Choose the correct answer for each question.

1. The production possibility frontier for a country producing two goods is shown in the diagram below
   
   
   
   The opportunity cost of increasing the output of MP3 players from 80 to 100 (a movement from A to B) on the PPF is

   1.   ?    80 DVD players given up
   2.   ?    50 DVD players given up
   3.   ?    30 DVD players given up
   4.   ?    20 DVD players given up

2. Which of the combinations of output of DVD players and MP3 players are feasible given the PPF that a country faces a PPF shown in the diagram below
   
   

   
   1.   ?    A, B and C
   2.   ?    A, B, C and D
   3.   ?    E only
   4.   ?    A, B, C, D and E

3. In the diagram below, what is happening to the marginal opportunity cost of producing extra MP3 players as a country reallocates resources from combination A to B and then to C?
   
   

   
   
   1.   ?    The marginal opportunity cost remains the same
   2.   ?    The marginal opportunity cost is increasing
   3.   ?    The marginal opportunity cost is falling
   4.   ?    The marginal opportunity cost cannot be calculated

4. The diagram below shows a production possibility frontier for health services.
   
   

   
   
   The outward shift of the PPF from PPF1 to PPF2 might have been caused by
   
   1.   ?    An increase in the efficiency of labour and capital providing heart operations only
   2.   ?    A fall in new capital investment in the health service
   3.   ?    An increase in the number of heart surgeons employed by the NHS
   4.   ?    Improvements in medical technology available to provide a full range of health services

5. An economy can choose to allocate scarce resources between consumer goods and services or capital goods. Which combination of output shown in the production possibility frontier would represent a preference within this economy to increase consumption of goods and services in future time periods?
   
   

   
   1.   ?    A
   2.   ?    B
   3.   ?    C
   4.   ?    D

6. The diagram below shows the production possibility frontier for two countries, Italy and the UK.
   

   
   From the information contained in the PPF we can deduce that
   1.   ?    The UK has a comparative advantage in producing dishwashers
   2.   ?    The UK has a comparative advantage in producing freezers
   3.   ?    Italy has an absolute advantage in both goods
   4.   ?    Italty has a comparative advantage in both goods

7. If an economy is operating on its production possibility curve, the most likely effect of an increase in the output of capital goods is that the output of consumer goods will

   1.   ?    increase in the short run but fall in the long run
   2.   ?    fall in the short run but increase in the long run
   3.   ?    fall in both the short and the long run
   4.   ?    increase in both the short and the long run