Micro - Production Possibility Frontiers (PPF) ✔️

Question 1

The PPF Curve.

Answer 1

The production possibility frontier helps economists analyse trade-offs. The maximum productive potential of an economy is shown on the PPF Curve

Question 2

The maximum potential of an economy. (Pareto Efficiency)

Answer 2

This is located on the very edge of the PPF Curve, and is the maximum amount of the two goods combined that they are able to make sustainably with their current factors of production. This is the point at which it is impossible to reallocate resources without creating more or less of the other good.

Question 3

Opportunity Cost Recap.

Answer 3

All that is given up in choosing to produce one good over another (next-best option)

Question 4

Economic Growth

Answer 4

An increase in the amount of goods and services produced per head of the population over a period of time

Question 5

Economic Decline

Answer 5

An decrease in the amount of goods and services produced per head of the population over a period of time

Question 6

Economic efficiency

Answer 6

An economic state in which every resource is optimally allocated to serve each individual or entity in the best way while minimizing waste and inefficiency

Question 7

Economic inefficiency

Answer 7

An economic state in which every resource is not optimally allocated to serve each individual or entity in the best way possible by minimizing waste and inefficiency

Question 8

Possible production

Answer 8

Production which could happen if all resources are employed

Question 9

Unobtainable production

Answer 9

A point outside the PPF (beyond the curve)

Question 10

Capital goods

Answer 10

Capital goods are man-made, durable items that businesses use to produce goods and services. Tools, machinery, buildings, vehicles, computers, and construction equipment are types of capital goods

Question 11

Customer Goods

Answer 11

consumer good, in economics, any tangible commodity produced and subsequently purchased to satisfy the current wants and perceived needs of the buyer

Question 12

Explain the distinction between movements along and shifts in production possibility curves, considering the possible causes for such changes

Answer 12

Movements along the PPF curve illustrate a change in resource allocation. For example, factors of production may shift from making consumer goods to making capital good