Question

3. A change from a technically or productively inefficient mix to an efficient mix of output would BEST be represented with a production possibilities frontier (PPF) as a

	a) movement from inside the PPF onto the PPF.
	b) movement from a point on the PPF to a point inside the PPF.
	c) shift outward of the PPF.
	d) shift inward of the PPF. 4. If one country has a(n) _____ advantage in the production of one item, it can always produce more of the same item than another nation, given the same resources. a) comparative b) special c) absolute d) trade 5. Why is entrepreneurial ability considered a factor of production? a) because entrepreneurs work very long hours and demand large profits for the work that they accomplish b) because it is a physical input such as land, labor, and capital c) because it is an input that can be used by itself to produce many goods and services desired by society d) because entrepreneurs assume the risk of producing output, an important part of the production process 6. “How goods and services are advertised” is one of the three basic economic questions that each society must answer. true or false?

Answer 1

(3) A change from a technically or productively inefficient mix to an efficient mix of output would BEST be represented with a production possibilities frontier (PPF) as a "(a) movement from inside the PPF onto the PPF.​"

To know why we have selected this, let's consider each of the options but before that let's first understand what a PPF is: A production possibilities frontier, or PPF, defines the set of possible combinations of goods and services a society can produce given the resources available. Choices outside the PPF are unattainable, and choices inside the PPF are wasteful.

As any choice inside the PPF are wasteful, so when in the question we say that we are at technically or productively inefficient mix, that means we are still not on PPF, now let's take each of the options:

a)    movement from inside the PPF onto the PPF.

this is the correct option as we are moving from an inefficient mix to an efficient mix. Combinations of the output of consumer and capital goods lying inside the PPF happen when there are unemployed resources or when resources are used inefficiently.

b)    movement from a point on the PPF to a point inside the PPF.

As we are not on PPF as explained above the movement is not possible on PPF. All choices along a PPF display productive efficiency and it is impossible to use society’s resources to produce more of one good without decreasing production of the other good.

c)    shift outward of the PPF.

Again, as we are not on PPF as explained above, an outward shift is not possible. Combinations that lie beyond the PPF are unattainable at the moment. An economy would require an increase in factor resources, an increase in the productivity or an improvement in technology to reach this combination.

d)    shift inward of the PPF.

Inward shift is when we are moving from a efficient mix to an inefficient mix whereas it is other way round in the question.

(4) If one country has a(n) _ABSOLUTE_ advantage in the production of one item, it can always produce more of the same item than another nation, given the same resources.

to understand why we selected absolute, let's take each of the option and understand the significance:

a)   comparative : A country is said to have a comparative advantage when produces a good or service for a lower opportunity cost than other countries.

b)    special: Special advantage happens when some special benefits are provided to a country but that happens only in case of trade and not in production. We are viewing this question from a production perspective

c)    absolute :    The capability to produce more of a given product using less of a given resource than a competing entity. A country with an absolute advantage can sell the good for less than the country that does not have the absolute advantage.

d)    trade : trade advantage happens when the existence of a comparative advantage allows both parties to benefit from trading, because each party will receive a good at a price that is lower than its opportunity cost of producing that good.

(5) Why is entrepreneurial ability considered a factor of production? because entrepreneurs assume the risk of producing output, an important part of the production process

An entrepreneur strives to invent new products and services or bring innovation in the existing products and introduce them in the market.He make the optimal use of various resources, such as man, material, and machine. An entrepreneur bears the risks and uncertainties involved in the business. The formulation of an effective business plan and sound execution help an entrepreneur to maximize the chances of success.

According to J. A. Schumpeter, a German economist, an entrepreneur has the power to change the way an economy is moving. He also advocated that an entrepreneur is the person who combines production factors to make the production process efficient. According to him, an entrepreneur is a foresighted person having a risk taking and innovation capability.

(6) “How goods and services are advertised” is one of the three basic economic questions that each society must answer. FALSE

Every society answer these three basic questions:

1. What goods and services will be produced? For example, an economy must decide whether they should produce food items or weapons, build and fix roads or buy textbooks for schools.

2. How will goods and services be produced? For example, should we use copper or plastic to make pipes? Should machines be used to make clothing or should workers make it by hand? Should a product be more labour intensive or capital intensive?

3. Who will consume the goods and services? Once the goods and services are produced, who will get to consume them? Will people consume them on a first-come, first-served basis? Should goods be allocated or given out by height, weight, religion, age, gender race, looks, strength, health or wealth?