Understanding Economics 19 2 - Production Possibility Curve

MULTIPLE CHOICE QUESTIONS

J/02/1/01
1 The diagram shows an economy’s production possibility curve.

What will cause a movement from point X on the production possibility curve to point Y
within the curve?
(A) an increase in unemployment
(B) a fall in the size of the labour force
(C) a reduction in the availability of land for industrial production
(D) an improvement in technology in consumer good production

N/02/1/01
2 The diagram shows an economy’s production possibility curve.

Why does the curve slope downwards?

(A) Agriculture and industry are subject to decreasing returns to scale.
(B) Agriculture and industry are subject to increasing returns to scale.
(C) Resources are shared equally between industrial and agricultural production.
(D) Total resources available to the economy are limited.
Understanding Economics 20 2 - Production Possibility Curve

J/03/1/02
3 The diagram shows a production possibility curve LM.
What might cause the curve to shift to NP?

(A) technological progress

(B) unemployment of resources
(C) the depletion of natural resources
(D) a reallocation of resources

N/03/1/02
4 The diagram shows shifts in an economy’s production possibility curve.

Which change could have come about as a result of an improvement in technology?

(A) S to Y (B) T to S (C) W to T (D) W to Y

J/04/1/01
5 What is the opportunity cost to a fully employed economy of increasing capital
investment?

(A) a fall in consumption (B) a fall in income

(C) a rise in saving (D) a rise in the rate of interest
Understanding Economics 21 2 - Production Possibility Curve

J/04/1/02
6 The diagram shows a production possibility curve for an economy which produces only
two goods, X and Y.

The economy produces 400 of good Y and produces on its production possibility curve.
Which quantity of good X is given up?

(A) 600 (B) 800 (C) 1200 (D) 1600

N/04/1/02
7 The diagram shows two production possibility curves (EF and GH), before and after
technological progress has taken place.

After technological progress has taken place, what is the opportunity cost in capital goods
of producing OX consumer goods?

(A) MH (B) OH (C) OM (D) YF

Understanding Economics 22 2 - Production Possibility Curve

J/05/1/03
8 The diagram illustrates the production possibility curves for an economy in Year 1
(X1,Y1) and Year 2 (X2, Y2)

What can be deduced from the diagram?

(A) The cost of production was lower in Year 2 than in Year 1.
(B) The full employment level of output was lower in Year 2 than in Year 1.
(C) The opportunity cost was lower in Year 2 than in Year 1.
(D) Unemployment rose between Year 1 and Year 2.

N/05/1/02
9 The diagram shows a country’s production possibility curve.

What could allow the economy to move from M to N?

(A) an increase in consumer spending

(B) an increase in demand for exports
(C) an increase in government spending on pensions
(D) an increase in investment
Understanding Economics 23 2 - Production Possibility Curve

J/06/1/02
10 In the diagram the original production possibility curve is LM.

What might cause the curve to shift to NP?

(A) technological progress (B) unemployment of resources
(C) the depletion of natural resources (D) a reallocation of resources

J/07/1/01
11 Thediagramshowsaproductionpossibilitycurveforaneconomythatproducesonlytwogoods,
X and Y.

The economy produces 400 of good Y and produces on its production possibility curve.
Which quantity of good X is given up?
(A) 600 (B) 800 (C) 1200 (D) 1600

N/07/1/01
12 Some people are shipwrecked on a tropical island and allocate their time between
gathering coconuts and fishing. Each individual is equally productive in collecting
coconuts or catching fish.
Which diagram represents the production possibility curve of this community?
Understanding Economics 24 2 - Production Possibility Curve

J/08/1/01
13 A country’s production possibility curve moves from XX to YY as shown in the diagram.

What could have caused this movement?

(A) a rise in the retirement age
(B) an increase in investment
(C) an increase in net emigration
(D) a rise in technological progress

N/08/1/02
14 The production possibility curve for an economy producing capital and consumer goods
is represented by the line PQ.

What is the opportunity cost of producing OS of consumer goods?

