CH 2 - The Production Possibility Model, Trade, and Globalization Flashcards
-The __________ _____________ model can be either a table or graph
-__________ ___________ table lists the trade-offs between two choices
*An input is what you put in a production process to achieve an output
*An output is a result of an activity
Production possibility table
A __________ ___________ ____ (PPC) is a curve measuring the maximum combination of 2 outputs that can be obtained from a given number of inputs.
*It gives you a visual picture of the tradeoff embodied in a decision
*A PPC is created from a production possibility table by mapping the table in a graph
*Axis – two goods or outputs – one on each axis
*Two good model
Production possibility curve
Free exercise - Look at a PPC graph
PPC graph moment
*On the PPC for an economy
*Fixed resources
*Full use of all resources
*Fixed technology
Production Possibilities Curve
PPC shows limit to what can be produced given existing institutions, resources, and technology
Every choice has opportunity cost. You can get more of something only giving up something else
PPC - can be a straight line
opportunity costs do not change along the PPC
opportunity costs have fixed ratio
PPC
___ - can be curve (concave)
PPC
*Law of __________ ___________ _____
*As more of a particular good is produced, its marginal opportunity costs increase
*Must give up more and more of one good to make another one
Increasing Opportunity Costs
(PPC) Why concave or bowed outward?
some resources are better suited for the production of certain kinds of good
EX: Use land to raise cattle or grow strawberries
The principle of increasing marginal opportunity cost
opportunity costs increase the more you concentrate on the activity
(Concave example A-Cattle, B-Strawberries)
*Slope is flat at A
This means there is a low opportunity cost to produce more strawberries
(Concave example A-Cattle, B-Strawberries)
*Slope is steep at B
This means there is a high opportunity cost to produce more strawberries
_________ __________ is achieving as much output as possible from a given amount of inputs or resources
Productive efficiency
(free exercise: look up) Points of efficiency
Points of efficiency moment
(free exercise: look up) Unattainable with given amounts of inputs
Unattainable point moment
(free exercise: look up) Point of inefficency
Point of inefficency moment
(free exercise: look up) Efficiency and Technological Change (CH 2 P 12)
*Neutral technological increase or an increase in resources
*Biased technological increase
