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PPF - Outward Shifts quiz #1 Flashcards

PPF - Outward Shifts quiz #1
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  • When does a production possibilities frontier (PPF) shift outward?
    A production possibilities frontier shifts outward when there is an increase in resources or an improvement in technology, allowing the economy to produce more goods and services than before.
  • What can cause an outward shift of a nation's production possibilities frontier?
    An outward shift of a nation's PPF can occur due to a general increase in resources (such as more labor or raw materials) or technological advancements that improve productivity in one or more industries.
  • How does a technological improvement in only one industry affect the shape of the PPF?
    A technological improvement in one industry shifts only one side of the PPF outward, increasing the maximum output of that good while the other good's maximum remains unchanged.
  • What happens to resource allocation when technology makes production of one good more efficient?
    More efficient production of one good allows resources to be reallocated to produce more of the other good, increasing overall output without increasing the first good's quantity.
  • What is an example of a general increase in resources that shifts the entire PPF outward?
    An example is population growth that provides more labor or acquiring new resources, which increases production capabilities for all goods.
  • Why are inward shifts of the PPF considered rare?
    Inward shifts are rare because they typically require catastrophic events, such as a meteor strike or massive loss of resources, which drastically reduce production capacity.
  • How does a new technology that benefits all industries affect the PPF?
    A new technology that benefits all industries causes both sides of the PPF to shift outward, allowing for increased production of all goods.
  • If a society chooses not to increase output of a good after a technological advance, how can it still benefit?
    The society can reallocate freed-up resources to produce more of other goods, increasing overall production efficiency and output.
  • What does the outward shift of both sides of the PPF indicate about an economy?
    It indicates that the economy has experienced a general increase in productivity or resources, enabling higher production of all goods.
  • How does the PPF illustrate changes in an economy's productive capacity over time?
    The PPF shifts outward as societies become more productive due to technological advances or resource increases, reflecting growth in potential output.