(A) OR of capital goods
(B) PR of capital goods
(C) SQ of consumer goods
(D) SQ of consumer goods + PR of capital goods
Understanding Economics 25 2 - Production Possibility Curve

J/09/1/02
15 The diagram shows two production possibility curves (EF and GH), before and after
technological progress has taken place.

After technological progress has taken place, what is the opportunity cost in capital goods
of producing OX consumer goods?

(A) MH (B) OH (C) OM (D) YF

N/09/1/01
16 The diagram illustrates the production possibility curves for an economy in Year 1 (X 1 Y1)
and Year 2 (X2 Y2).

What can be concluded from the diagram?

(A) The cost of production was lower in Year 2 than in Year 1.

(B) The full employment level of output was lower in Year 2 than in Year 1.
(C) The opportunity cost of production was lower in Year 2 than in Year 1.
(D) Unemployment rose between Year 1 and Year 2.
Understanding Economics 26 2 - Production Possibility Curve

J/10/1/01
17 The diagrams show the change in a country’s production possibility curve between Year
1 and Year 2.

What can be deduced from the diagrams?

(A) Future growth prospects have been harmed.

(B) The level of unemployment has fallen.
(C) The opportunity cost of consumer goods has risen.
(D) The proportionate growth in production is greater in consumer goods.

N/10/1/03
18 The diagram shows the production possibility curve of an economy.

capital
goods

O consumer
goods
Which statement explains the shape of this curve?

A More efficient workers are drawn away from the production of consumer goods.
B Resources cannot be switched between producing capital and consumer goods.
C The economy is more efficient at producing capital than consumer goods.
D The opportunity cost of producing capital goods increases the more capital goods
are made.
Understanding Economics 27 2 - Production Possibility Curve

N/11/1/02
19 The curve PP in the diagram is the production possibility curve for a country producing
goods X and Y. The production of X is more labour intensive than the production of Y.
R

Q
P
S
good Y T

O S T PR Q
good X

The working hours of the labour force are reduced by law.

Which curve could be the country’s new production possibility curve?

(A) TT (B) SS (C) QQ (D) RR

J/12/1/02
20 In the diagram, JK is an economy’s production possibility curve.

industrial
goods

O H K
agricultural goods

What could cause the curve to shift to GH?

A a decrease in innovation
B an increase in the retirement age
C an increase in the price of energy
D an increase in the unemployment rate
Understanding Economics 28 2 - Production Possibility Curve

N/12/1/02
21 In the diagram the original production possibility curve is LM.

What might cause the curve to shift to L

NP?
N
A a higher retirement age
good X
B a reallocation of resources
C the depletion of natural
resources
D the underemployment of
resources
O P M
good Y
N/12/1/03
22 The diagram shows a production possibility curve for an economy that produces only two
goods, X and Y.
The economy produces 1000
1200 of good X and
produces on its production
possibility curve.
good Y
Which quantity of good Y is 500
given up?

A 400
B 600
0
C 800
0 500 1000 1500 2000
D 1000
good X

J/13/1/02
23 The diagram shows two production possibility curves (EF and GH), before and after
technological progress has taken place.

G
After technological progress has
taken place, what is the opportunity E
cost in capital goods of producing OX consumer
consumer goods? goods
X

A MH
B OH
C OM
D YF O Y M F H
capital goods
Understanding Economics 29 2 - Production Possibility Curve

J/14/1/02
24 A country was at point P on its production possibility curve. Following the threat of
invasion it prepared for war. The war then reduced the country’s infrastructure.

What are the most likely changes on the

P
production possibility curve diagram that are
consistent with these events? consumer
goods
S R Q
A P to Q followed by Q to R
B P to Q followed by Q to S
C P to R followed by R to Q
O
D P to R followed by R to S military goods

N/14/1/03
25 The diagram shows the production possibility curve XX of an economy that produces
both consumer goods and capital goods.

X
M

capital N
goods
If the economy moves from point M to point N,
which diagram represents the most likely
position of the production possibility curve YY
X
in the future? O consumer goods
A B
X
X
Y Y

capital capital
goods goods

Y X Y X
O consumer goods O consumer goods

C D

X
Y

capital Y capital X
goods goods

X Y X Y
O consumer goods O consumer goods