A diagram which depicts the maximum combinations of two goods that can be produced in an economy.
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What is assumed in a PPC?
All resources are fully employed and used efficiently.
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What does a point on the PPC imply?
All factors of production are fully employed.
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What does a point inside the PPC imply?
An economy is operating inefficiently, with unused resources.
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What does a movement from a point inside the PPC to a point on the PPC imply?
An economy is making fuller use of its existing, previously unemployed resources.
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What are shifts of the PPC driven by?
Changes in the quantity ad efficiency of the factors of production.
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What are 4 causes of an outward shift of the PPC?
Technological improvements, improvements in education and training, discovery of new resources, and changes that lead to an increase in the working population.
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What are 4 causes of an inward shift of the PPC?
Natural disasters, wars, global warming or climate change, and a prolonged recession.
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How does a PPC have an opportunity cost?
As more capital goods are produced, more consumer goods must be given up.
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What is economic growth?
An increase in the productive capacity of an economy overtime.
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What does an improvement in any factors that shift a PPC mean?
There has been an increase in the productive capacity of an economy.
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What is productive efficiency?
How well society uses its scarce resources to maximise outputs.
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When does productive efficiency occur?
When maximum output is produced from available factors of production, and when it is not possible to produce more of one good/service without producing less of another.
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Where in a PPC does productive efficiency occur?
At any point on the PPC.
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Where in a PPC is productively inefficient?
Any point inside the PPC.
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What is allocative efficiency?
When an economy's factors of production are used to produce the combination of goods and services that maximises society's welfare.
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Where in a PPC is the allocatively efficient point?
The one that best reflects society's preferences for particular goods and services.
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Other cards in this set
Card 2
Front
What is assumed in a PPC?
Back
All resources are fully employed and used efficiently.
Card 3
Front
What does a point on the PPC imply?
Back
Card 4
Front
What does a point inside the PPC imply?
Back
Card 5
Front
What does a movement from a point inside the PPC to a point on the PPC imply?
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