ECON
A production possibilities frontier (PPF) is a curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology.
At which point is the country’s future growth rate likely to be the highest? Briefly explain why. Point W (top) because it is where the most resources are used to produce capital goods.
What happens if a country produces a combination of goods that efficiently uses all of the resources available in the economy? The country is operating on it production possibilities frontier.
What does increasing marginal opportunity costs mean? Increasing the production of a good requires larger and larger decreases in the production of another good.
What are the implications of this idea for the shape of the production possibilities frontier? The production possibilities frontier will be bowed outward.
What is absolute advantage? The ability to produce more of a good or service than competitors using the same amount of resources
What is comparative advantage? The ability to produce a good or service at a lower opportunity cost than other producers
Is it possible for a country to have a comparative advantage in producing a good without also having an absolute advantage? A country without an absolute advantage in producing a good … will have a comparative advantage if it has a lower opportunity cost of producing that good
For Fred and Barney, which of the following is true?
Barney has a comparative advantage in making unicycles and Fred in making pogo sticks.
For each bottle of wine that Italy produces, it gives up the opportunity to make 10 pounds of cheese. France can produce 1 bottle of wine for every 25 pounds of cheese it produces. Which of the following is true about the comparative advantage between the two countries?
Italy has the comparative advantage in wine.
Whether carried out by an individual or a country, production beyond the production possibilities frontier … is not
At which point is the country’s future growth rate likely to be the highest? Briefly explain why. Point W (top) because it is where the most resources are used to produce capital goods.
What happens if a country produces a combination of goods that efficiently uses all of the resources available in the economy? The country is operating on it production possibilities frontier.
What does increasing marginal opportunity costs mean? Increasing the production of a good requires larger and larger decreases in the production of another good.
What are the implications of this idea for the shape of the production possibilities frontier? The production possibilities frontier will be bowed outward.
What is absolute advantage? The ability to produce more of a good or service than competitors using the same amount of resources
What is comparative advantage? The ability to produce a good or service at a lower opportunity cost than other producers
Is it possible for a country to have a comparative advantage in producing a good without also having an absolute advantage? A country without an absolute advantage in producing a good … will have a comparative advantage if it has a lower opportunity cost of producing that good
For Fred and Barney, which of the following is true?
Barney has a comparative advantage in making unicycles and Fred in making pogo sticks.
For each bottle of wine that Italy produces, it gives up the opportunity to make 10 pounds of cheese. France can produce 1 bottle of wine for every 25 pounds of cheese it produces. Which of the following is true about the comparative advantage between the two countries?
Italy has the comparative advantage in wine.
Whether carried out by an individual or a country, production beyond the production possibilities frontier … is not