Module 3: The Production Possibilities Curve Model

An increase in the amount of resources available to Tom for use in producing coconuts and fish does not change his production possibilities curve.

False

Points inside a production possibility curve are efficient and points outside a production possibilities curve are inefficient.

False

Technology

The technological means for producing goods and services

A technological change that allows Tom to catch more fish relative to any amount of coconuts gathered results in a change in his production possibilities curve.

True

production possibilities curve

A graph that describes the maximum amount of one good that can be produced for every possible level of production of the other good.

Trade offs

Alternatives that must be given up when one is chosen rather than another

efficent

An economy is efficient if there is no way to make anyone better off without making at least one person worse off

economic growth

When the economy can produce more Reasons why: 1) increase in resources 2) new technology

productive efficiency

an economy achieves this if it produces at a point on its production possibilities curve

allocative efficiency

an economy achieves this if it produces at the point along its production possibilities curve that makes consumers as well off as possible