VIII. Say whether the following statements are true or false.

1. An expansion of an economy’s capacity to produce would be reflected in an «outward» movement of the production possibility frontier.

2. An economy in which there’s unemployment is not producing on the production possibility frontier.

3. The assumption of diminishing returns states that, as more resources are devoted to the production of a commodity, their productivity declines.

4. When more output of one good can be achieved only by sacrificing output of the other good the economy works inefficiently.

5. For each level of output of one good the PPF shows the maximum amount of the other good that can be produced.

6. Scarcity of resources limits society to a choice of points that lie beyond the PPF.

7. The production possibility frontier shows feasible combinations that the economy can produce.

8. Feasible combination implies more of one commodity at the expense of the other.

9. People increase their work effort and accept less leisure only if they receive a sufficient addition to consumption.

10. A technological advance leads to an upward shift of the PPF.

IX. Complete the sentences using prepositions from the box.

to to (x2) on (x2) per of at (x2) in (x2)

1. He joined this company after working (1) ____ the retailing and banking industries.

2. The economy grew at an average rate of 6% (2) ____ annum.

3. We have a considerable amount of capital (3) ____ our disposal.

4. India will relax the tough restrictions (4) ____ import, which were imposed in March.

5. High production rates are often achieved (5) ____ the expense of quality of work.

6. The country depends heavily (6) ____ its tourist trade.

7. The increase (7) ____ the value (8) ____ the yen over the next year is forecast by many analysts.

8. The manager suggested a series of projects which would lead (9) ____ the improvement of productivity in the region.

9. Deutsche Bank limits any one shareholder (10) ____ 5% of the votes.

X. Read the text and choose the correct word or words from a, b, c or d to fill in each gap.

Because resources are insufficient to (1) ____ all the things we want, we have to choose how best to use those resources. In deciding how to use our limited resources, certain (2) ____ are necessary.

The value of what we give up when resources are used to produce one thing rather than another is the opportunity cost of what is produced. In order to get the greatest (3) ____ from our limited resources, we should use then for the (4) ____ that best serve our needs. If we don’t, then the opportunity costs of what we produce will be too high.

A production possibility frontier (PPF) shows the trade-off between two alternative uses of a resource.

The PPF shows the opportunity cost of producing more of one good by showing the amount

of the (5) ____ good that is (6) ____ . Production possibility frontiers generally curve outward because of increasing opportunity costs incurred as more of one good is produced. Production possibility frontiers are economic (7) ____ helpful in analyzing the opportunity costs of trade-offs.

All economic systems must resolve three basic economic questions: what to produce; how to produce; for whom to produce. (8) ____ cannot efficiently be dealt with unless the economy

(9) ____ its resources to producing the goods and services most needed and desired. An economic system needs also to (10) ____ the most efficient production methods with the resources available. Finally, an economic system must determine who gets how much of what is produced.

1. A do B construct C produce D build

2. A advantages B trade-offs C cuts D trades

3. A benefits B changes C income D allowances

4. A effects B outputs C results D inputs

5. A selective B conventional C competitive D alternative

6. A satisfied B given away C abandoned D sacrificed

7. A tools B weapons C equipment D gadgets

8. A rarity B diversity C scarcity D variability

9. A donates B presents C allocates D surrenders

10. A utilize B exercise C operate D handle