Lecture 2

What does the Production Possibility Frontier (PPF) represent?

• The demand curve for a product

• The total cost of production

• The maximum attainable amount of goods and services

• The profit margin of a business

What is opportunity cost?

• The cost of producing one more unit of a good

• The value of the next best alternative forgone

• The total revenue from sales

• The fixed costs of production

What does a bowed-out shape of the PPF indicate?

• Increasing opportunity cost

• No opportunity cost

• Constant opportunity cost

• Decreasing opportunity cost

What is production efficiency?

• Producing only one type of good

• Producing at the lowest cost

• Producing at the highest cost

• Producing beyond the PPF

What happens when moving along the PPF?

• Opportunity cost remains constant

• Resources are wasted

• Production becomes inefficient

• Opportunity cost increases

What is the marginal cost (MC) of a good?

• The total cost of production

• The opportunity cost of producing one more unit

• The fixed cost of production

• The average cost of all units produced

What does the marginal benefit (MB) curve show?

• The relationship between total cost and quantity produced

• The relationship between marginal benefit and quantity consumed

• The relationship between price and demand

• The relationship between supply and production

What is allocative efficiency?

• Producing at any point on the PPF

• Producing beyond the PPF

• Producing at the point where MB equals MC

• Producing only one good

What is comparative advantage?

• The ability to produce more of a good than others

• The ability to produce a good at a lower opportunity cost

• The ability to reduce production costs

• The ability to sell goods at a higher price

What is absolute advantage?

• The ability to sell goods at a higher price

• The ability to produce more of a good than others

• The ability to reduce production costs

• The ability to produce a good at a lower opportunity cost