3.1.1.5 PPF NOTES

What does a Production Possibility Frontier (PPF) graphically represent?

• The maximum output combinations of two goods an economy can produce with given resources and technology

• The inflation rate over a period of time

• The total demand and supply in an economy

• The price elasticity of various goods

What does the downward slope of the PPF curve indicate?

• The deflation rate of an economy

• The opportunity cost of producing one good in terms of the other

• The increase in consumer preference for a product

• The decrease in resource availability

What do points on the PPF represent?

• Inefficient allocation of resources

• Efficient allocation of resources where there is no waste

• Points of economic recession

• Unattainable production levels

What do points inside the PPF indicate?

• Economic stability

• Optimal production levels

• Underutilization of resources

• Overutilization of resources

What can cause the PPF to shift?

• A constant level of technology

• Improvements in technology or changes in resource availability

• A decrease in consumer demand

• A reduction in workforce

What does productive efficiency imply?

• Producing goods at the highest possible cost

• Producing goods at the lowest possible cost using available resources

• Focusing solely on technology improvement

• Maximizing the import of resources

What is allocative efficiency?

• Producing goods according to the government's directives

• Ignoring consumer preferences in production

• Focusing on maximum employment

• Allocating resources in a way that maximizes societal welfare

When is an economy considered to be allocatively efficient?

• When the PPF intersects with society's indifference curve

• When there is maximum technological advancement

• When all resources are utilized regardless of cost

• When the economy is in a state of recession

Why might points on the PPF boundary not be allocatively efficient?

• Because they indicate economic instability

• Because they may not align with society's preferences

• Because they are always outside the attainable region

• Because they represent underutilization of resources

How does an increase in resource quality affect the PPF?

• It shifts the PPF inward, indicating reduced production possibilities

• It does not affect the PPF

• It shifts the PPF outward, indicating increased production possibilities

• It makes the PPF more linear