Question

refer to the graph to answer questions 1 - 5.

1. which point(s) on the graph represent productive efficiency?

a. b and c
b. a and d
c. a, b, c, and d
d. a, b, c, d, and e
e. a, b, c, d, e, and f

1. for this economy, an increase in the quantity of capital goods produced without a corresponding decrease in the quantity of consumer goods produced

a. cannot happen because there is always an opportunity - cost.
b. is represented by a movement from point e to point a.
c. is represented by a movement from point c to point b.
d. is represented by a movement from point e to point b.
e. is only possible with an increase in resources or technology.

1. an increase in unemployment could be represented by a movement from point

a. d to point c.
d. b to point e.
b. b to point a.
e. e to point b.
c. c to point f.

1. which of the following might allow this economy to move from point b to point f?

a. more workers
b. discovery of new resources
c. building new factories
d. technological advances
e. all of the above

1. this production possibilities curve shows the trade - off between consumer goods and capital goods. since capital goods are a resource, an increase in the production of capital goods today will increase the economys production possibilities in the future. therefore, all other things equal (ceteris paribus), producing at which point today will result in the largest outward shift of the ppc in the future?

a. a
d. d
b. b
e. e
c. c

1. the production possibilities curve will certainly be straight if

a. making more of one good means that less of the other good can be made.
b. the opportunity cost of making each good increases as more is made.
c. no resources are specialized for the production of either good.
d. the opportunity cost of making the first unit of each good is the same.
e. the economy experiences decreasing opportunity costs for the production of both goods.

1. allocative efficiency is achieved

a. at every point along a production possibilities curve.
b. at every point above a production possibilities curve.
c. at every point below a production possibilities curve.
d. at the point on a production possibilities curve that minimizes the use of resources.
e. at the point along a production possibilities curve that makes consumers as well off as possible.

Explanation:

Question 1

Productive efficiency occurs when an economy is producing on its production - possibilities curve (PPC). Points \(A\), \(B\), \(C\), and \(D\) lie on the PPC, while points \(E\) and \(F\) are inside or outside the PPC respectively.

An increase in capital goods production without a decrease in consumer goods production is only possible if there is an increase in resources or technology (shifting the PPC outward). A movement from \(E\) (inside the PPC) to \(B\) (on the PPC) is just moving towards efficiency, not increasing production of one without decreasing the other. A movement from \(C\) to \(B\) is a trade - off. A movement from \(E\) to \(A\) is also a trade - off. Only an increase in resources or technology can allow more of one good without less of the other.

An increase in unemployment means the economy is moving further inside the PPC. Point \(E\) is inside the PPC. Moving from \(B\) (on the PPC) to \(A\) (on the PPC) is a trade - off. Moving from \(D\) (on the PPC) to \(C\) (on the PPC) is a trade - off. Moving from \(C\) (on the PPC) to \(F\) (outside the PPC assumption, assuming \(F\) is not a feasible point in the context of current resources) is not relevant. Moving from \(B\) (on the PPC) to \(E\) (inside the PPC) shows a decrease in production due to unemployment (less resources used effectively).

Answer:

d. \(A\), \(B\), \(C\), \(D\)

Question 2