4) Production and Possibility Curves -MB Flashcards
Production and Possibility Curves:
what is trade-off?
a situation in which the choice of one alternative requires the sacrifice of another
Production and Possibility Curves:
what is the opportunity cost?
in decision making, the value of the next-best alternative forgone (gone without)
Production and Possibility Curves:
what is a production possibility curve (PPC)?
a curve showing the maximum combinations of goods or services that can be produced in a set period of time given available resources
Production and Possibility Curves:
what are capital goods?
goods used as part of the production process, such as machinery or factory buildings
Production and Possibility Curves:
what are consumer goods?
goods produced for present use (consumption)
Production and Possibility Curves:
when do consumers experience opportunity cost?
when choosing, on what, to spend income
Production and Possibility Curves:
when do producers experience opportunity cost?
when deciding on production and forgoing profits from an alternative venture
Production and Possibility Curves:
when does the government experience opportunity cost?
when looking at the lost value to society from policies they choose not to implement
Production and Possibility Curves:
The PPC shows the… that scarcity imposes on… production combinations of two goods
limit… possible
Production and Possibility Curves:
why is the PPC curved?
we assume that the best factors of production for one good are the worst for another
Production and Possibility Curves:
if production for a good is low, there is…
low opportunity cost to increase production
Production and Possibility Curves:
if production for a good is high, there is…
high opportunity cost to increase production
Production and Possibility Curves:
a movement from one point on a PPC diagram to another shows a…
choice being made
Production and Possibility Curves:
if the movement is from one point on the PPC curve to another point on the PPC curve, then this shows…
an opportunity cost
Production and Possibility Curves:
the opportunity cost of the increase in production of one good is the…
decrease in production of the other good (pareto efficiency)
