ch2 Flashcards
PPC is …
Production Possibility Curve
input is…
output is…
output is the result of an activity
input is what you put into a production process to achieve an output
e.g. input study time, output grades
the Principle of Increasing Marginal-Opportunity Cost states…
in order to get more of something, one must give up ever-increasing quantities of something else
what is the Production Possibility Curve
The Production Possibility Curve charts the maximum output from given inputs
why are Production Possibility Curves outward bowed?
Most are outward bowed due to increasing marginal opportunity cost.
Without Increasing Marginal-Opportunity Cost the curve would be a straight line.
What causes the curve to shift?
Increases in inputs, or increases in the productivity of inputs will shift the PPC out. Decreases shrink it.
The curve moves along the axis which is changing.
points inside the PPC are…
points on the PPC are…
points outside the PPC are…
Points inside the Production Possibility Curves are INEFFICIENCIES
Points on the Production Possibility Curves are points of EFFICIENCY
Points beyond the Production Possibility Curves are the UNOBTAINABLE GOALS
comparative advantage is…
the specialized skill/resource/product that each trading partner brings to the table, each has something the other wants and can’t obtain on their own
