SB Chapter 2 Econ 2101

Assume there are 4 million total workers. Also assume that each worker takes one day to make a shirt or half a day to grow a bushel of wheat. The number of workers making shirts equals X, and the number growing wheat equals ½ of Y. We can write this in equation form as X + (1/2)Y = 4 million. The slope of the production possibilities frontier is

-2

The two main factors that drive the change in U.S. production possibilities are

1. # of workers 2. changes in technology

How does the production possibilities frontier help us answer economists' second question, "What are the trade-offs?"

Along the PPF, in order to get more of one thing, you must give up some of another thing.

True or false: Points inside the production possibilities frontier are achievable, but still make full use of all available resources.

False; Points inside the PPF are achievable, but they do not make full use of all available resources.

Points inside the production possibilities frontier are

achievable, but don't make full use of all available resources.

The production possibilities frontier shows all the possible combinations of outputs that can be produced using

all available resources

The production possibilities frontier helps us answer economists' first question—"What are the wants and constraints of those involved?"—because it shows

all possible combinations of outputs that can be produced with ideal resources.

The production possibilities frontier shows

all the possible combinations of two outputs that can be produced using all available resources.

When opportunity costs are increasing, the shape of the production possibilities frontier is a ——— (only one word per blank) curve.

concave

The production possibilities frontier gives us a way to represent the ——— on production.

constraints

The opportunity cost of producing one good in terms of the other typically ———— as more of a good is produced, because skills vary among workers.

increases

Assume that all workers cannot produce the same amount of each good. The opportunity cost of producing one good in terms of the other

increases as more of a good is produced, because skills vary among workers.

Points within (inside) the production possibilities frontier are

inefficient.

When opportunity costs are constant, the slope of the production possibilities frontier

is also constant.

When an economy chooses a point inside the production possibilities frontier, it can produce ______ goods by using all the available resources.

more

Based on the assumption of efficiency, we can predict that an economy will choose to produce at a point

on the frontier rather than inside it.

Along a straight line production possibilities curve, the slope of the line measures the ——— cost of one good in terms of the other.

opportunity

The _____ cost of one good is the amount of the other good that must be given up to produce it.

opportunity

The ________ cost of one good is the amount of the other good that must be given up to produce it.

opportunity

When the production possibilities frontier is concave,

opportunity costs are increasing.

Points that lie ——— the production possibilities frontier are unattainable.

outside

The production possibilities frontier shows the ______.

production constraint of two outputs that can be produced using all available resources

The first question economists use to break down problems—"What are the wants and constraints of those involved?"—can be answered using the

production possibilities frontier.

When the working population decreases, the production possibilities frontier

shifts inward

When opportunity costs are increasing, the slope of the production possibilities frontier becomes

steeper as you move along the production possibilities frontier.

The opportunity cost of one good is

the amount of the other good that must be given up.

Along a straight line production possibilities curve, the slope of the line measures

the opportunity cost of one good in terms of the other.

The production possibilities frontier helps us answer economists' second question "What are the trade-offs?" because

there is a trade-off between the production of the two goods.

Without trade, points that lie outside the production possibilities frontier are

unattainable.