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Questions and Answers
What does a production possibility curve (PPC) represent?
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?
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?
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?
What does a shift outward of the production possibility curve indicate?
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Which factor contributes significantly to the productive potential of a country as shown on a PPC?
Which factor contributes significantly to the productive potential of a country as shown on a PPC?
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How does a production possibility curve illustrate opportunity cost?
How does a production possibility curve illustrate opportunity cost?
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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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