Ch5 Production Possibility Curve (PPC)

Front

What does a PPC model show?

Back

A PPC shows the maximum level of output that an economy can produce given its current resources and state of technology.

Front

What is another name for a PPC?

Back

A PPC is also known as a production possibility frontier.

Front

What does a point on the PPC represent?

Back

A point on the PPC shows the possible combinations of the two goods where there is an efficient allocation of resources.

Front

What does a movement along a PPC indicate?

Back

A movement along a PPC indicates a re-allocation of output between the two goods while ensuring an efficient allocation of resources.

Front

What does it mean when an economy operates from a point inside its PPC?

Back

It means there is an inefficient allocation of resources, and the economy is producing less of both goods than it could, given the resources available.

Front

Is a point outside the PPC a possible outcome? Why or why not?

Back

No, a point outside the PPC is not possible because the economy does not have the resources required to achieve this level of output.

Front

What does the PPC show regarding agricultural and manufactured goods?

Back

The PPC shows the maximum outputs of agricultural goods and manufactured goods that can be produced, given current resources and the state of technology.