PPF

Question 1

What does a point on the PPF mean?

Answer 1

Resources fully used—efficient production.

Question 2

What does a point inside the PPF mean?

Answer 2

Inefficient use of resources (e.g., unemployment, waste).

Question 3

What does a point outside the PPF represent?

Answer 3

Currently unattainable with existing resources and technology.

Question 4

What causes movement along the PPF curve?

Answer 4

A change in the allocation of existing resources between two goods (e.g., producing more capital goods and fewer consumer goods).

Question 5

What causes a movement inwards along the PPF (but still on the curve)?

Answer 5

Reallocation of resources to produce more of one good and less of the other, with no change in efficiency or total resources.

Question 6

What causes an outward shift of the PPF?

Answer 6

Economic growth: improvements in technology, increase in quantity/quality of factors of production (e.g., labor, capital, land).

Question 7

What causes an inward shift of the PPF?

Answer 7

Economic decline: war, natural disasters, pandemics, or loss of factors of production.