SOLVED

2.1  Production Possibilities Frontiers and Opportunity Costs 1) Scarcity A) stems from the incompatibility between limited resources and unlimited wants. B) can be overcome by discovering new resources. C) can be eliminated by rationing products. D) is a bigger problem in market economies than in socialist economies. 2) BMW recently decided to build a manufacturing plant in Shenyang, China. At this plant, BMW is able to take advantage of paying lower wages to its Chinese workers than it pays its German workers, but it also sacrifices the high levels of technical training possessed by its German workers. In deciding to open the Shenyang plant, BMW A) faced no trade-offs because employing lower-wage workers increased efficiency. B) faced a trade-off between higher cost and lower precision. C) adopted a negative technological change because it replaced high-skilled workers with low-skilled workers. D) eroded some of its competitiveness in the luxury car market because of its decreased cost of production. 3) The principle of opportunity cost is that A) in a market economy, taking advantage of profitable opportunities involves some money cost. B) the economic cost of using a factor of production is the alternative use of that factor that is given up. C) taking advantage of investment opportunities involves costs. D) the cost of production varies depending on the opportunity for technological application. 4) The production possibilities frontier shows the ________ combinations of two products that may be produced in a particular time period with available resources. A) minimum attainable B) maximum attainable C) only D) equitable 5) The production possibilities frontier model shows that A) if consumers decide to buy more of a product its price will increase. B) a market economy is more efficient in producing goods and services than is a centrally planned economy. C) economic growth can only be achieved by free market economies. D) if all resources are fully and efficiently utilized, more of one good can be produced only by producing less of another good. 6) The production possibilities frontier model assumes which of the following? A) labor, capital, land and natural resources are unlimited in quantity. B) the economy produces only two products. C) any level of the two products that the economy produces is currently possible. D) the level of technology is variable. 7) The attainable production points on a production possibility curve are A) the horizontal and vertical intercepts. B) the points along the production possibilities frontier. C) the points outside the area enclosed by the production possibilities frontier. D) the points along and inside the production possibility frontier. 8) The points outside the production possibilities frontier are A) efficient. B) attainable. C) inefficient. D) unattainable. 9) Refer to Figure 2-1. Point A is A) technically efficient. B) unattainable with current resources. C) inefficient in that not all resources are being used. D) the equilibrium output combination. 10) Refer to Figure 2-1.  Point B is A) technically efficient. B) unattainable with current resources. C) inefficient in that not all resources are being used. D) the equilibrium output combination. 1