concept of opportunity cost

Question 1

Given scarcity

Answer 1

Given scarcity and the fact that we cannot have everything we want, countries (and individuals) are forced to choose between alternative uses of resources.

Question 2

opportunity cost

Answer 2

A decision to have one thing results in the loss of another; that is, production in one area is forgone to gain the advantage of another area of production. This is called opportunity cost.

Question 3

PPD

Answer 3

The production possibility diagram illustrates these economic choices.

Question 4

PPF

Answer 4

The production possibility frontier maps out the production combinations or choices that are possible when a nation uses all resources as efficiently as technology currently permits. It shows the economy’s productive potential, capacity or limit.

Question 5

allocation of resources

Answer 5

The most efficient choice or allocation of resources is an output mix or combination located somewhere on the production possibility frontier. Here, the satisfaction of society’s wants is at its maximum.

Question 6

outside PPF

Answer 6

A point outside the production possibility frontier is not currently possible due to the lack of resources available. Inside the frontier, there would probably be unemployment, poverty and lower living standards.