1.1.3 the concept and applications of opportunity cost - The Production Possibilities Curve (Frontier)

Question 1

Opportunity cost

Answer 1

Meaning: opportunity cost

The value lost for another best choice that only considers the trade-off of the value lost for another best choice

Question 2

Relative scarcity

Answer 2

Is about there being limited resources in relation to satisfying society’s unlimited wants.

Question 3

Production possability curve (PPC)

Answer 3

A tool used to measure the production possibilities for a nation in relation to oprtunity cost and relative scarcity

Question 4

Levels of efficiency – illustrated through the PPC/PPF

Answer 4

1. Allocative efficiency
2. Productive (technical efficiency)

Question 5

Allocative efficiency

Answer 5

Utilising the best production possibility combination to maximise society’s wellbeing

Question 6

Productive (technical efficiency)

Answer 6

Obtaining maximum production from minimal resources in relation to ensuring cost-effectiveness