PPF ( Production Possbility Frontiers )

Question 1

What is a PPF?

Answer 1

Shows the maximum possible output combinations of goods/services can achieve when all resources are full and efficiently employed

Question 2

Describe the shape of PPF?

Answer 2

• usually curved because of the law of diminishing of returns - the marginal output of consumers goods diminishes as more factor resources are allocated to it
• straight line: opportunity costs are constant

Question 3

What does the point inside the PPF mean?

Answer 3

Inefficient - resources are unemployed

Question 4

What does the point on the PPF curve mean?

Answer 4

Efficient all resources are fully employed

Question 5

What does the point outside the ppf mean?

Answer 5

Unattainable with current resources

Question 6

How can ppf shift outward?

Answer 6

Increase in the quantity/quality of resources/technology

Question 7

What causes a ppf to shift inward?

Answer 7

• decrease in the quality or quantity of factors of production