Which of the following could explain why an economy is operating inside its ppf

Answer the following questions and then press 'Submit' to get your score.

Question 1

Which of the following is not required for a country to be producing at a point on its production possibility frontier?

a) Full employment of labour.

b) All producers using the latest technology.

c) Stable prices.

d) All producers having productive efficiency.

Question 2

Which of the following statements is true?

a) The production possibility frontier is steeper at the right end than the left because some resources are better suited to making some products than others.

b) The production possibility frontier is straight because some resources are better suited to making some products than others.

c) The production possibility frontier is steeper at the left end than the right because some resources are better suited to making some products than others.

d) The production possibility passes the point which represents total wants in the economy.

Question 3

Which of the following will not shift a country's production possibility frontier?

a) A fall in unemployment.

b) An increase in the age at which people retire.

c) The introduction of improved technology.

d) Purchases of new capital by firms.

Question 4

Which of the following types of economy describes the economy of the UK?

a) A command economy.

b) A market economy.

c) A mixed economy.

d) A planned economy.

Question 5

All the following government policies are likely to increase the quantity of some products that are produced. But with one policy, this effect is a side-effect rather than the aim. Which policy is that?

a) A policy intended to improve efficiency.

b) The introduction of subsidies on some products.

c) A policy intended to reduce unemployment.

d) The introduction of taxes on the rich and transfers to the poor.

Question 6

Which of the following policies would increase production by taking it to a point closer to the production possibility frontier, but would not shift the frontier?

a) A policy that encouraged firms to buy more industrial plant.

b) A policy that encouraged firms to develop and introduce improved technology.

c) A policy that encouraged firms to buy more machinery.

d) A policy that encouraged firms to adopt better technologies that are already available.

Question 7

Suppose a country is currently producing at a point on its production possibility frontier, and undertakes no trade with other countries. Then trade is opened up. Which of the following would not occur as a direct result?

a) Its production possibility frontier would shift.

b) Its production would shift to another point on its production possibility frontier.

c) The pattern of products that the country produced would differ from the pattern that its consumers consumed.

d) Consumers would be able to consume at a point outside the production possibility frontier.

Question 8

Which of the following policies is not classed as a stabilization policy?

a) A policy aimed at reducing unemployment.

b) A policy aimed at reducing the number of people in poverty.

c) A policy aimed at reducing the rate of inflation.

d) A policy aimed at shifting the production possibility frontier outwards.

Question 9

Which of the following statements is a positive statement?

a) Bankers' bonuses should be taxed.

b) The eurozone ought to allow member countries in difficulty to stop using the euro and use currencies of their own instead.

c) One of the largest industries in the UK is the financial services industry.

d) The UK government ought to split up some of the largest UK banks to promote more competition in the banking industry.

Question 10

Suppose you buy Economics by David King. What is the opportunity cost of your purchase?

a) The money you paid for the book.

b) Whatever you would have spent the money on if you had not bought the book.

c) The cost of producing the book.

d) The time you spend studying the book.

Why might an economy be operating inside the PPF?

What does it mean to be operating inside the PPF?

What happens when an economy is operating inside its PPF?