Podcast
Questions and Answers
A straight-line production possibilities frontier (PPF) illustrates ___ opportunity costs.
A straight-line production possibilities frontier (PPF) illustrates ___ opportunity costs.
constant
Given the data, the opportunity cost of 1X is ___ and the opportunity cost of 1Y is ___.
Given the data, the opportunity cost of 1X is ___ and the opportunity cost of 1Y is ___.
2Y, 1/2X
The production possibilities frontier is bowed outward. This is illustrative of ___ opportunity costs.
The production possibilities frontier is bowed outward. This is illustrative of ___ opportunity costs.
increasing
The law of increasing opportunity costs states that as more of a good is produced, the opportunity costs of producing the good increase.
The law of increasing opportunity costs states that as more of a good is produced, the opportunity costs of producing the good increase.
Signup and view all the answers
A movement from point A to B is a movement from a productive ___ point to a productive ___ point.
A movement from point A to B is a movement from a productive ___ point to a productive ___ point.
Signup and view all the answers
At point A there are ___ resources.
At point A there are ___ resources.
Signup and view all the answers
An advance in technology will shift the PPF ___.
An advance in technology will shift the PPF ___.
Signup and view all the answers
An increase in resources will shift the PPF ___.
An increase in resources will shift the PPF ___.
Signup and view all the answers
Does point B lie on, above, or below the PPF?
Does point B lie on, above, or below the PPF?
Signup and view all the answers
___ has a comparative advantage in producing X and ___ has a comparative advantage in producing Y.
___ has a comparative advantage in producing X and ___ has a comparative advantage in producing Y.
Signup and view all the answers
The opportunity cost for Jillian of producing good X is 1X = 12Y, which means the opportunity cost for Jillian of producing 1Y is ___ X.
The opportunity cost for Jillian of producing good X is 1X = 12Y, which means the opportunity cost for Jillian of producing 1Y is ___ X.
Signup and view all the answers
Specialization and trade permits individuals to consume beyond their ___.
Specialization and trade permits individuals to consume beyond their ___.
Signup and view all the answers
As a result of an increase in resources that can be used to produce good X but not good Y, the PPF shifts outward.
As a result of an increase in resources that can be used to produce good X but not good Y, the PPF shifts outward.
Signup and view all the answers
A decrease in resources will shift the PPF ___.
A decrease in resources will shift the PPF ___.
Signup and view all the answers
As ___ of a good is produced, the opportunity cost of producing that good ___.
As ___ of a good is produced, the opportunity cost of producing that good ___.
Signup and view all the answers
Study Notes
Production Possibilities Frontier (PPF)
- A straight-line PPF indicates constant opportunity costs.
- Bowed outward PPF represents increasing opportunity costs as more of a good is produced.
Opportunity Costs Calculation
- Between two points on the PPF, such as Point A (10X, 20Y) and Point B (5X, 30Y), the opportunity cost of producing 1X is 2Y, while the cost of producing 1Y is 0.5X.
- The opportunity cost illustrates trade-offs in production choices, showing what is foregone when increasing output of a particular good.
Efficiency in Production
- Point A being below the PPF indicates inefficiency, while Point B on the PPF reflects efficient production.
- Resources at Point A are considered unemployed, meaning not all resources are utilized effectively.
Impact of Technology and Resources
- Advancements in technology can shift the PPF outward (right), increasing production potential.
- An increase in available resources also shifts the PPF outward (right), improving overall production capacity.
Comparative Advantage
- Sam has a comparative advantage in producing good X (1X = 2Y), whereas Jackson excels in producing good Y (1Y = 0.2X).
- Jillian's opportunity cost for producing 1X is equivalent to 12Y, allowing for comparability in production efficiencies among individuals.
Specialization and Trade
- Specialization enables individuals to produce goods more efficiently, allowing for consumption beyond their individual PPFs.
Changes in PPF due to Resource Shifts
- An increase in resources for good X, while keeping those for good Y constant, shifts the PPF outward but maintains the original intersection on the vertical axis. True statement.
- A decrease in resources leads to an inward shift of the PPF (left), indicating a reduction in production capabilities.
Law of Increasing Opportunity Costs
- As more of a good is produced, the opportunity cost of that good increases, reflecting the principle of diminishing returns in resource allocation.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
Test your understanding of Chapter 2 in Microeconomics with these flashcards. This set covers concepts like opportunity costs and production possibilities frontiers. Perfect for reinforcing key microeconomic principles!