PPF Curve

Question 1

What does a PPF Curve Show?

Answer 1

A PPF curve shows the maximum possible production of two goods/services with given factors of production.

Also, it shows the various combination of two goods/services that can be produced with given factors of production.

Question 2

What is the Law of Increasing Opportunity Cost?

Answer 2

The more that we can produce of something, the more of the other thing that has to be given up each time.

Question 3

What does a Concave PPF and a Linear PPF show?

Answer 3

Concave PPF: Increasing Opportunity Cost
Linear PPF: Constant Opportunity Cost

Question 4

What is Productive Efficiency?

Answer 4

Any point on the curve - Using all factors of production to the maximum level to maximise production.

Question 5

What is Productive Inefficiency?

Answer 5

Any point inside the curve - Wasting factors of production and not maximising the use of our factors of production.

Question 6

What is Allocative Efficiency?

Answer 6

Whether whats being produced is satisfying consumer demand/wants. This cannot be known from a PPF.

Question 7

What is Pareto Efficiency?

Answer 7

The idea that nobody can be made better off without making somebody else worse off. This is any point on the PPF. For example, making more laptops that tablets.

Question 8

How can you shift the PPF curve?

Answer 8

By increasing the quantity and/or quality of their factors of production.