Chapter 4: Production Possibility Curves Flashcards
What does PPC stand for?
Production Possibility Curve
What does PPF stand for?
Production Possibility Frontier
True or false?
PPCs are also known as PPF
True
What are PPCs?
They are curves that show the maximum output of two types of products and combinations of those products that can be produced with existing resources and technology
What do production points show?
They show what is being produced or what may be produced in the future
What does it mean when a production point is inside the curve?
It means that there is not full use of resources
What does it mean when a production point is on the curve?
It means that maximum use is being made of the resource. This is an efficient output
What does it mean when a production point is above the curve?
It means that there are not enough resources to produce that combination. It is not currently attainable.
What does a movement along the PPC curve show?
It shows that resources are being reallocated and it also shows the opportunity cost of that decision
If a country initially decides to produce 80 units of manufactured goods and 75 units of agricultural goods. Then, it decides to produce 100 units of agricultural goods, it will now only produce 60 units of manufactured goods. What’s the opportunity cost of producing 25 extra units of agricultural goods?
20 units of manufactured goods
(Tip: ALWAYS pay attention to what is being lost and what is being produced even more. In these types of questions, you need to say what is being lost. Saying “__ units” only is not enough to get the full mark)
If a country initially decides to produce 80 units of agricultural goods and 75 units of manufactured goods. Then, it decides to produce 100 units of manufactured goods, it will now only produce 60 units of agricultural goods. What’s the opportunity cost of producing 25 extra units of manufactured goods?
20 units of agricultural goods
What shape are PPCs usually?
A curve bowed outwards
Can PPCs be straight line?
Yes
If a PPC is a straight line. what does that mean?
It means that the resources are equally suited to producing both types of products. This means the opportunity cost is constant
What causes a PPC to shift to the right?
An increase in the quantity or quality of resources