AP Macroeconomics Module 3 Krugman's

false

TRUE OR FALSE: an increase in the amount of resources available to Tom for use in producing coconuts and fish does not change his PPC.

false

TRUE OR FALSE: points inside a PPC are efficient and points outside a PPC are inefficient.

production possibilities curve

a model that helps economists think about the trade-offs every economy faces shows *maximum* quantity of one good that can be produced for each possible quantity of the other good produced. helps us understand 3 important aspects of the real economy: *efficiency, opportunity cost, economic growth*

true

TRUE OR FALSE: a technological change that allows Tom to catch more fish relative to any amount of coconuts gathered results in a change in his PPC.

slope of a production possibilities curve

equal to the opportunity cost (measured on the x axis in terms of goods measured on y axis)

what can cause the production possibilities curve to shift outward?

increase in resources to produce goods & services: C.E.L.L. progress in technology: better, more efficient ways to produce [change in trade (not so basic source)]

capital good

manufactured use to produce other goods and services -- assembly line

efficient

no missed opportunities in the economy no way to make anyone better off without making at least one person worse off

examples of inefficiency

not producing at a point on production possibilities curve people want to work but unable to find jobs

consumer good

tangible commodity -- a car

nothing

what happens to a PPC if demand shifts?

nothing

what happens to a PPC if many workers are unemployed?

all values increase

what happens to a PPC if population increases?

one axis's values increase

what happens to a PPC if technology improves?

all values decrease

what happens to a PPC if there in a decrease in resources?

opportunity cost

whatever must be given up to obtain some item *increasing* bows down *constant* straight line

trade-off

when you give up something in order to have something else

efficient in allocation

economy allocate its resources (so consumers are well-off)

efficient in production

an economy is producing at a point on its production possibilities curve

economic growth

an increase in what the economy CAN produce, not necessarily what it WILL produce (that depends on personal choices of consumers)

economic growth results in

an outward shift of the production possibilities curve--production possibilities expand PRODUCE MORE!!

requirements for efficiency

efficient production efficient allocation