A-Level - Production Possibility Curves

A production possibility curve is drawn on the assumption that:

• there are always opportunities to produce more of one good

• all existing resources and technology are being used

• there are unused resources in economy

• production never takes place within or outside the production possibility curve

What happen if production moves from point C (yellow) to point D (green)?

• increased production of consumer goods and capital goods

• decreased production of consumer goods and capital goods

• increased production of consumer goods and decreased production of capital goods

• decreased production of consumer goods and increased production of capital goods

An economy produces two goods: cars and smartphones. Its production possibility curve shifts outwards. What would have caused this shift?

• the discovery of a new valuable oil reserve

• closure of an inefficient car assembly plant

• an increase in sales tax on cars and smartphones

• a rise in the rate of unemployment

All of the following factors impact an economy's production possibility curve, EXCEPT:

• a newly-discovered energy source

• increase in the number of labour force

• a technological advance

• technological stagnation

An economy produces two goods: cars and smartphones.

The diagram shows that, as a result of a technological advance, more smartphones can be produced for the same resources.

What is the change in the opportunity cost of producing OC cars?

• PN to PM

• PM to QN

• PQ to PM

• QM to PM