When the curve shifts outward, or to the right, that means output is increasing. When the curve shifts inward, or to the left, that means output is decreasing.
Q. How does war affect the PPF?
A war taken place in the US soil leads to reduction in capital stock, potential resources and also kills people. This in turn shifts the US’s PPF inward. Production possibilities frontier (PPF) curve: PPF curve refers to the combinations of goods and services that can be produced using available resources.
Table of Contents
- Q. How does war affect the PPF?
- Q. How does unemployment affect the PPF?
- Q. What condition must hold for the PPF to be bowed outward?
- Q. Why are most PPF for goods bowed outward?
- Q. What is the difference between a straight line PPF and a bowed out PPF?
- Q. What is the difference between a point inside a PPF and one on the PPF?
- Q. What does a point inside the PPF represent?
- Q. When would a PPF be a straight line?
- Q. Would a PPF be bowed towards the origin?
Q. How does unemployment affect the PPF?
Increases in unemployment or inefficiency move the production point further from the PPF (toward the origin) representing less output of goods and services. (But if additional resources are acquired or technology increases productivity, it may be possible to move the entire PPF in that direction.)
Q. What condition must hold for the PPF to be bowed outward?
What condition must hold for the production possibilities frontier to be bowed outward (concave downward)? To be a straight line? To be bowed outward the opportunity costs must be increasing, and to be a straight line the opportunity costs must be constant. You just studied 3 terms!
Q. Why are most PPF for goods bowed outward?
The usual PPF is bowed outward because some resources are more suited to the production of one good than another (the law of increasing opportunity cost). But the resources used for making films are probably equally suitable for both features and shorts, so a straight-line PPF makes sense in this case.
Q. What is the difference between a straight line PPF and a bowed out PPF?
When the PPC is a straight line, opportunity costs are the same no matter how far you move along the curve. When the PPC is concave (bowed out), opportunity costs increase as you move along the curve. When the PPC is convex (bowed in), opportunity costs are decreasing.
Q. What is the difference between a point inside a PPF and one on the PPF?
Key Points The PPF captures the concepts of scarcity, choice, and tradeoffs. The shape of the PPF depends on whether there are increasing, decreasing, or constant costs. Points that lie on the PPF illustrate combinations of output that are productively efficient.
Q. What does a point inside the PPF represent?
According to the PPF, points A, B, and C on the PPF curve represent the most efficient use of resources by the economy. Point X represents an inefficient use of resources, while point Y represents a goal that the economy simply cannot attain with its present levels of resources.
Q. When would a PPF be a straight line?
A straight line PPF: A straight line PPF where the opportunity cost is constant. The slope of the PPF shows the rate at which the production of one good can be transferred to another.
Q. Would a PPF be bowed towards the origin?
2 Chapter 1 Under what circumstances would the production possibility curve be (a) a straight line; (b) bowed in toward the origin? This will occur when resources are equally suited to producing either good. This might possibly occur in our highly simplified world of just two goods. In the real world it is unlikely.
