Table of Contents
What the circular flow and the production possibilities frontier models are trying to demonstrate?
[4 The circular flow diagram illustrates the interdependence of the flows, or activities, that occur in the economy, such as the production of goods and services (or the output of the economy) and the income generated from that production.
What does a straight line production possibilities frontier PPF represent?
What Does It Mean When the PPF Is a Straight Line? A straight line occurs if the opportunity cost remains constant. In this scenario, the opportunity cost of producing two goods is projected as being equal regardless of where you are along the line.
Which of the following is a correct statement about production possibilities frontiers at a given point in time?
The correct answer is c) An economy can produce at any point on or inside the production possibilities frontier, but not outside the frontier.
What is a circular flow diagram quizlet?
circular-flow diagram. a visual model of the economy that shows how dollars flow through markets among households and firmsfactors of production. goods and services using inputs such as labor, land, and capital produced by firms and purchased by households.
What does a production possibilities frontier model demonstrate?
In business analysis, the production possibility frontier (PPF) is a curve illustrating the varying amounts of two products that can be produced when both depend on the same finite resources. The PPF demonstrates that the production of one commodity may increase only if the production of the other commodity decreases
What is a circular flow diagram and what does it demonstrate?
What is the circular flow diagram and what does it illustrate? It shows how firms and households are linked through product and factor markets. Note that in the diagram, households and firms are not linked to each other; rather, they are linked to the two markets.
What does the production possibilities model teach us?
The production possibilities model is a visual model of scarcity and efficiency. It simplifies the concept of how an economy can produce things using only two goods as an example. It’s going to show us all the production possibilities we have between these two goods.
What is the purpose of the circular flow model of a market economy?
The basic purpose of the circular flow model is to understand how money moves within an economy. It breaks the economy down into two primary players: households and corporations. It separates the markets that these participants operate in as markets for goods and services and the markets for the factors of production.
What does a straight line PPF represent?
A straight-line PPF represents constant opportunity costs between two goods. For example, for every unit of X produced, one unit of Y is forfeited. A bowed-outward PPF represents increasing opportunity costs.
What does the shape of a PPF represent?
A production possibilities frontier defines the set of choices society faces for the combinations of goods and services it can produce given the resources available. The shape of the PPF is typically curved outward, rather than straight. Choices outside the PPF are unattainable and choices inside the PPF are wasteful.
What does a PPF graph display?
A PPF graph displays the different production options that are possibleor even impossiblefor an economy. Producing on the frontier assumes the economy is using all its resources and is using them efficiently. This level is sometimes called full employment.
What is true of the production possibility frontier?
A production possibilities frontier defines the set of choices society faces for the combinations of goods and services it can produce given the resources available. The shape of the PPF is typically curved outward, rather than straight. Choices outside the PPF are unattainable and choices inside the PPF are wasteful.
Which statement about a production possibility curve is correct?
1 Which statement about a production possibility curve is correct? A A production possibility curve is an alternative name for an industry supply curve. B A production possibility curve is an economic model of potential output. C A realistic production possibility curve must be drawn as a straight line.
Which of the following is the assumption for production possibilities frontier?
PPF is the curve that shows the best (maximum) combinations of two outputs that an economy can produce given three assumptions: 1) Technology is fixed; 2) Resources are fixed; and 3) Resources are used at their fullest.
What does a production possibilities frontier show?
In business analysis, the production possibility frontier (PPF) is a curve illustrating the varying amounts of two products that can be produced when both depend on the same finite resources. The PPF demonstrates that the production of one commodity may increase only if the production of the other commodity decreases
What is the circular flow diagram?
A circular flow diagram represents how goods, services, and money move through our economy. Households then offer land, labor, and capital (known as factors) to firms so that they can then produce the goods and services.
What is the circular flow diagram and why is it useful?
The basic purpose of the circular flow model is to understand how money moves within an economy. It breaks the economy down into two primary players: households and corporations. It separates the markets that these participants operate in as markets for goods and services and the markets for the factors of production.
What does the simple circular flow show quizlet?
The simple circular flow model shows that: households are on the buying side of both product and resource markets. businesses are on the selling side of both product and resource markets. households are on the selling side of the resource market and on the buying side of the product market.
What does the production possibility model tell us?
The production possibilities model is a visual model of scarcity and efficiency. It simplifies the concept of how an economy can produce things using only two goods as an example. It’s going to show us all the production possibilities we have between these two goods.
What does a production possibilities frontier show quizlet?
What is the Production Possibilities Frontier (PPF)? a graph that shows the combinations of two goods the economy can possibly produce given the available resources and the available technology.
What do points on the production possibilities frontier represent?
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. Points that lie on the PPF illustrate combinations of output that are productively efficient
What is a production possibility frontier when and for what purposes can it be used Explain with examples?
The production possibilities curve measures the trade-off between producing one good versus another. For example, say an economy produces 20,000 oranges and 120,000 apples. On the chart, that’s point B. If it wants to produce more oranges, it must produce fewer apples.
What does the circular flow diagram represent?
In economics, the circular flow diagram represents the organization of an economy in a simple economic model. This diagram contains, households, firms, markets for factors of production, and markets for goods and services. The flow of inputs and outputs.
What is the circular flow diagram and what does it illustrate quizlet?
What is the circular flow diagram and what does it illustrate? It shows how firms and households are linked through product and factor markets. Note that in the diagram, households and firms are not linked to each other; rather, they are linked to the two markets.
What does the production possibilities model tell us?
The Production Possibilities Curve (PPC) is a model used to show the tradeoffs associated with allocating resources between the production of two goods. The PPC can be used to illustrate the concepts of scarcity, opportunity cost, efficiency, inefficiency, economic growth, and contractions.
