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Production Possibility Curve Overview

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Questions and Answers

What does a production possibility curve (PPC) represent?

The economic efficiency of a country in managing resources.

The total revenue generated by a country.

The maximum output combinations of two goods given a set of resources. (correct)

The distribution of wealth in a society.

Which of the following points represents inefficiency on a production possibility curve?

A point on the curve.

A point beyond the curve.

A point inside the curve. (correct)

A point at the axis intercept.

What happens when the economy operates at a point beyond the production possibility curve?

There is a surplus of goods produced.

The economy experiences zero opportunity cost.

The economy is efficiently utilizing its resources.

It is unattainable with current resources. (correct)

What does a shift outward of the production possibility curve indicate?

An improvement in production technology. Signup and view all the answers

Which factor contributes significantly to the productive potential of a country as shown on a PPC?

All of the above. Signup and view all the answers

How does a production possibility curve illustrate opportunity cost?

By showing how much one good can be produced without sacrificing another. Signup and view all the answers

Study Notes

Production Possibility Curve (PPC)

The USA has a much larger economy than Mauritius.
The USA's output in 2015 was valued at $18 trillion.
Mauritius's output in 2015 was valued at $25 billion.
The USA's larger economy is due to factors such as a larger labor force, more capital equipment, more entrepreneurs, and more natural resources.
A PPC diagram illustrates the productive potential of an individual, firm, or country
A PPC diagram can also illustrate opportunity cost and efficiency.

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Description

This quiz delves into the Production Possibility Curve (PPC) and its applications in understanding economies like the USA and Mauritius. Learn about how PPC illustrates efficiency, opportunity costs, and the productive potential of firms and countries. Test your knowledge on economic concepts related to PPC.