Production Possibility Curves

Question 1

A production possibility curve shows the maximum output of:

Accepted Answer

Two goods with fully used resources — A PPC shows the maximum combinations of two goods when resources are fully used.

Question 2

A point on the production possibility curve represents:

Accepted Answer

Full and efficient use of resources — Points on the curve show resources being fully and efficiently used.

Question 3

A point inside the curve indicates that resources are:

Accepted Answer

Not fully used or inefficient — A point inside the curve means some resources are unemployed or used inefficiently.

Question 4

A point outside the curve is currently:

Accepted Answer

Unattainable — Points beyond the curve cannot be reached with existing resources and technology.

Question 5

Movement along the curve from one point to another shows:

Accepted Answer

Opportunity cost — Producing more of one good means giving up some of the other, an opportunity cost.

Question 6

The whole curve shifts outward when:

Accepted Answer

The economy grows — Economic growth from more or better resources shifts the curve outward.

Question 7

The curve would shift inward following:

Accepted Answer

A serious natural disaster — A disaster that destroys resources reduces capacity, shifting the curve inward.

Question 8

An economy moves from making more food to more machines. The food given up is the:

Accepted Answer

Opportunity cost — The food sacrificed to make more machines is the opportunity cost.

Question 9

The production possibility curve usually bows outward because:

Accepted Answer

Resources are not equally suited to both goods — Because resources differ in suitability, opportunity cost rises, bowing the curve outward.

Question 10

Which concepts can a production possibility curve illustrate?

Accepted Answer

Scarcity, choice and opportunity cost — A PPC shows scarcity, the need for choice and the opportunity cost of decisions.