1.1.4 - Production Possibility Frontiers

Question 1

What Does PPF Stand For?

Answer 1

Production possibility frontiers.

Question 2

What Does The PPF Curve Show?

Answer 2

Maximum possible production of 2 good and services with the given level of factors of production.

Question 3

What Is On The Axes Of A PPF?

Answer 3

Capital and consumer goods.

Question 4

What Are Capital Goods?

Answer 4

Assets that help a firm or nation to produce output.

Question 5

What Are Consumer Goods?

Answer 5

Are end products and have no future productive use.

Question 6

Calculate The Opportunity Cost Of This PPF
(3 Points)

~ This firm wants to increase tablet production from 50 -> 60.

Answer 6

~ Moving from points a -> b, means that they would have to give up some production of laptops.

~ Given up 75 - 60 = 15 laptops.

~ To produce 60 - 50 = 10 tablets, they would have to give up production of 15 laptops.

Question 7

What Does A Concave PPF Indicate?

Answer 7

Law of increasing opportunity cost, the more we produce something the more of the other thing has to be given up.

Question 8

What Does A Linear PPF Indicate?

Answer 8

Constant opportunity cost, the units of goods given up are always the same.

Question 9

What Are 3 Types Of Efficiency We Can Talk About When Drawing PPF Curves?

Answer 9

~ Productive efficiency.

~ Allocative efficiency.

~ Pareto efficiency.

Question 10

What Is Meant By ‘Pareto Efficiency’?

Answer 10

Nobody can be made better off without somebody being made worse off.

Question 11

Describe The 3 Efficiency’s On This Curve
(4 Points)

Answer 11

~ A,B & C is productively efficient, as any point on the curve is productively efficient, indicating maximum production.

~ D is productively inefficient, wasting resources.

~ E is unattainable with given FOPs.

~ Any point on the PPF is Pareto efficiency.

Question 12

How Can Economic Growth & Decline Be Shown On A PPF?
(2 Points)

Answer 12

~ Inward Shift = Economic decline, caused by a decrease in Q2 CELL of various aspects (FOPs, Labour, e.t.c).

~ Outward Shift = Economic growth, caused by an increase in Q2 CELL of various aspects (FOPs, Labour, e.t.c).

Question 13

What Does A Shift Of The PPF Like This Show?
(2 Points)

Answer 13

~ Change in the Q2 CELL, that only benefit the production of tablets.

~ E.g. Improvements in the quality of FOPs.