Production Possibility Frontiers

Question 1

What does the PPF curve show?

Answer 1

The maximum possible output a country can generate if all factors of production are used efficiently to produce two goods/services.

Question 2

How is opportunity cost shown on a PPF curve?

Answer 2

The difference between how much could have been made for a good/service and how much was actually made.

Question 3

Difference between increasing/constant opportunity cost.

Answer 3

Increasing = curved
Constant = a straight line

Question 4

Where the point on a PPF is and what does it show.

Answer 4

On the curve = productive efficiency

Inside the curve = inefficiency

Outside the curve = unattainable

Question 5

Shifts in the PPF curve.

Answer 5

Outward shift = improved factors of production

Inward shift = falling quality/quantity of factors of production

Shift on one side = Factors of production improve/worsen for one good/service on the PPF.

Question 6

If you’re not sure what to label your axes in a PPF label them…

Answer 6

Y-axis = Output consumer goods

X-axis = Output capital goods

Question 7

What is opportunity cost?

Answer 7

The benefit given up of the next best alternative.