Production possibility diagrams

Question 1

Factors affecting production?

Answer 1

Q2CELL, quantity, quality, land, labour, capital, enterprise

Question 2

What do production possibility diagrams illustrate about resource allocation?

Answer 2

They show the maximum possible output combinations of two goods or services, illustrating how resources are allocated between competing uses.

Question 3

How do production possibility diagrams show opportunity cost and trade-offs?

Answer 3

Moving along the curve shows the trade-off between two goods, with the opportunity cost represented by the amount of one good sacrificed to produce more of the other.

Question 4

What does a point inside the production possibility curve represent?

Answer 4

It indicates unemployment or underutilization of economic resources, where not all resources are being used efficiently.

Question 5

How is economic growth shown on a production possibility diagram?

Answer 5

Economic growth is illustrated by an outward shift of the production possibility curve, indicating an increase in the economy’s productive capacity.