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PPF and Circular Flow Essentials
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PPF and Circular Flow Essentials
PPF and Circular Flow Essentials
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1
Question
What does the production possibilities boundary illustrate?
Answer
Scarcity, trade-offs, and opportunity cost in production choices
2
Question
What are attainable vs unattainable combinations on the PPF?
Answer
Attainable: inside the curve; Unattainable: outside the curve
3
Question
Why is the PPF concave?
Answer
Because opportunity cost increases as more investment goods are produced
4
Question
What does a straight-line PPF imply about opportunity cost?
Answer
Opportunity cost remains constant
5
Question
What is shown by a negatively sloped PPF boundary?
Answer
A trade-off where producing more of one good requires sacrificing another
6
Question
What are the three concepts illustrated by the PPF?
Answer
Scarcity, choice, and opportunity cost
7
Question
Define efficiency in a nation’s use of resources.
Answer
Resources are used to produce a mix of goods/services that society desires
8
Question
In the circular flow diagram, who supplies resources and receives payments from factor markets?
Answer
Individuals (consumers)
9
Question
Who receives payments for goods and services in the circular flow?
Answer
Firms (producers)
10
Question
What is the function of goods markets in the circular flow?
Answer
Where goods and services are exchanged
11
Question
What is the function of factor markets in the circular flow?
Answer
Where factors of production are exchanged
12
Question
What does division of labor mean?
Answer
Breaking production into specialized tasks performed by different workers
13
Question
What is specialization of labor?
Answer
Allocating different jobs to different people to produce efficiently
14
Question
What determines comparative advantage?
Answer
Producing goods with the lowest opportunity cost
15
Question
What is barter?
Answer
Trading goods directly without money
16
Question
What characterizes a traditional economy?
Answer
Dominant norms guide production roles; limited change
17
Question
What characterizes a command economy?
Answer
Economy controlled by the government
18
Question
What characterizes a free-market economy?
Answer
Prices and production guided by voluntary exchange; limited government
19
Question
What is a mixed economy?
Answer
Combination of free markets and some government intervention
20
Question
What does the production possibilities boundary illustrate?
Answer
Scarcity, trade-offs, and opportunity cost in production choices
21
Question
Why is the PPF concave?
Answer
Increasing opportunity costs as resources are reallocated to more capital-intensive goods
22
Question
What does a straight-line PPF imply about opportunity cost?
Answer
Constant opportunity cost per additional unit of output
23
Question
Define efficiency in a nation’s use of resources.
Answer
Production at a mix society desires without wasted resources
24
Question
In the circular flow diagram, who supplies resources and receives payments from factor markets?
Answer
Households supply resources and earn factor payments