Production Possibilities Curve Flashcards
What does productive efficiency mean?
They’re producing resources to their full potential without being wasteful
What does it mean when a production possibility combination is below its curve?
It’s experiencing productive inefficiency
What is the most common type of productive inefficiency?
Excessive unemployment
How do you calculate per unit cost?
Units given up divided by units gained
What does PPC stand for
Production possibility curve
What does an outward bowing PPC indicate?
Increasing opportunity cost
What does a straight negatively sloped PPC indicate?
Constant opportunity cost
What does a PPC shifting outward indicate?
The capacity for a country to produce becomes greater
What are the 3 determinants in shifting PPCs?
- change in quality/quantity
- change in technology
- change in trade
Increase of the 3 determinants causes what to the PPC?
Outward shift
Decrease of the 3 determinants causes what to the PPC?
Inward shift of the PPC
What does a PPC represent?
A visual representation of all the combinations of production possibilities
What do points outside the PPC curve show?
Room for future growth
