Opportunity Cost and Production Possibilities Curve - AP Macroeconomics
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What does allocative efficiency refer to?
What does allocative efficiency refer to?
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Optimal distribution of resources. Producing the right mix of goods that society values most.
Optimal distribution of resources. Producing the right mix of goods that society values most.
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What does a point on the PPC represent?
What does a point on the PPC represent?
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Efficient production. All resources are fully utilized in the best possible way.
Efficient production. All resources are fully utilized in the best possible way.
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What shape does a PPC have for increasing opportunity costs?
What shape does a PPC have for increasing opportunity costs?
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Bowed outward. Shows increasing opportunity cost as production of one good increases.
Bowed outward. Shows increasing opportunity cost as production of one good increases.
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What does a point inside the PPC indicate?
What does a point inside the PPC indicate?
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Inefficient resource use. Resources are not fully utilized or not used optimally.
Inefficient resource use. Resources are not fully utilized or not used optimally.
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State the implication of a PPC shifting to the right.
State the implication of a PPC shifting to the right.
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Improved economic capacity. Society can produce more of both goods than before.
Improved economic capacity. Society can produce more of both goods than before.
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State the implication of a PPC shifting to the right.
State the implication of a PPC shifting to the right.
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Improved economic capacity. Society can produce more of both goods than before.
Improved economic capacity. Society can produce more of both goods than before.
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What is opportunity cost?
What is opportunity cost?
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The next best alternative foregone. The value of the best option not chosen when making a decision.
The next best alternative foregone. The value of the best option not chosen when making a decision.
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Define the Production Possibilities Curve (PPC).
Define the Production Possibilities Curve (PPC).
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A graph showing maximum potential output combinations. Shows all possible combinations of two goods an economy can produce.
A graph showing maximum potential output combinations. Shows all possible combinations of two goods an economy can produce.
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What does a point outside the PPC signify?
What does a point outside the PPC signify?
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Unattainable with current resources. Beyond the economy's current production capacity.
Unattainable with current resources. Beyond the economy's current production capacity.
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Identify the shape of a PPC for two goods with constant opportunity costs.
Identify the shape of a PPC for two goods with constant opportunity costs.
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A straight line. Opportunity cost remains the same regardless of production level.
A straight line. Opportunity cost remains the same regardless of production level.
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Which factor causes the PPC to shift outward?
Which factor causes the PPC to shift outward?
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Economic growth. Increased resources or improved technology expand production capacity.
Economic growth. Increased resources or improved technology expand production capacity.
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Which economic concept does the PPC illustrate?
Which economic concept does the PPC illustrate?
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Scarcity and trade-offs. Limited resources force choices between alternative uses.
Scarcity and trade-offs. Limited resources force choices between alternative uses.
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What does a PPC shift inward indicate?
What does a PPC shift inward indicate?
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A decrease in resources or technology. Economic contraction due to reduced productive capacity.
A decrease in resources or technology. Economic contraction due to reduced productive capacity.
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If a country can produce either cars or trucks, what does the PPC show?
If a country can produce either cars or trucks, what does the PPC show?
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Maximum combinations of cars and trucks. All efficient production possibilities for these two goods.
Maximum combinations of cars and trucks. All efficient production possibilities for these two goods.
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What is meant by productive efficiency?
What is meant by productive efficiency?
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Producing on the PPC. Using resources to achieve maximum possible output.
Producing on the PPC. Using resources to achieve maximum possible output.
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What does allocative efficiency refer to?
What does allocative efficiency refer to?
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Optimal distribution of resources. Producing the right mix of goods that society values most.
Optimal distribution of resources. Producing the right mix of goods that society values most.
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Which factor can cause a PPC to shift outward?
Which factor can cause a PPC to shift outward?
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Technological advancement. Better methods increase production capacity without more resources.
Technological advancement. Better methods increase production capacity without more resources.
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What is implied by a PPC that is a straight line?
What is implied by a PPC that is a straight line?
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Constant opportunity cost. Resources are equally productive in both goods.
Constant opportunity cost. Resources are equally productive in both goods.
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How does opportunity cost relate to the slope of the PPC?
How does opportunity cost relate to the slope of the PPC?
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The slope represents opportunity cost. Steeper slopes indicate higher opportunity costs.
The slope represents opportunity cost. Steeper slopes indicate higher opportunity costs.
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Which type of resources lead to a bowed-outward PPC?
Which type of resources lead to a bowed-outward PPC?
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Resources that are not perfectly adaptable. Some resources are better suited for specific production tasks.
Resources that are not perfectly adaptable. Some resources are better suited for specific production tasks.
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What might cause a PPC to become steeper?
What might cause a PPC to become steeper?
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Increased opportunity cost. Higher relative cost of producing the good on the horizontal axis.
Increased opportunity cost. Higher relative cost of producing the good on the horizontal axis.
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What does the term 'trade-off' mean in economics?
What does the term 'trade-off' mean in economics?
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Sacrificing one good for another. Choosing one option means giving up another option.
Sacrificing one good for another. Choosing one option means giving up another option.
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What economic concept does the PPC demonstrate when it shifts?
What economic concept does the PPC demonstrate when it shifts?
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Changes in resource availability or technology. Shows how economic capacity can expand or contract over time.
Changes in resource availability or technology. Shows how economic capacity can expand or contract over time.
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What would cause a PPC to shift inward?
What would cause a PPC to shift inward?
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Natural disaster reducing resources. Reduces available resources and shrinks production possibilities.
Natural disaster reducing resources. Reduces available resources and shrinks production possibilities.
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Define economic efficiency in terms of the PPC.
Define economic efficiency in terms of the PPC.
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Producing on the PPC with optimal allocation. Maximum output with resources allocated to highest-valued uses.
Producing on the PPC with optimal allocation. Maximum output with resources allocated to highest-valued uses.
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Which condition leads to a straight-line PPC?
Which condition leads to a straight-line PPC?
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Constant opportunity costs. Resources transfer equally well between different production uses.
Constant opportunity costs. Resources transfer equally well between different production uses.
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What is indicated by moving along the PPC?
What is indicated by moving along the PPC?
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Trade-off between two goods. Shows the opportunity cost of choosing different production mixes.
Trade-off between two goods. Shows the opportunity cost of choosing different production mixes.
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How does specialization affect the PPC?
How does specialization affect the PPC?
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Allows for more efficient production. Can shift the PPC outward by improving productivity.
Allows for more efficient production. Can shift the PPC outward by improving productivity.
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Which factors can shift the PPC?
Which factors can shift the PPC?
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Resource changes, technology, labor force. Any change that affects the economy's productive capacity.
Resource changes, technology, labor force. Any change that affects the economy's productive capacity.
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What does a rightward shift in the PPC suggest?
What does a rightward shift in the PPC suggest?
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Economic growth. The economy can now produce more of both goods.
Economic growth. The economy can now produce more of both goods.
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