Module 3

Question 1

Trade off

Answer 1

When you give up something in order to have something else

Question 2

Production possibilities frontier

Answer 2

Model used to evaluate trade offs by simplifying the economy to only produce 2 goods
Shows the amount that can be produced if all resources are used efficiently

Question 3

Efficient

Answer 3

No missed opportunities

You cannot make someone better off without making someone else worse off

Question 4

Efficient in production

Answer 4

The economy is producing on its production possibility frontier

Question 5

Efficient in allocation

Answer 5

Distributes resources so consumers are as well off as possible
Ex: if you prefer coconuts, producing at point a ( more coconuts) is more efficient in allocation than point b even if both a and b are efficient in production

Question 6

Economic growth

Answer 6

Expansion of economy’s production possibilities

Can produce at a point outside the original ppf

Question 7

Sources of economic growth

Answer 7

1) increase in resources (land labor capital enterprise)

2) technology

Question 8

Technology

Answer 8

Technical means for production

“ a better way to make it”

Question 9

What does a curved ppf mean?

Answer 9

Rising opportunity costs at the extremes

Usually the case because resources are not perfectly compatible

Question 10

What. Does the slope of the ppf represent?

Answer 10

The opportunity cost

NOTE: opportunity cost A = units B you give up / unit A you produce