TEST BANK FOR INTERNATIONAL ECONOMICS THEORY AND POLICY 10TH EDITION KRUGMAN OBSTFELD MELITZ |QUESTIONS AND CORRECT ANSWERS

TEST BANK FOR INTERNATIONAL ECONOMICS THEORY AND POLICY 10TH EDITION KRUGMAN OBSTFELD MELITZ |QUESTIONS AND CORRECT ANSWERS

File: Chapter 02 The Production Possibility Model, Trade, and Globalization
True/False
[Question]
1. The production possibility model can be used to demonstrate the concept of opportunity cost.
Ans: True
AACSB: Reflective Thinking
Bloom’s: Remember
Difficulty: 01 Easy
Learning Objective: 02-01
Topic: The Production Possibility Model
Feedback: The production possibility model shows all the possible production combinations and
also demonstrates the trade-offs involved in moving from one combination to another.
[Question]
2. Production possibility curves are upward-sloping because increased production of one good
implies reduced production of other goods.
Ans: False
AACSB: Reflective Thinking
Bloom’s: Understand
Difficulty: 02 Medium
Learning Objective: 02-01
Topic: The Production Possibility Model
Feedback: Production possibility curves are downward-sloping. The rest of the statement is
correct.
[Question]
3. An economy that operates inside its production possibility curve is less efficient than it would
be if it were operating on its production possibility curve.
Ans: True
AACSB: Reflective Thinking
Bloom’s: Understand
Difficulty: 02 Medium
Learning Objective: 02-01
Topic: The Production Possibility Model
Feedback: The production possibility curve represents the most output we can get with a given
level of inputs. Operating inside that curve would mean that we can produce more with the given
inputs and, as long as we prefer more to less, represents a less efficient point than a point on the
production possibility curve.
[Question]
4. If the principle of increasing marginal opportunity cost holds, the opportunity cost of
producing each additional unit of a good should fall as production of that good rises.
Ans: False
AACSB: Reflective Thinking