How would increased investment in education affect a country's PPC in the long run?
It would likely shift the PPC outward by improving the quality of human capital and increasing productivity.
How would a policy that restricts international trade (e.g., tariffs) affect a country's ability to consume beyond its PPC?
It would limit the country's ability to specialize and trade, preventing it from consuming beyond its own production possibilities.
What is the likely impact of a policy promoting technological innovation on the PPC?
The PPC would shift outward, reflecting the increased productive capacity resulting from new technologies.
How might a government policy focused on resource conservation affect future PPCs?
By preserving resources, the policy could help maintain or even expand future production possibilities, leading to a larger outward shift of the PPC over time.
What is the potential impact of a policy that leads to high inflation on a country's productive efficiency, as represented on the PPC?
High inflation can create uncertainty and distort resource allocation, potentially leading to production inside the PPC (inefficiency).
How would a policy that encourages immigration affect a country's PPC?
Increased immigration can increase the quantity of labor resources, potentially shifting the PPC outward.
How might a policy that subsidizes the production of renewable energy affect a country's PPC?
It could lead to a shift in the PPC, favoring the production of renewable energy and potentially shifting the curve outward along the renewable energy axis.
What is the likely effect of a policy that reduces investment in infrastructure (e.g., roads, bridges) on the PPC?
Reduced infrastructure investment can hinder productivity and resource mobility, potentially slowing the outward shift of the PPC or even causing it to shift inward over time.
How would a policy promoting free trade zones affect a country's PPC and consumption possibilities?
Free trade zones encourage specialization and trade, allowing the country to potentially consume beyond its PPC and experience economic growth.
How does a government policy that increases unemployment benefits affect the PPC?
Increase in unemployment benefits decreases the labor available. The PPC shifts inward.
What is scarcity?
Limited resources + unlimited wants = the fundamental economic problem.
What are trade-offs?
Because of scarcity, every decision involves giving something up.
What is opportunity cost?
The value of the *next best* alternative you give up when making a choice.
What are production possibilities?
All the different combinations of goods and services an economy can produce with its limited resources and technology.
What is the Production Possibilities Curve (PPC)?
A graph that visualizes the production possibilities for two goods.
What is productive efficiency?
Producing at the lowest possible cost; represented by any point on the PPC.
What is allocative efficiency?
Producing the specific mix of goods that society desires; the point on the PPC that best meets society's needs.
What is increasing opportunity cost?
As you produce more of one good, the opportunity cost (what you give up) increases.
What is constant opportunity cost?
You give up the same amount of one good for each additional unit of the other good.
What is economic growth (in terms of the PPC)?
A shift of the entire PPC to the right, meaning we can produce more of *both* goods.
How does scarcity apply to a country deciding between funding healthcare or education?
The country has limited resources (tax revenue) and must choose how to allocate them, giving up some of one service to fund the other.
How does opportunity cost apply to a student choosing between studying and working?
The opportunity cost of studying is the money the student could have earned working; the opportunity cost of working is the potential grade improvement from studying.
How does the PPC apply to a farmer deciding between growing corn and soybeans?
The PPC shows the maximum combinations of corn and soybeans the farmer can produce with their land, labor, and capital, given their technology.
How does productive efficiency relate to a factory operating at full capacity?
Operating at full capacity means the factory is producing the maximum possible output with its resources, representing a point on the PPC and productive efficiency.
How does allocative efficiency relate to a government deciding how much to spend on defense vs. social programs?
Allocative efficiency means the government is allocating resources to defense and social programs in the proportions that best reflect society's needs and preferences.
How does increasing opportunity cost apply to a country shifting from agriculture to manufacturing?
As the country produces more manufactured goods, it must give up increasing amounts of agricultural output because resources become less and less suited to manufacturing.
How does economic growth, depicted by a shift in the PPC, impact a society's standard of living?
Economic growth allows a society to consume more of all goods and services, potentially leading to a higher standard of living.
How does a technological advancement in renewable energy affect a country's PPC?
If the tech advancement is only in renewable energy, the PPC will shift outward more along the renewable energy axis, allowing the country to produce more renewable energy without sacrificing as much of other goods.
How does a natural disaster affect a country's PPC?
The PPC will shift inward. The country can produce less of both goods.
How does international trade allow a country to consume beyond its PPC?
By specializing in producing goods where they have a comparative advantage and trading with other countries, a country can access a combination of goods and services that lies outside its own production possibilities.
