1.1.4 Production possibility frontiers

Question 1

Production Possibility Frontier (PPF)

Answer 1

a graphical representation of an economy’s maximum production potential given its resources and technology.
It shows the trade-off between producing different combinations of two goods/services.

Question 2

Opportunity cost

Answer 2

the cost of choosing one option over another.#
PPF helps illustrate opportunity cost through the slope of the curve. The steeper the slope, the higher the opportunity cost.

Question 3

Marginal analysis

Answer 3

involves analyzing the cost and benefit of producing one more unit of a good.

Question 4

Economic Growth on the PPF

Answer 4

depicted by a shift of the PPF outward, showing an increase in an economy’s productive capacity.

Question 5

Economic decline on the PPF

Answer 5

represented by a shift inward, indicating a reduction in productive capacity.

Question 6

Efficient or Inefficient Allocation of Resources on the PPF

Answer 6

Points on the PPF represent efficient resource allocation, where all resources are fully utilized.
Points inside the curve indicate inefficiency, where resources are underutilized.

Question 7

Possible and Unobtainable Production on the PPF

Answer 7

Points on the PPF are attainable given current resources and technology.
Points beyond the PPF are unattainable without changes in resources or technology.

Question 8

Movements Along the PPF

Answer 8

Movements along the curve represent changes in the quantity produced of one good while holding the production of the other constant.
Typically caused by changes in resource allocation

Question 9

Shifts in the PPF

Answer 9

Shifts represent changes in the economy’s overall production potential.
Caused by factors like technological progress, increased resources, or improvements in labor productivity.

Question 10

Capital Goods

Answer 10

Capital goods are goods used to produce other goods and services.
They include machinery, factories, infrastructure, and technology.
Investment in capital goods can lead to economic growth.

Question 11

Consumer Goods

Answer 11

Consumer goods are items purchased for personal use and consumption.
They include clothing, food, electronics, and automobiles.
Consumption of consumer goods satisfies immediate needs and wants.