PPC (IB)

The diagram shows a production possibility curve (PPC). It indicates the combinations of

consumer goods and capital goods produced by an economy using all its available resources. What does position X indicate?

• 1. a lower ratio of capital to consumer goods is necessary to achieve economic growth

• 1. increasing levels of unemployment

• 1. insufficient factors of production are available

• 1. future levels of economic growth due to decrease in unemployment

1. Why does a production possibility curve exist for every economy?

• Resources are unlimited

• 1. Resources have alternative uses

• 1. Some resources can be infinite

• 1. Some resources may be unemployed

A worker earning $40/h decided to visit a museum for 3 hours. The visit costs $40. What's the opportunity cost involved?

• $40

• $80

• $120

• $160

A country’s PPC moves from XX to YY as shown in the diagram. What could have caused this movement?

• a rise in technological progress

• a drop in the retirement age

• an increase in investment

• an decrease in net emigration

Match the scenario with its effect on the PPC diagram of an economy producing corn and laptops.

• A movement from inside closer to the PPC

• Natural disaster hits the region

• PPC shifts inwards

• Abundant rainfall and sunshine prevail in the region

• PPC has a non-parallel shift outwards

• Government increases spending on adult re-training programs

• A movement along the PPC

• Consumers demanding more laptops to become hackers

• PPC shifts outwards

• A central bank decreasing the interest rate making borrowing cheaper

A country is producing at point X on its production possibility curve which shows how it can allocate its production between capital goods and consumer goods.

A period of recession then causes some of its factories to close.

Which point could represent the country's new position?

• A

• B

• C

• D

The diagram shows production possibility curves (PPC) for a country that can produce agricultural products or manufactured products.

Its current PPC passes through points Q and S but the country is currently experiencing unemployment. If there is now full employment at the same time as new agricultural techniques enable an increase in productivity, what would be the movement on the PPC?

• P to R

• S to Q

• Q to R

• P to S

In the diagram XY is an economy’s production possibility curve. What could cause the curve to shift to XZ?

• a higher demand for manufactured goods

• a fall in the price of manufactured goods

• an improvement in manufacturing technology

• a fall in productivity in manufacturing

What would cause an outward shift of a country’s production possibility curve (PPC)?

• a fall in unemployment

• an increase in the rate of income tax

• a reduction in expenditure on education

• an increase in the labour force

1. The diagram shows a production possibility curve for an economy that produces two goods, X

and Y. When will the opportunity cost of producing more of good X be the largest?

• 1. moving from point E to point F

• 1. moving from point E to point G

• 1. moving from point E to point H

• 1. moving from point G to point H