Linear Production – Principles of Macroeconomics Quiz 9

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Linear Production, Point, PPF, Debra, Advantage, Principles of Macroeconomics Quiz 9

The key terms in this Principles of Macroeconomics course include Linear Production, Point, PPF, Debra, Comparative Advantage, Absolute Advantage, Production Possibilities Frontier (PPF), Principles of Macroeconomics Quiz 9


Mike has a linear production possibilities frontier that shows maximum production of trucks or computers of 10 million each. Debra also has a linear production possibilities curve that shows maximum production of 9 million trucks or 3 million computers.

Mike has a linear production possibilities frontier that shows maximum production of trucks or computers of 10 million each. Debra also has a linear production possibilities curve that shows maximum production of 9 million trucks or 3 million computers.

Based on the graphs, which of the following statements is true?

Mike has a comparative advantage in the production of computers.

Debra has an absolute advantage in the production of trucks.

Debra has an absolute advantage in the production of computers.

Debra has an absolute advantage in the production of computers.

Explanation:

Mike has an absolute advantage in both goods. That means he can produce more than Debra using the same quantity of resources. From the graph, you can see that Mike has a lower opportunity cost in producing trucks; he gives up one truck for each computer he produces, while Debra gives up three trucks for each computer she produces. Mike has a comparative advantage in producing computers but not in producing trucks.


Suppose that a politician wants to build more production facilities for solar power and wind power. At the same time, the politician is unwilling to cut any other programs. If the resources that would be used to produce the solar and wind power facilities are already being efficiently used in other programs, where is the point the politician is trying to reach located on the production possibilities frontier?

this point does not exist

a point inside the frontier

a point on the original frontier

a point outside the frontier

Explanation:

If the resources are already being efficiently used in other programs (and the politician cannot raise the funds from another source), then it will be impossible to build additional facilities given the existing technology and resources available. The politician could build more wind and solar power facilities, but not without decreasing production of one or more of the goods currently in production. Producing more wind and solar power facilities without decreasing current production requires more resources or technology, represented by a point outside of the current PPF.


Suppose workers attend several skill-building workshops, increasing their labor productivity. How is this represented by a production possibilities frontier?

The entire PPF shifts out.

The economy moves from a point below the PPF to a point on the PPF.

The entire PPF shifts in.

The economy moves from a point on the PPF to a point beyond the PPF.

Explanation:

If workers become more skilled they can produce more goods. An increase in skills is an increase in human capital, a resource and input in the production of goods. When resources increase, the entire PPF shifts out.