Theme 1.1 - Production Possibility Frontiers

Question 1

Define Opportunity Cost

Answer 1

The benefit lost from the next best alternative forgone

Question 2

What can you determine from a production possibility curve?

Answer 2

Maximum productive potential
Opportunity cost
Economic growth/decline
Possible + unobtainable production
Efficient + non-efficient allocation of resources

Question 3

What is increasing opportunity cost?

Answer 3

The more you want, the more you must give up

Question 4

Define pareto efficiency

Answer 4

Impossible to increase production of x without compromising production of y (on the curve)

Question 5

Define pareto inefficiency

Answer 5

Possible to increase production of x without compromising production of y (inside the curve)

Question 6

How can you infer economic growth from a production possibility curve?

Answer 6

The curve grows in an outward direction

Question 7

How can you infer economic decline from a production possibility curve?

Answer 7

The curve shrinks

Question 8

How can you infer possible production from a production possibility curve?

Answer 8

Any point which lies on or within the curve is possible

Question 9

How can you infer unobtainable production from a production possibility curve?

Answer 9

Any point which lies outside of the curve is unobtainable

Question 10

How can you infer maximum productive potential from a production possibility curve?

Answer 10

Any point which lies on the curve
Demonstrates max. amount of each product that can co-exist/be produced simultaneously

Question 11

How can you infer efficient allocation from a production possibility curve?

Answer 11

Any point which lies on the curve