# Section Quiz

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```					                  1-11-10
“Stop thinking in terms of limitations and
start thinking in terms of possibilities”
- Terry Josephson

What would you like to accomplish this
year?
Why do graphs show information
more clearly than texts or tables?
Production Possibilities
Economists use graphs to analyze the
choices and trade offs people make.
Production Possibilities curve shows
alternative ways to use the economy’s
productive resources.

Lets looks at some Possibilities
Step 1
Graph A                                                                 Graph B
25                                                                         25
no watermelons,
Shoes (millions of pairs)

Shoes (millions of pairs)
all possible shoes
20                                                                         20

15                                                                         15
a (0,15)

10                                                                         10                       no shoes, all
possible
watermelons
5                                                                          5

f (21,0)

0       5        10      15   20     25                                    0      5      10      15       20        25

Watermelons (millions of tons)                                             Watermelons (millions of tons)
Step 2
Plot and label the points.
This is the production
Watermelons                Shoes                                               possibilities curve.
(millions of tons)   (millions of pairs)
25
0                   15

Shoes (millions of pairs)
20
8                   14
15
14                   12
10

18                    9
5

20                    5
0      5      10      15     20      25
21                    0
Watermelons (millions of tons)
Step 3
The curve will move
to the right if more
25                                             land, labor or capital
resources become
Shoes (millions of pairs)

20                                             available.

15
Each time a shift
in production
10
takes place, cost
occurs.
5
What is the cost in
shoes when we
move from 20 to
0      5      10      15     20      25   21 million tons of
watermelon?
Watermelons (millions of tons)

Hot Dogs   Bicycles

100        0

90         4

75         8

50         12

0          16
Law of Increasing Costs
• Shifting the factors of production to
produce a different item requires
increasingly more resources to produce
more of the new item, therefore
opportunity costs increase.
• This explains why the line curves
Chapter 1, Section 3 Quiz
Match the Term with its definition
1. Underutilization          a. Shifting the factors of
production to produce a
different item requires
2. Efficiency
increasingly more
resources to produce
3. Law of Increasing Costs      more of the new item
b. an economy that is not
using all its resources
c. an economy that is
using all of its resources
to produce the
maximum output of
goods and services
4. A production possibilities curve shows the
relationship between the production of
a.   Farm goods and factory goods.
b.   Two types of farm goods.
c.   Two types of factory goods.
d.   Any two categories of goods.
5. The line on a production possibilities
curve showing the relative amounts of
two types of goods processed using all
resources is called the

a.   production possibilities frontier.
b.   opportunity cost line.
c.   utilization of resources.
d.   maximum possible production line.
6. Increasing the number of laborers in an
economy generally causes a(n)
a. increase in the production possibilities
curve.
b. decrease in the production possibilities
curve.
c. increase in the opportunity cost of
production.
d. decrease in the opportunity cost of
production.
7. The law of increasing costs means that as
production shifts from one item to
another,
a. the cost of production gets cheaper and
cheaper.
b. the cost of producing an item stays the
same no matter how many are produced.
c. more and more resources are necessary
to increase production of the second
item.
d. the land costs of increasing production
rise much more steeply than do the labor
costs.
8. An economy that is NOT using all of its
resources to gain the maximum possible
production is

c. growing
a. efficient
9. The curve usually seen in a production
possibilities frontier can be explained by
a. growth in the economy.
b. underutilization of resources.
c. increasing an economy’s efficiency.
d. the law of increasing costs.
10. An economy that is producing the maximum
amount of goods and services is considered

a. efficient             c. growing

Match the Term with its definition
1. Underutilization          a. Shifting the factors of
production to produce a
different item requires
2. Efficiency
increasingly more
resources to produce
3. Law of Increasing Costs      more of the new item
b. an economy that is not
using all its resources
c. an economy that is
using all of its resources
to produce the
maximum output of
goods and services
4. A production possibilities curve shows the
relationship between the production of
a.   Farm goods and factory goods.
b.   Two types of farm goods.
c.   Two types of factory goods.
d.   Any two categories of goods.
5. The line on a production possibilities
curve showing the relative amounts of
two types of goods processed using all
resources is called the

a.   production possibilities frontier.
b.   opportunity cost line.
c.   utilization of resources.
d.   maximum possible production line.
6. Increasing the number of laborers in an
economy generally causes a(n)
a. increase in the production possibilities
curve.
b. decrease in the production possibilities
curve.
c. increase in the opportunity cost of
production.
d. decrease in the opportunity cost of
production.
7. The law of increasing costs means that as
production shifts from one item to
another,
a. the cost of production gets cheaper and
cheaper.
b. the cost of producing an item stays the
same no matter how many are produced.
c. more and more resources are necessary
to increase production of the second
item.
d. the land costs of increasing production
rise much more steeply than do the labor
costs.
8. An economy that is NOT using all of its
resources to gain the maximum possible
production is

c. growing
a. efficient
9. The curve usually seen in a production
possibilities frontier can be explained by
a. growth in the economy.
b. underutilization of resources.
c. increasing an economy’s efficiency.
d. the law of increasing costs.
10. An economy that is producing the maximum
amount of goods and services is considered

a. efficient             c. growing

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 views: 7 posted: 9/7/2011 language: English pages: 27