Question

Chapter 2 Homework 1. Points that lie outside (or beyond) the PPF are attainable. ainable. efficient. D. ineflficient 2. Which of the following statements is true? less of some other good. to produce goods. another possibilities frontier (PPF). A. In a world of efficiently used scarce B. The law of increasing opportunity costs assumes that all people have the same ability C. Efficiency implies that it is impossible to get more of one good without getting less of D. Even if a country has unemployed resources, it can still be operating on its production E. a and c resources, more of one good necessarily means 3. Through war, many of the factories in country 1 are destroyed and many of its people are killed. As a result, the country's A. production possibilities frontier (PPF) after the war has probably shifted to the right compared to its PPF prior to the war. B. PPF after the war has probably shifted to the left compared to its PPF prior to the war. C. PPF after the war is probably the same PPF as before the war. D. ability to produce goods and services has increased. E. b and d 4. Both country 1 and country 2 are located on their respective production possibilities frontiers (PPFs) for consumer goods and capital goods, but country 1 produces twice the output of both types of goods compared to country 2. It follows that A. country I's PPF lies further to the right than country 2's PPF. B. country 1 has a smaller population than country 2. C. country 1 has a bigger population than country 2. D. country 1 is efficient and country 2 is inefficient. E. none of the above 5. Points that lie inside (or below) the PPF are A. unattainable attainable and productive efficient. C attainable but productive inefficient. attainable and neither productive efficient nor productive inefficient. 6. If increasingly more units of good Y must be given up as each successive unit of good X produced, then the PPF for these two goods is

Answer 1

1. B. Unattainable

Any point outside (beyond) the Production possibility curve is due to scarcity of resources. Therefore this combination is unattainable.

2. E. A and C

1. In a world of efficiently used scarce resources, more of one good necessarily means less of some other good.

C. Efficiency implies that it is impossible to get more of one good without getting less of another.

            Productive efficiency implies that it is possible to produce more of one good and no less of another, even without additional resources.   This happens when an economy is operating along its production possibility frontier.

3. B. PPF after the war has probably shifted to the left compared to its PPF prior to the war.

During war, many people were killed and factories were destroyed. This indicates loss of manpower resources and loss of capital. Hence there is reduction in the country’s resources which will cause a leftward shift in PPF.

4. A. Country 1’s PPF lies further to the right than country 2’s PPF.
5. C. Attainable but productive inefficient

• Points outside the PPC - Unattainable
• Points on PPC - Attainable
• Points inside the PPC - Inefficient

If an economy is operating at a point inside the production possibilities curve, its resources are not being used efficiently.