Production Possibility Frontiers (1.1.4)

Question 1

What does a PPF graph show?

Answer 1

Maximum possible combinations of capital and consumer goods that the economy can produce with its current resources and technology

Question 2

What are the two different types of goods? (present on PPF graph)

Answer 2

Capital and Consumer goods

Question 3

Define capital goods

Answer 3

Man-made products used by firms to produce other capital or consumer goods

Question 4

Define consumer goods

Answer 4

Goods purchased for consumption and not to produce another good

Question 5

Do you think we should produce more capital goods or consumer goods?

Answer 5

The UK has limited factors of production and so therefore we can only produce a certain combination of both

Question 6

What are the two shapes that a PPF can be?

Answer 6

Curved and straight line PPF graphs

Question 7

What is the shape that the PPF graph normally is?

Answer 7

Curved

Question 8

What are the three points on a PPF graph?

Answer 8

Productively Inefficient
Productively Efficient
Unachievable

Question 9

What does Productive Inefficiency Mean?

Answer 9

Refers to a situation where an economy or producer is not utilizing all of its resources (factors of production) in the most efficient way possible.

Question 10

What does Productive Efficiency Mean?

Answer 10

Max units of output with the given factors of production (resources)

Question 11

What does Unachievable Mean?

Answer 11

Refers to any point that lies outside the curve. This represents a situation where the production of goods is beyond the economy’s or producer’s capacity, given the current resources and technology.

Question 12

Which point on a PPF graph represents the maximum productive potential of the economy?

Answer 12

Anywhere on the curved line

Slide 3 on PowerPoint

Question 13

How can a PPF be used to work out the opportunity cost?

Answer 13

PowerPoint slide 4

Question 14

How can economic growth or decline be shown on a PPF diagram?

Answer 14

Slide 5 on PowerPoint

Question 15

What does a Straight Line PPF look like?
(Including points A,B and C and what they mean)

Answer 15

Slide 6

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Question 16

What does a Concave PPF look like?
(Including points A,B and C)

Answer 16

Slide 7

Question 17

State what would happen if the firm increased its factors of production (on PPF)

Answer 17

The PPF would shift outwards to PPF2 showing an increase in the productive capability of the firm

Slide 8

Question 18

What does a fall in capital production but no change in consumer production look like on a PPF graph?

Answer 18

Slide 9

Question 19

What does an increase in the ability to produce consumer goods but no change in capital goods look like on a PPF graph?

Answer 19

Slide 9

Question 20

What is the difference between the PPF curve shifting and a movement along the line of the curve mean?

Answer 20

The PPF curve shifting- Change in productive potential of the economy. More or less consumer and capital goods can be produced. Change in number of resources/ tech available so potential output changed.

Movement along the line of the curve-Change in the combination of goods produced. Same amount of resources are allocated amongst the two goods differently