CH 2.3 : Production Possibility Curve
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Questions and Answers

What is the Production Possibility Curve (PPC) based on?

  • Full employment of resources
  • Fixed resources and technology (correct)
  • Variable resources and technology
  • Partially employed resources

What does the PPC demonstrate?

  • The optimum output of two goods
  • The average output of two goods
  • The maximum potential output of two goods (correct)
  • The minimum possible output of two goods

What is the concept illustrated by moving along the PPC?

  • Opportunity cost (correct)
  • Opportunity benefit
  • Economic growth
  • Resource allocation

What shape of PPC suggests increasing opportunity costs?

<p>Concave curve (D)</p> Signup and view all the answers

What can cause a change in the PPC?

<p>Improvements in technology (B)</p> Signup and view all the answers

What does an outward shift in the PPC indicate?

<p>Economic growth (B)</p> Signup and view all the answers

What is the PPC used to illustrate?

<p>The trade-offs and opportunity costs associated with resource allocation (C)</p> Signup and view all the answers

What happens when there is a leftward shift in the PPC?

<p>A reduction in resources or technological setbacks (A)</p> Signup and view all the answers

What is the number of goods or services assumed to be produced in a PPC?

<p>Two (C)</p> Signup and view all the answers

What is the implication of a straight line PPC?

<p>Constant opportunity costs (C)</p> Signup and view all the answers

What do indifference curves show?

<p>The different combinations of two goods that provide the same level of satisfaction (A)</p> Signup and view all the answers

Which of the following is a cause of market failures?

<p>Uneven income distribution (C)</p> Signup and view all the answers

What is a measure taken by governments to correct monopolies?

<p>Regulating monopolies (D)</p> Signup and view all the answers

What can high inflation rates lead to?

<p>Eroded purchasing power and destabilized economy (A)</p> Signup and view all the answers

What is the goal of government policies in addressing market failures?

<p>To move the economy towards the PPC (B)</p> Signup and view all the answers

What does the PPC represent?

<p>The trade-offs and choices facing economies due to scarce resources (A)</p> Signup and view all the answers

What can be a consequence of inefficiencies in resource allocation?

<p>The economy operates inside the PPC curve (C)</p> Signup and view all the answers

What is an example of government intervention to correct market failures?

<p>Environmental regulations (D)</p> Signup and view all the answers

What is a result of pollution, according to the content?

<p>Irreversible environmental damage (B)</p> Signup and view all the answers

What is the role of government in correcting market failures?

<p>To correct market failures and promote equitable distribution of resources (D)</p> Signup and view all the answers

What is the main purpose of the Production Possibility Curve (PPC)?

<p>To show the trade-offs between two goods or services (B)</p> Signup and view all the answers

What is assumed in a PPC about the resources and technology?

<p>They are fixed and constant (D)</p> Signup and view all the answers

What is the implication of a concave PPC?

<p>Increasing opportunity costs (B)</p> Signup and view all the answers

What is a result of an improvement in technology in a PPC?

<p>An outward shift of the PPC (A)</p> Signup and view all the answers

What is a consequence of a leftward shift in the PPC?

<p>A reduction in resources or technological setbacks (B)</p> Signup and view all the answers

What is the main difference between a concave and a convex PPC?

<p>The opportunity costs of production (A)</p> Signup and view all the answers

What is the relationship between the production of two goods or services in a PPC?

<p>They are trade-offs with each other (D)</p> Signup and view all the answers

What is the effect of an increase in resource availability on the PPC?

<p>It leads to an outward shift of the PPC (D)</p> Signup and view all the answers

What is the significance of the PPC in resource allocation?

<p>It helps in allocating resources efficiently (D)</p> Signup and view all the answers

What is the PPC used to illustrate in economics?

<p>The concept of opportunity cost (B)</p> Signup and view all the answers

What is the primary purpose of indifference curves in understanding consumer behavior?

