ECONOMICS
OPPORTUNITY COST
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A simplified representation of a real situation that is used to better understand real-life situations.
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Illustrates trade-offs facing an economy that produces 2 goods. Shows max quantity of 1 good that can be produced for any given quantity produced of the other.
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Represents transactions in an economy by 2 kinds of flows around a circle:flows of physical things (goods or labor) in one direction and flows of money to pay for these physical things in the opposite direction.
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None of the above
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Detailed explanation-1: -The Production Possibilities Frontier (PPF) is a graph that shows all the different combinations of output of two goods that can be produced using available resources and technology. The PPF captures the concepts of scarcity, choice, and tradeoffs.
Detailed explanation-2: -In economics, the production possibilities curve is a visualization that demonstrates the most efficient production of a pair of goods. Each point on the curve shows how much of each good will be produced when resources shift to making more of one good and less of another.
Detailed explanation-3: -Points either on or inside the frontier, points like B and A, are attainable with the currently level of resources and technology. The addition of the PPF curve thus illustrates scarcity by dividing production space into attainable and unattainable levels of production.
Detailed explanation-4: -Question: Why is the shape of the production possibilities frontier (PPF) often curved instead of straight? a) Because the PPF is based on the productive capabilities of a nation overall rather than the productive capacity of an individual.
Detailed explanation-5: -The production possibilities frontier (the line) shows all the possible combinations of the two products using all the available resources. Since we are using all available resources, increasing the production of one of the goods means decreasing the production of the other good (illustrates the idea of trade-offs).