“Production Possibilities Curves” 1-3 Notes “Production Possibilities Curves”

1. What task did America face after 1941? -Create weapons needed to win WWII, had to switch from consumer goods to military. Farms, factories, and mines all converted.

2. What do economists use graphs for? -Analyze choices and trade-offs Why? -See how one value relates to another (Guns v. Butter).

4. What is a Production Possibilities Curve? -A graph that shows alternative ways of using resources 5. What do the axes show? -Categories of goods and services

6. How does an economist begin to draw a Production Possibilities Curve? -Decide what goods and services to show 7. What is Production Possibilities Frontier? -The points on the graph that show maximum use of resources

8. What does each point in 1.5 reflect? -A trade-off of products 9. If a farm grows more watermelons a factory has to produce less shoes. Why? -Production resources- Land, Labor, and capital are scarce

10. What three important things does a Production Possibilities graph tell us? A. Efficiency of the economy B. Growth or shrinking economy C. The opportunity cost of producing one good or service

11. What is efficiency? 12. Give an example of inefficiency. -Resources are used in a way to maximize production 12. Give an example of inefficiency. -Workers are laid off (then production goes down)

13. How would you mark inefficiency on a Production Possibilities Curve? -A point inside of the frontier 14. What does any point inside the Production Possibilities Frontier indicate? -Underutilization

15. Under growth, what three factors can cause a curve to move? -Land, Labor, and Capital Changes 16. Give an example or two and explain. -Immigrants= Growth -Inventions (assembly line)= produce at a lower cost

17. What does it mean if the Production Possibilities Curve shifts to the right? -Economic Growth 18. What does it mean if the Production Possibilities Curve shifts to the left? -Production capacity decreases

19. Give an example of why it would shift left. -War, strike, un-used factories, vacations, etc… 20. What is the Cost of something in economic terms? -Alternative that we give up when we chose one thing over another V.

21. What does cost always mean? -Opportunity Cost 22. What is the cost of producing 8 million tons of watermelons? -One million pairs of shoes

23. What is the cost of producing 9 million pairs of shoes? -Three million tons of watermelons 24. What is the law of increasing costs? -Production switches from one item to another, more resources are necessary, and opportunity cost increases

25. Explain why costs increase. -Some resources are better suited for the production of one item over another 26. What do a country’s resources include? -Land, natural resources, work force, and physical & human capital

27. Is technology important? Why? -Yes, production possibilities frontier depends on it