Opportunity Cost and Production Possibilities Curve - AP Macroeconomics
- What is meant by productive efficiency?
- Producing on the PPC. Using resources to achieve maximum possible output.
- How does specialization affect the PPC?
- Allows for more efficient production. Can shift the PPC outward by improving productivity.
- Which condition leads to a straight-line PPC?
- Constant opportunity costs. Resources transfer equally well between different production uses.
- Which type of resources lead to a bowed-outward PPC?
- Resources that are not perfectly adaptable. Some resources are better suited for specific production tasks.
- How does a new technology in agriculture affect the PPC?
- Shifts PPC outward for agricultural goods. Increases capacity to produce farm products relative to other goods.
- What does allocative efficiency refer to?
- Optimal distribution of resources. Producing the right mix of goods that society values most.
- What is the effect of a technological improvement in one industry?
- Shifts PPC for that good outward. Increases production capacity for that specific good only.
- What does a movement from inside to on the PPC indicate?
- Improved efficiency. Economy moves from waste to full resource utilization.
- What is opportunity cost?
- The next best alternative foregone. The value of the best option not chosen when making a decision.
- Which factor causes the PPC to shift outward?
- Economic growth. Increased resources or improved technology expand production capacity.
- Identify the shape of a PPC for two goods with constant opportunity costs.
- A straight line. Opportunity cost remains the same regardless of production level.
- Which economic concept does the PPC illustrate?
- Scarcity and trade-offs. Limited resources force choices between alternative uses.
- Identify a reason for PPC shifting leftward.
- Resource depletion. Available inputs decrease, reducing overall production capacity.
- What does a PPC shift inward indicate?
- A decrease in resources or technology. Economic contraction due to reduced productive capacity.
- Which factor can cause a PPC to shift outward?
- Technological advancement. Better methods increase production capacity without more resources.
- State the implication of a PPC shifting to the right.
- Improved economic capacity. Society can produce more of both goods than before.
- What does the term 'trade-off' mean in economics?
- Sacrificing one good for another. Choosing one option means giving up another option.
- What results from an economy producing at a point on the PPC?
- Efficient use of resources. No waste occurs and maximum output is achieved.
- What would cause a PPC to shift inward?
- Natural disaster reducing resources. Reduces available resources and shrinks production possibilities.
- Define economic efficiency in terms of the PPC.
- Producing on the PPC with optimal allocation. Maximum output with resources allocated to highest-valued uses.
- What is indicated by moving along the PPC?
- Trade-off between two goods. Shows the opportunity cost of choosing different production mixes.
- What does a point outside the PPC signify?
- Unattainable with current resources. Beyond the economy's current production capacity.
- What does a point on the PPC represent?
- Efficient production. All resources are fully utilized in the best possible way.
- What does a point inside the PPC indicate?
- Inefficient resource use. Resources are not fully utilized or not used optimally.
- What is implied by a PPC that is a straight line?
- Constant opportunity cost. Resources are equally productive in both goods.
- How does opportunity cost relate to the slope of the PPC?
- The slope represents opportunity cost. Steeper slopes indicate higher opportunity costs.
- What happens to opportunity cost as more of a good is produced?
- Opportunity cost increases. Resources become less efficient as they're reallocated.
- Identify the type of PPC for perfectly substitutable resources.
- Linear PPC. Resources can be used equally well for either good.
- Which factors can shift the PPC?
- Resource changes, technology, labor force. Any change that affects the economy's productive capacity.
- What might cause a PPC to become steeper?
- Increased opportunity cost. Higher relative cost of producing the good on the horizontal axis.
- Define the Production Possibilities Curve (PPC).
- A graph showing maximum potential output combinations. Shows all possible combinations of two goods an economy can produce.
- If a country can produce either cars or trucks, what does the PPC show?
- Maximum combinations of cars and trucks. All efficient production possibilities for these two goods.
- What economic concept does the PPC demonstrate when it shifts?
- Changes in resource availability or technology. Shows how economic capacity can expand or contract over time.
- What does it mean if a PPC is concave to the origin?
- Increasing opportunity costs. Opportunity cost rises as more of one good is produced.
- How does the law of increasing opportunity costs affect PPC shape?
- Makes PPC concave. Resources become less suitable as production increases.
- What does a rightward shift in the PPC suggest?
- Economic growth. The economy can now produce more of both goods.
- What shape does a PPC have for increasing opportunity costs?
- Bowed outward. Shows increasing opportunity cost as production of one good increases.