Production possibilities frontier

The boundary between those combinations of goods and services that can be produced and those combinations that cannot

production efficiency

A situation in which goods and services are produced at the lowest possible cost.

allocative efficiency

A situation in which goods and services are produced at the lowest possible cost and in the quantities that provide the greatest possible benefit. We cannot produce more of any good without giving up some of another good that we value more highly.

of a good is the opportunity cost of producing one more unit of it. We calculate marginal cost from the slope of the PPF

of a good or service is the benefit received from consuming one more unit of it.

marginal benefit curve

which is a curve that shows the relationship between the marginal benefit of a good and the quantity consumed of that good.

allocative efficiency

the point on the PPF that we prefer above all other points.

comparative advantage

in an activity if that person can perform the activity at a lower opportunity cost than anyone else.

A person who is more productive than others.

The expansion of production possibilities is called economic growth. Economic growth increases our standard of living, but it doesn’t overcome scarcity and avoid opportunity cost.

the development of new goods and of better ways of producing goods and services.

the growth of capital resources, including human capital.

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Econ Ch 2

Question	Answer
Production possibilities frontier	The boundary between those combinations of goods and services that can be produced and those combinations that cannot
production efficiency	A situation in which goods and services are produced at the lowest possible cost.
allocative efficiency	A situation in which goods and services are produced at the lowest possible cost and in the quantities that provide the greatest possible benefit. We cannot produce more of any good without giving up some of another good that we value more highly.
marginal costs	of a good is the opportunity cost of producing one more unit of it. We calculate marginal cost from the slope of the PPF
marginal benefit	of a good or service is the benefit received from consuming one more unit of it.
marginal benefit curve	which is a curve that shows the relationship between the marginal benefit of a good and the quantity consumed of that good.
allocative efficiency	the point on the PPF that we prefer above all other points.
comparative advantage	in an activity if that person can perform the activity at a lower opportunity cost than anyone else.
absolute advantage	A person who is more productive than others.
economic growth	The expansion of production possibilities is called economic growth. Economic growth increases our standard of living, but it doesn’t overcome scarcity and avoid opportunity cost.
Technological change	the development of new goods and of better ways of producing goods and services.
Capital accumulation	the growth of capital resources, including human capital.

Created by: user-2051748

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