Economics Topic 1 And 2 Flashcards
(25 cards)
What does PPF stand for in economics?
Production Possibility Frontier
What does the PPF curve represent?
The maximum output combinations of two goods that an economy can produce given its resources and technology
True or False: Points inside the PPF curve represent efficient use of resources.
False
What does a point outside the PPF curve indicate?
It indicates that production levels are unattainable with the current resources and technology
What does a straight-line PPF curve indicate about the opportunity cost?
Constant opportunity cost
What does a bowed-outward PPF curve indicate about the opportunity cost?
Increasing opportunity cost
What does a bowed-inward PPF curve indicate about the opportunity cost?
Decreasing opportunity cost
What does moving along the PPF curve represent?
Shifting resources from one good to another to maintain the same level of total output
What does a shift of the PPF curve to the right indicate?
An increase in the economy’s production capacity
What does a shift of the PPF curve to the left indicate?
A decrease in the economy’s production capacity
What is the opportunity cost of moving from point A to point B on the PPF curve?
The quantity of the good being given up to produce more of the other good
What is the main assumption behind the PPF curve?
Resources are fully utilized and efficiently allocated
In economics, what does the law of increasing opportunity cost state?
To produce more of one good, a successively larger amount of the other good must be sacrificed
What does the PPF curve not show?
It does not show the distribution of resources among different goods
What is the purpose of using a PPF curve in economics?
To illustrate the concept of opportunity cost and trade-offs in production decisions
What does a point on the PPF curve indicate?
Efficient use of resources to produce a combination of goods
What does a point below the PPF curve indicate?
Underutilization of resources
What does a point above the PPF curve indicate?
Unattainable production levels with current resources and technology
What factor can cause the PPF curve to shift outward?
Technological advancements or an increase in available resources
What factor can cause the PPF curve to shift inward?
Natural disasters or a decrease in available resources
What is the economic implication of a PPF curve shifting outward?
Potential for increased economic growth and higher levels of production
What is the economic implication of a PPF curve shifting inward?
Potential for decreased economic growth and lower levels of production
What does a point of tangency on the PPF curve represent?
Optimal allocation of resources to maximize total output
What does a point inside the PPF curve indicate in terms of resource allocation?
Inefficient allocation of resources
