PPC Theory (Week 1)

Question 1

What is the shape of the graph in constant return

Answer 1

Straight line from top left to bottom right

Question 2

What does decreasing return mean

Answer 2

You you increase one factor, the other factor wont decrease exactly the same amount-it varies because the capital reduced from the decreasing factor cant all be used to the same amount for the increasing factors.

Question 3

What is the line called on both PCC graphs?

Answer 3

Production possibility- it is the most they can produce with the full capital and production inputs

Question 4

What does it mean in the point of production is over the production possibility line

Answer 4

Its not attainable

Question 5

What does it mean in the point of production is on the production possibility line

Answer 5

It is efficient

Question 6

What does it mean in the point of production is below the production possibility line

Answer 6

Its inefficient

Question 7

What does constant return mean

Answer 7

If you increase on factor, the other will decrease by exactly the same amount

Question 8

What is the shape of the graph in decreasing returns

Answer 8

Curved from top left to bottom right

Question 9

What happens if their is high unemployment

Answer 9

The curve doesn’t shift- they are just producing inefficiently as one of their production factor (labour) is not working to its full potential

Question 10

What happens if education increases

Answer 10

The curve shifts outwards as quality has increased