<p>To show different combinations of two goods that provide the same level of satisfaction (D)</p> Signup and view all the answers

Which of the following is a consequence of uneven income distribution?

<p>Social and economic inequalities (B)</p> Signup and view all the answers

What is the primary goal of government intervention in markets?

<p>To correct market failures and promote efficient resource allocation (D)</p> Signup and view all the answers

What is the consequence of an economy operating inside the PPC curve?

<p>Resources are not being used efficiently (B)</p> Signup and view all the answers

Which of the following is a tool used by central banks to control inflation?

<p>Monetary policy (D)</p> Signup and view all the answers

What is the primary role of indifference curves in understanding consumer behavior?

<p>To determine the level of satisfaction or utility from different goods (D)</p> Signup and view all the answers

What is the consequence of pollution on the environment?

<p>Harm to society's well-being (C)</p> Signup and view all the answers

What is the primary goal of government policies in addressing market failures?

<p>To move the economy towards the PPC curve (A)</p> Signup and view all the answers

What is the primary consequence of monopolies in the market?

<p>Reduced competition and potentially higher prices (B)</p> Signup and view all the answers

What is the primary goal of antitrust laws?

<p>To prevent monopolistic practices and promote competition (D)</p> Signup and view all the answers

What is the primary assumption underlying the Production Possibility Curve?

<p>Resources are fully employed and technology is constant (A)</p> Signup and view all the answers

What shape of the PPC indicates that the economy is experiencing decreasing returns to scale?

<p>Convex curve (A)</p> Signup and view all the answers

What is the effect of an improvement in technology on the PPC?

<p>An outward shift of the PPC (B)</p> Signup and view all the answers

What is the result of a decrease in resource availability on the PPC?

<p>A leftward shift of the PPC (B)</p> Signup and view all the answers

What is the implication of a PPC with a straight line shape?

<p>Constant opportunity costs (A)</p> Signup and view all the answers

What is the primary reason for the PPC to shift outward?

<p>All of the above (D)</p> Signup and view all the answers

What is the relationship between the PPC and the concept of opportunity cost?

<p>The PPC demonstrates the trade-off between two goods, illustrating opportunity costs (A)</p> Signup and view all the answers

What is the effect of external factors on the PPC?

<p>Either an outward or leftward shift of the PPC (D)</p> Signup and view all the answers

What is the implication of producing at a point inside the PPC?

<p>The economy is underutilizing its resources (D)</p> Signup and view all the answers

What is the primary purpose of the PPC in resource allocation?

<p>To show the maximum potential output of two goods with limited resources (B)</p> Signup and view all the answers

What is the primary implication of an economy operating inside the PPC curve?

<p>Inefficient allocation of resources (A)</p> Signup and view all the answers

What is the primary goal of government policies in addressing market failures in terms of resource allocation?

<p>To move the economy towards the PPC (C)</p> Signup and view all the answers

What is the primary consequence of monopolies in the market?

<p>Higher prices (B)</p> Signup and view all the answers

What is the primary role of indifference curves in understanding consumer behavior?

<p>To show the impact of changes in income or prices on consumption choices (B)</p> Signup and view all the answers

What is the primary consequence of uneven income distribution?

<p>Social and economic inequalities (B)</p> Signup and view all the answers

What is the primary goal of antitrust laws?

<p>To promote competition (A)</p> Signup and view all the answers

What is the primary consequence of high inflation rates?

<p>Eroded purchasing power and destabilized economy (B)</p> Signup and view all the answers

What is the primary role of government intervention in markets?

<p>To correct inefficiencies and promote equitable distribution of resources (A)</p> Signup and view all the answers

What is the primary implication of a shift in the PPC curve?

<p>A change in the availability of resources (D)</p> Signup and view all the answers

What is the primary goal of government policies in addressing environmental pollution?

<p>To prevent irreversible environmental damage (D)</p> Signup and view all the answers

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