1.5 Production Possibility Diagrams

Question 1

Who do we explain that the economic problem affects the whole economy?

Answer 1

Through a production possibility frontier diagram

Question 2

What is technical progress?

Answer 2

New and better ways of making goods and new techniques for producing more output from scarce resourcesn

Question 3

What is a production possibility frontier?

Answer 3

A curve depicting various combinations of two products that can be produced when all the Available resources are fully and efficiently employed

Question 4

Why does a choice have to be made about the type of good to produce?

Answer 4

Resources and capacity are limited

Question 5

What does the ppd actually show?

Answer 5

All the different combinations of capital goods and consumer goods can be produced

Question 6

What does the combination of consumer and capital goods reflect?

Answer 6

Decisions made into society about allocating scarce resources between competing uses

Question 7

What does it mean when the PPF describes the economy as a whole?

Answer 7

It is a macroeconomic ppf diagram

Question 8

What is economic growth?

Answer 8

Increase in the potential level of real output the economy can produce over a period of time

Question 9

Full employment?

Answer 9

When all who work and are able to work are employed

Question 10

Unemployment

Answer 10

When not all of those who are able and willing to work are employed

Question 11

What are the two forms of economic growth?

Answer 11

Long-run economic growth
Short-run economic growth

Question 12

What is long-run economic growth in a PPF?

Answer 12

The outward movement of the PPF to PPF2

Question 13

What does long-run growth actually do?

Answer 13

Increases total productive capacity

Question 14

What does short-run growth actually do?

Answer 14

Makes use of spare capacity and takes up the slack in the economy

Question 15

What is short term economic growth on the PPF?

Answer 15

Moving from a point to another point closer or on the line of the PPF (making the most and being efficient with available resources

Question 16

What do all points on the PPF actually show?

Answer 16

Full employment of available resources that can be used in the course of production

Question 17

_______ occurs at all points inside the Frontier

Answer 17

Unemployment

Question 18

How can we tell if the PPF is micro or macro?

Answer 18

The axis

Micro: two goods
Macro: capital goods v consumer goods

Question 19

What does a micro PPF actually show

Answer 19

Different ways scarce resources can be allocated between competing uses

Question 20

What is resource allocation?

Answer 20

The process through which the available factors of production are assigned to produce different goods and services

E.g how many of society’s economic resources are devoted to supplying different products such as food and cars healthcare and defence

Question 21

What are ppfs good at demonstrating?

Answer 21

Opportunity cost

Question 22

What actually shows the opportunity cost on a PPF

Answer 22

The slope of the ppf

Question 23

Productive efficiency?

Answer 23

For the economy as a whole, occurs when it is impossible to produce more of one good without producing less of another. For a firm it occurs when the average total cost of production is minimised

Question 24

When does productive efficiency occur?

Answer 24

When output is maximised from available inputs

Question 25

All points on the curve of the PPF are known as?

Answer 25

Productively efficient

Question 26

All points inside the PPF are known as?

Answer 26

Productively Inefficient

Question 27

What is productive inefficient often associated with?

Answer 27

Unemployment

Question 28

How can you prove productive efficiency

Answer 28

To improve one resource there must be a reduction of the other resource

Question 29

What does it mean when the PPF has a straight line?

Answer 29

There is a constant opportunity cost of 10 aircraft whenever 10 tanks are produced(as an example)

Question 30

What is allocative efficiency more of?

Answer 30

A welfare concept rather than a production concept

Question 31

what does a ppf look like?

Answer 31

:

Question 32

what does a ppf showimg economic growth look like?

Answer 32

Question 33

when does full employment occur in a ppf?

Answer 33

on the line itself