Production Possibility Diagrams

Question 1

What does a production possibility frontier show

Answer 1

all the possible combinations of two goods we can produce using all of our resources efficiently.

Question 2

What does any points outside the PPF mean

Answer 2

we do not have sufficient resources to produce there

Question 3

Where can you produce on the PPF

Answer 3

inside the PPF and on the PPF

Question 4

Define productively efficient

Answer 4

using resources to there full potential (producing on the line)

Question 5

Define productively inefficient

Answer 5

When you are not using your resources to there full potential and producing as much as you could

Question 6

on a PPF, where do you find productively inefficient

Answer 6

any point inside the PPF but it is productively inefficient

Question 7

Define allocative efficient

Answer 7

When Welfare is maximised

Question 8

Are all point on the PPF allocative efficient or productively effect

Answer 8

all points on the PPF are productively efficient.

Question 9

Why can’t we see allocative efficiency on our PPF

Answer 9

We cannot see allocative efficient on our PPF because our PPF just tells us what we can produce not what makes people happiest and how to maximise welfare

Question 10

Limitation of PPF

Answer 10

there is no way of knowing which point will maximise welfare without more information.