Economics Production Possibility Curve Quiz

Increasing opportunity cost highlights the law of diminishing returns, indicating that as more of one good is produced, larger amounts of another good must be sacrificed.

In a PPC with decreasing opportunity costs, the slope becomes less steep, indicating that the sacrifice of one good for another decreases as more units are produced.

The law of variable proportions explains how output changes as one input is varied while others are held constant, affecting the slope of the PPC due to changing opportunity costs.

<p>A scenario occurs when producing additional units of wheat requires increasingly smaller sacrifices of cotton, reflecting higher efficiency at larger scales of wheat production.</p> Signup and view all the answers

<p>Diminishing returns to scale imply that, beyond a certain point, increasing all inputs results in less than proportional increases in output, affecting long-run production decisions.</p> Signup and view all the answers

<p>It indicates that opportunity costs are constant.</p> Signup and view all the answers

<p>The PPC will be positioned anywhere below the curve.</p> Signup and view all the answers

<p>Opportunity cost refers to the value of the next best alternative foregone.</p> Signup and view all the answers

<p>Technological improvement can push the PPC outward.</p> Signup and view all the answers

<p>There could be a prevalence of decreasing opportunity costs in certain cases.</p> Signup and view all the answers

<p>It assumes that all resources are fully utilized in production.</p> Signup and view all the answers

<p>Quantitative and qualitative improvements in factors of production.</p> Signup and view all the answers

<p>They suggest that such scenarios may be theoretical or hypothetical.</p> Signup and view all the answers

<p>The main characteristics of perfect competition include a large number of buyers and sellers, homogenous products, perfect knowledge of the market, free entry and exit, and no single participant can influence the market price.</p> Signup and view all the answers

<p>In perfect competition, a firm's equilibrium occurs where its marginal cost (MC) equals marginal revenue (MR), maximizing profit at this output level.</p> Signup and view all the answers

<p>A firm's supply curve under perfect competition is derived from its marginal cost curve above the average variable cost (AVC) curve.</p> Signup and view all the answers

<p>The market supply curve in perfect competition is determined by the horizontal summation of all individual firms' supply curves at each price level.</p> Signup and view all the answers

<p>In the short run, a firm's equilibrium occurs where it produces at a level where MR equals MC, allowing for positive, zero, or negative economic profits.</p> Signup and view all the answers

<p>Long-run equilibrium in perfect competition occurs when firms make zero economic profits, with price equaling both marginal cost and minimum average total cost.</p> Signup and view all the answers

<p>The Long-Run Industry Supply Curve (LRS) illustrates the relationship between industry price and quantity supplied, assuming that all firms can enter or exit the market.</p> Signup and view all the answers

<p>Allocative efficiency in perfect competition occurs when resources are distributed in such a way that maximizes total surplus, where price equals marginal cost.</p> Signup and view all the answers

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