MICROECONOMICS: Opportunity Cost and Production Possibility Frontiers

What is a Possibility Production Frontier?

A graph to show the maximum number of goods and services an economy can produce using their resources to their full potential

What labels are on the axis of a PPF?

Good A and Good B

Define 'scarcity'

Having unlimited wants but limited resources

How does a PPF diagram demonstrate opportunity cost?

If the resources are biased towards good a or good b, there is an opportunity cost in allocating resources to one good over the other

If an economy are situated inside the curve of the PPF, they are

Inefficient

What are the four resources an economy may want?

Land, labour, capital, entrepreneurship

What can be used to demonstrate opportunity cost?

PPF diagram

If an economy are situated on the curve of the PPF, they are

Productively efficient

What is opportunity cost?

The cost of choosing one option rather than another

If an economy are extended outside the PPF, what does this mean?

They cannot reach this point of efficiency with the current resources they have

Straight lined PPFs mean

What is needed to produce Good A is exactly the same as to what is need to produce Good B