Production Possibility Frontier Flashcards
Why is a PPF drawn concave to the origin?
Because not all factor inputs are equally suited to producing goods.
How does a PPF show economic efficiency?
Combinations of the two goods that are lying on the existing PPF show efficient output.
How does a PPF show the concept of opportunity cost?
If the output of one good is increased then fewer resources are available to produce the other good.
What do points inside the PPF show?
That all resources are not being employed or used efficiently.
What does a PPF show?
The maximum possible output combinations of two goods/services an economy can achieve when all resources are fully and efficiently employed.
What do points beyond the PPF show?
An output combination that is not yet attainable due to lack of resources or sufficient productivity.
What does it mean if a PPF is linear?
The marginal opportunity cost of switching resources between goods is constant.
What is resource depreciation?
When factor inputs are used in supplying goods and services over time deteriorate and become harder/costly to maintain.
What is resource depletion?
When the stock of available resources declines.
