PPF’s:

Question 1

Production Possibility Frontier (PPF)?

Answer 1

A curve depicting the various combinations of two products that can be produced when all the available economic resources are fully and efficiently employed

Question 2

What can be implied when an economy is operating at a point on the PPF? (F.O.P’s)

Answer 2

Any point on the curve implies all factors of production are fully employed

Question 3

What can cause an outwards shift in the PPF curve? (4)

Answer 3

Technological improvements → improved productivity of capital equipment
Discovery of new resources
Improved education & training → a more productive workforce
Changes leading to an increase in the working population

Question 4

What can cause an inwards shift in the PPF curve? (4)

Answer 4

Disasters such as earthquakes or floods
Wars
Global warming/ climate change
A prolonged recession

Question 5

How can the PPF show short-run economic growth?

Answer 5

Short-run economic growth is shown by movement from a point inside the frontier to a point on the frontier

Question 6

How can the PPF show long-run economic growth?

Answer 6

Long-run economic growth is shown by a shift outward in the PPF curve

Question 7

What are the two types of economic efficiency?

Answer 7

Productive efficiency & allocative efficiency

Question 8

Productive efficiency?

Answer 8

When it is impossible to produce more of one good without producing less of another

Question 9

Allocative efficiency?

Answer 9

When the available economic resources are used to produce the combination of goods and services that maximises societies welfare

Question 10

Where is productive efficiency on the PPF curve?

Answer 10

All points on the PPF curve are productively efficient

Question 11

Where is productive inefficiency on the PPF curve?

Answer 11

All points inside the PPF curve are productively inefficient

Question 12

Where is allocative efficiency on the PPF curve?

Answer 12

A PPF curve cannot specify an allocatively efficient point