Chapter 2 - Production Possibilities Frontier

Question 1

Production Possibilities Frontier (PPF)

Answer 1

The possible combinations of two goods that can be produced during a certain span of time under the conditions of a given state of technology and fully employed resources.

Question 2

Law of increasing opportunity costs

Answer 2

As more of a good as produced, the opportunity costs of producing that good increase.

Question 3

Productive efficient

Answer 3

The condition in which the maximum output is produced with the given resources and technology.

Question 4

Productive inefficient

Answer 4

The condition in which less than the maximum output is produced with the given resources and technology. Productive inefficiency implies that more of one good can be produced without any less of another being produced.

Question 5

Technology

Answer 5

The body of skills and knowledge involved in the use of resources in production. An advance in technology commonly increases the ability to produce more output with a fixed amount of resources or the ability to produce the same output with fewer resources.

Question 6

Comparative advantage

Answer 6

The situation in which someone can produce a good at lower opportunity cost than someone else.