AP Economics Module 3

a

This production possibilities curve shows the trade-off between consumer goods and capital goods. Since capital goods are a resource, an increase in the production of capital goods today will increase the economy's production possibilities in the future. Therefore, all other things equal (ceteris paribus), producing at which point today will result in the largest outward shift of the PPC in the future? a. A b. B c. C d. D e. E

production possibilities curve

a model that helps economists think about the trade-offs every economy faces—shows the max quantity of one good that can be produced for each possible quantity of the other good produced

economic growth

a sustained rise in aggregate output—the economy can produce more of everything—outward shift of the PPC

efficient

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

increase in resources and progress in technology

what causes PPC to shift outward?

trade-off

when you give up something in order to have something else

d

An increase in unemployment could be represented by a movement from point a. D to point C. b. B to point A. c. C to point F. d. B to point E. e. E to point B.

d

For this economy, an increase in the quantity of capital goods produced without a corresponding decrease in the quantity of consumer goods produced a. cannot happen because there is always an opportunity cost. b. is represented by a movement from point E to point A. c. is represented by a movement from point C to point B. d. is represented by a movement from point E to point B. e. is only possible with an increase in resources or technology.

e

Which of the following might allow this economy to move from point B to point F? a. more workers b. discovery of new resources c. building new factories d. technological advances e. all of the above

c

Which point(s) on the graph represent efficiency in production? a. B and C b. A and D c. A, B, C, and D d. A, B, C, D, and E e. A, B, C, D, E, and F

opportunity cost

everything else in addition to money that must be given up to receive that good (slope of a straight line PPC)