4_PPC

A curve that shows the maximum output of two types of products and combination of those products that can be produced with existing resources and technology.

• production possibility curve

• PPC diagram

• PPC cost

• PPC opportunity cost

It is the graphical representation of the maximum combination of the amounts of goods and services that can be produced in an economy, per period of time.

• production possibility curve

• PPC diagram

• PPC cost

• PPC opportunity cost

The diagram shows a country’s production possibility curve for rice and wheat. A major flood destroys a large area of agricultural land. Which movement could represent the resulting change in output?

• P to Q

• Q to R

• R to S

• S to P

A point inside the curve indicates that it is unattainable at current period of time.

• True

• False

The diagram shows a production possibility curve for a country. As a result of an increase in demand for manufactured goods it moves from a situation of unemployment to full employment. How would this be represented on this diagram?

• by a movement from E to G

• by a movement from F to E

• by a movement from F to G

• by a movement from G to H

A production possibility curve can be used to illustrate opportunity cost.

• True

• False

Using all available resources an economy produces different combinations of two types of good, clothes and food, shown on the production possibility curve (PPC) diagram. What does the PPC indicate?

• It is more efficient to produce more of clothes than food.

• It is only possible to increase the output of clothes by reducing the output of food.

• The best situation is to produce equal units of clothes and food.

• The cost of producing a unit of clothes is always higher than the cost of producing a unit of food.

Using the diagram, determine the opportunity cost of increasing the output luxury goods from 25 to 35.

• 8 basic goods

• 10 luxury goods

• 25 luxury goods

• 92 basic goods

A country experiences a fall in unemployment. How would this be shown on a PPC diagram?

• a movement of the production point away from the curve

• a movement of the production point towards the curve

• a shift of PPC to the left (inward)

• a shift of PPC to the right (outward)

Which of the following is most likely to cause an inwards shift of a country's production possibility curve?

• a natural disaster in the economy

• an increase in the quantity of factors of production

• better quality factors of production

• higher opportunity costs of production