Production Possibility Frontiers

Question 1

What does PPF stand for?

Answer 1

Production Possibility Frontier

Question 2

What is a PPF?

Answer 2

Graph that shows the maximum possible combinations of 2 goods/services that can be produced using all available resources in most efficient way with a given level of technology

Question 3

What does a PPF show?

Answer 3

Maximum productive potential of economy
Oppurtunity cost
Economic growth/decline
Efficient/inefficient allocation of resources
Possible and unobtainable production

Question 4

What is a PPF drawn assuming?

Answer 4

Country has fixed quantity and quality of resources and state of technology

Question 5

What does a straight line on a PPF show?

Answer 5

Resources are equally efficient in production of both items

Question 6

What does a concave (bowed out) line on a PPF show?

Answer 6

Indicates increasing oppurtunity cost, some resources are better suited to making one item than the other

Question 7

What affect does more consumer goods being produced have on living standards?

Answer 7

Living standards higher at present

Question 8

What affect does more capital goods being produced have on living standards?

Answer 8

Living standards will be lower at present but will enable more economic growth in future

Question 9

When would a PPF shift outwards?

Answer 9

Improvements in productivity and engineering
Better management of existing resources
More factors of production available
Discovery of new natural resources
Technological Advances

Question 10

When would a PPF shift inwards?

Answer 10

Productive potential of economy has suffered eg. run out of resources, natural disaster

Question 11

What is a pivot in a PPF caused by?

Answer 11

Change in the productivity of only 1 service/good