Production Possibility Curve Flashcards, test questions and answers
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What is Production Possibility Curve?
The Production Possibility Curve (PPC) is a graphical representation of the maximum output possible for two different products given the same resources and technology. It is used to illustrate how much of one product can be produced in order to produce an equal amount of another product, with full production efficiency. This helps to demonstrate tradeoff opportunities between producing different goods and services, as well as opportunity cost the cost of a forgone alternative when one choice is made over another.The PPC shows all productive combinations that are technologically feasible and efficient given the available resources. All points along the curve represent efficient uses of those resources by producing combinations of two different products or services. Points inside the curve indicate that some combination not being utilized, while points outside represent combinations not possible given current resources and technology available. The PPC also shows increasing opportunity cost as more units are produced of one good or service in order to produce less units of another good or service. This means that if more units of one product are desired, less units will be available from other products due to resource limitations and efficiency constraints. The farther away from the origin on either axis a point lies on the graph, indicates higher opportunity costs for producing more output for either product being considered in production possibilities. In conclusion, Production Possibility Curves provide an important visual representation for understanding tradeoffs between two goods or services given finite amounts of resources and technology involved in their production process.