1.5 Production Possibility Curves

Question 1

What do PP curves show us?

Answer 1

1. The maximum possible production of 2 goods/services with the given factors of production
2. The various combinations of 2 goods/services that can be produced with given factors of production.

Question 2

What’s the difference between a concave and linear PP curve?

Answer 2

A linear PPC illustrates constant opportunity cost. Whereas a concave PPC represents increasing opportunity cost.

Question 3

What is the difference between a Micro and Macro PPC.

Answer 3

A micro PPC focuses on the production possibilities of an individual firm or industry, while a macro PPC illustrates the production possibilities for an entire economy, showing the trade-offs between different sectors or goods at a national level.

Question 4

What are the 3 types of efficiency ?

Answer 4

1. Productive
2. Allocative
3. Pareto

Question 5

Where would the point be if it is productively efficient?

Answer 5

On the line of a PPC.

Question 6

Where would the point be if it is productively inefficient?

Answer 6

Somewhere within the line of a PCC.

Question 7

Define the term “Pareto Efficiency”

Answer 7

The idea that nobody can be made better off without making somebody else worse off.