Production Possibilities Curve (PPC)

What does a production possibilities curve (PPC) show?

All possible combinations of two goods that can be produced using fixed resources efficiently.

What are the four assumptions of the PPC?

Resources are fully employed, production is for a specific time period, resources are fixed, and technology does not change.

What does a point on the PPC represent?

Production efficiency and a possible choice.

What does a point inside the PPC represent?

Inefficiency, such as unemployed or unused resources.

What does a point outside the PPC represent?

A currently unattainable combination given existing resources and technology.

How does the PPC illustrate opportunity cost?

Producing more of one good requires giving up some of the other good.

What causes an increasing opportunity cost PPC to be bowed outward?

Resources are not equally suited to producing both goods.

What happens to the PPC with economic growth?

It shifts outward, allowing more of both goods to be produced.