Lesson 4 - production possibility frontier Flashcards
If an economy is on the curve, how efficient is it?
100% efficient
What is the problem if an economy is inside the curve?
It’s not working to its maximum capabilities, it could be more productive
In terms of the production possibility frontier, what does growth mean?
Pushing the frontier outwards
Why is anywhere on the curve good?
The economy is totally efficient
Why is impossible to work outside of the curve?
The economy does not have enough resources to improve its production efficiency.
When does pareto efficiency occur?
When it is impossible to make one party better off without making someone else worse off.
When pareto efficiency has been reached, how are resources distributed?
In the most efficient way
When an economy is operating on a single production possibility frontier it’s impossible to increase the output of goods without reducing what?
The output of services
What is the first way to push out the production possibility curve?
More labour
What is the second way to push out the production possibility curve?
More capital
What is the third way to push out the production possibility curve?
Better enterprise
If an economy is getting smaller, what will happen to the production possibility curve?
The curve will get smaller
What does the production possibility curve show? (exam answer)
It shows the maximum output if an economy is efficient
