1. 1d – Production Possibilities
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2. 1d - Must Know / Outcomes
Construct a production possibilities curve (PPC) when given appropriate data; what is the production possibilities curve (PPC) or production possibilities frontier (PPF)?; what does it show?
What are the assumptions behind the PPC
Illustrate the following using the production possibilities curve: - we must make choices - choices have opportunity costs - the law of increasing costs - the effect of unemployment - the effect of productive inefficiency - how present choices affect future possibilities - the effect of international trade - two types of "economic growth" - it does NOT show the optimum product mix (allocative efficiency)
Explain WHY the PPC has the shape that it does -- concave to the origin. What is the law of increasing cost? Why are there increasing costs? (Draw, Define. Describe all graphs)
What would the PPC look like if there were constant costs?
What does a point outside the PPC represent?
What two things (2 Es) would a point inside the PPC indicate?
Summarize the general relationship between investment and economic growth.
Describe the two types of economic growth ("achieving the potential" and "increasing the potential") and explain how are they shown on a PPC?
What would cause a PPC to shift inward?
Use a PPC to illustrate the effect of international trade

3. 1. A production possibilities curve illustrates:
the necessity of making choices.
market prices.
consumer preferences.
the distribution of income.

4. 1. A production possibilities curve illustrates:
the necessity of making choices.
market prices.
consumer preferences.
the distribution of income.

5. 2. The PPC shows: The minimum amount that should be produced
The minimum amount that can be produced
The maximum amount that should be produced
The maximum amount that can be produced

6. 2. The PPC shows: The minimum amount that should be produced
The minimum amount that can be produced
The maximum amount that should be produced
The maximum amount that can be produced

7. 3. Which of the following is NOT one of the assumptions behind the PPC?
Fixed resources
Fixed technology
Productive efficiency
Allocative efficiency
Full employment
Only two goods

8. 3. Which of the following is NOT one of the assumptions behind the PPC?
Fixed resources
Fixed technology
Productive efficiency
Allocative efficiency
Full employment
Only two goods

9. 4. What does point S represent?
unattainable
unemployment
economic growth
satisfaction

10. 4. What does point S represent?
unattainable
unemployment
economic growth
satisfaction

11. With International Trade – “S” is possible
We will learn in lesson 2a that with international trade ALL countries can consume quantities like point “S”.
With trade, ALL COUNTRIES can consume more than they can produce!

12. 5. The combination of computers and bicycles shown by point F:
is unattainable, given currently available resources and technology.
is attainable, but implies productive inefficiency
is attainable, but implies allocative inefficiency
is attainable, but implies full employment

13. 5. The combination of computers and bicycles shown by point F:
is unattainable, given currently available resources and technology.
is attainable, but implies productive inefficiency
is attainable, but implies allocative inefficiency
is attainable, but implies full employment

14. 6. Refer to the diagram. This economy will experience unemployment if it produces atB. C. D. E.

15. 6. Refer to the diagram. This economy will experience unemployment if it produces atB. C. D. E.

16. A Point INSIDE the PPC:
A point inside the PPC, like point “D”, represents what happens if there is UNEMPLOYMENT or PRODUCTIVE INEFFICIENCY.
The economy is not producing the maximum possible (points A, B, and C)

17. 7. If all discrimination in the United States were eliminated, the economy would: 
have a less concave production possibilities curve.
produce at some point closer to its production possibilities curve.
be able to produce at some point outside of its production possibilities curve.
shift the production possibilities curve outward.

18. 7. If all discrimination in the United States were eliminated, the economy would: 
have a less concave production possibilities curve.
produce at some point closer to its production possibilities curve.
be able to produce at some point outside of its production possibilities curve.
shift the production possibilities curve outward.

19. Reducing unemployment or reducing productive inefficiency
will move an economy from a point inside the curve to a point
closer to the curve.

20. 8. What is the shape of the PPC?
convex
concave
concrete
confer

21. 8. What is the shape of the PPC?
convex
concave
concrete
confer

22. 9. What is the opportunity cost of the first 20 rice?
80 wheat
78 wheat
70 wheat
2 wheat

23. 9. What is the opportunity cost of the first 20 rice?
80 wheat
78 wheat
70 wheat
2 wheat

24. 10. If the production possibilities curve is a straight line:
1. the two products will sell at the same market prices.
2. economic resources are perfectly substitutable between the production of the two products.
3. the two products are equally important to consumers.
4. equal quantities of the two products will be produced at each possible point on the curve.

25. 10. If the production possibilities curve is a straight line:
1. the two products will sell at the same market prices.
2. economic resources are perfectly substitutable between the production of the two products.
3. the two products are equally important to consumers.
4. equal quantities of the two products will be produced at each possible point on the curve.

26. 11. Which combination is preferred (optimal)?
78 wheat and 20 rice
70 wheat and 40 rice
55 wheat and 60 rice
We cannot tell

27. 11. Which combination is preferred (optimal)?
78 wheat and 20 rice
70 wheat and 40 rice
55 wheat and 60 rice
We cannot tell

28. 12. Which of the following will not produce an outward shift of the production possibilities curve? 
an upgrading of the quality of a nation's human resources
the reduction of unemployment
an increase in the quantity of a society's labor force
the improvement of a society's technological knowledge

29. 12. Which of the following will not produce an outward shift of the production possibilities curve? 
an upgrading of the quality of a nation's human resources
the reduction of unemployment
an increase in the quantity of a society's labor force
the improvement of a society's technological knowledge

30. TWO TYPES OF “ECONOMIC GROWTH”
Achieving the Potential Increasing the Potential
Reducing Unemployment or Economic Growth
Achieving Productive Efficiency

31. it chooses point A. it chooses point B. it chooses point C.
13. Refer to the diagram. Other things equal, this economy will achieve the most rapid rate of growth if: 
it chooses point A.
it chooses point B.
it chooses point C.
it chooses point D.

32. it chooses point A. it chooses point B. it chooses point C.
13. Refer to the diagram. Other things equal, this economy will achieve the most rapid rate of growth if: 
it chooses point A.
it chooses point B.
it chooses point C.
it chooses point D.

33. c to point b. b to point c. a to point b. c to point d.
14. Refer to the production possibilities curve. At the onset of the Second World War the Soviet Union was already at full employment. Its economic adjustment from peacetime to wartime can best be described by the movement from point: 
c to point b.
b to point c.
a to point b.
c to point d.

34. c to point b. b to point c. a to point b. c to point d.
14. Refer to the production possibilities curve. At the onset of the Second World War the Soviet Union was already at full employment. Its economic adjustment from peacetime to wartime can best be described by the movement from point: 
c to point b.
b to point c.
a to point b.
c to point d.

35. c to point b. b to point c. a to point b. c to point d.
15. Refer to the production possibilities curve. At the onset of the Second World War the United States had large amounts of idle human and property resources. Its economic adjustment from peacetime to wartime can best be described by the movement from point: 
 c to point b.
b to point c.
a to point b.
c to point d.

36. c to point b. b to point c. a to point b. c to point d.
15. Refer to the production possibilities curve. At the onset of the Second World War the United States had large amounts of idle human and property resources. Its economic adjustment from peacetime to wartime can best be described by the movement from point: 
 c to point b.
b to point c.
a to point b.
c to point d.