The correct option is

• b. 10000 can openers and 6 drill presses.

The reason being that, the nation may produce 10000 can openers with no more than 4 drill presses, and to produce 6 drill presses, nation have to sacrifice 4000 can openers. This is the only combination not feasible. All other combinations are either on or under the PPF1.

9. The correct option is

• d. 7000

The reason being that, in the PPF2, the nation may produce 7 drill presses along with 7000 can openers (notice how opportunity cost of producing 7th is changed than before).

10. The correct option is

• b. an outward shift of the production possibility frontier.

An inward shift would mean nation can produce less than before, while an outward shift means that nation can produce more than before, ceteris paribus. All the PPF are supposed to be downward sloped, and moving from point inside to a point on the PPF means that the nation now uses the full potential (of resources, employment, etc). Thus, option b is correct.