Diagrams - AP Macroeconomics

The Production Possiblity Frontier is typically bowed outward with respect to the origin, reflecting the law of increasing opportunity costs, which states that as production of a particular good or service increases, costs associated with producing that good or service increase too.

The correct answer, therefore, is "The Production Possibility Frontier is bowed outward with respect to the origin." The other answer choices are incorrect because they do not accurately account for the law of increasing opportunity costs.

The bowed-outward shape of the PPF represents increasing opportunity costs of production because it indicates that it is becoming more and more costly to produce the good on the x-axis. This higher cost is represented by the increasingly steep slope of the PPF. The slope of the PPF corresponds to the costs of producing an extra unit of X. The steeper the slope, the steeper the cost.

The increasing opportunity costs as you move along a PPF are a result of the resources that are more specialized in the production of one good being used to produce the other good. These resources become less and less productive leading to higher costs. If the two goods are cars and burgers, the more burgers you start to make, the more car mechanics you have to start using to make these burgers (since your resources are fixed). The less productive car mechanics (that is, in the production of burgers) will lead to higher production costs. This is due to the fact that they will earn the same hourly wage as the burger specialists, but produce fewer burgers per hour. The cost of burger production progressively goes up.

would be the most appropriate point since it has a higher quantity of capital goods than point . Capital goods have a greater impact on the long term growth of an economy.

Both point and are along the PPF, so they are both productively efficient. For this reason, they represent identical unemployment rates. Additionally there is nothing to convince us that labour is necessarily the primary resource in the production of consumer goods in this economy.

At point , there is allocative efficiency because at this point the society is producing the right mix of goods (supply (marginal cost) of the consumer good matches its demand (marginal benefit\])). Point is on the PPF and as such is also productively efficient since all resources are being used for production at all points on the PPF.

On the PPF, the unemployment rate is equal to the natural rate of unemployment which consists of frictional unemployment and structural employment but excludes cyclical unemployment.

The move from PPF1 to PPF2 represents an increase in the productive potential(possibilities) of the economy. This can be effected by an increase in the productive resources in the economy, which would be represented by an increase in the labour force.

The diagram shows an increase in the potential productive capacity of the consumer good production without a corresponding increase in the productive capacity of capital good production. The best answer then is that whatever change happened affected only the capacity to produce consumer goods. Labour force increases would increase the capacity to produce both goods, and so would an economic boom.

The definition of the opportunity cost is the value of the highest valued alternative that is foregone in the production of a good. It is not the sum of all the alternative options, but rather only the most highly valued one.

The Production Possiblity Frontier is typically bowed outward with respect to the origin, reflecting the law of increasing opportunity costs, which states that as production of a particular good or service increases, costs associated with producing that good or service increase too.

The correct answer, therefore, is "The Production Possibility Frontier is bowed outward with respect to the origin." The other answer choices are incorrect because they do not accurately account for the law of increasing opportunity costs.

The bowed-outward shape of the PPF represents increasing opportunity costs of production because it indicates that it is becoming more and more costly to produce the good on the x-axis. This higher cost is represented by the increasingly steep slope of the PPF. The slope of the PPF corresponds to the costs of producing an extra unit of X. The steeper the slope, the steeper the cost.

The increasing opportunity costs as you move along a PPF are a result of the resources that are more specialized in the production of one good being used to produce the other good. These resources become less and less productive leading to higher costs. If the two goods are cars and burgers, the more burgers you start to make, the more car mechanics you have to start using to make these burgers (since your resources are fixed). The less productive car mechanics (that is, in the production of burgers) will lead to higher production costs. This is due to the fact that they will earn the same hourly wage as the burger specialists, but produce fewer burgers per hour. The cost of burger production progressively goes up.

would be the most appropriate point since it has a higher quantity of capital goods than point . Capital goods have a greater impact on the long term growth of an economy.

Both point and are along the PPF, so they are both productively efficient. For this reason, they represent identical unemployment rates. Additionally there is nothing to convince us that labour is necessarily the primary resource in the production of consumer goods in this economy.

At point , there is allocative efficiency because at this point the society is producing the right mix of goods (supply (marginal cost) of the consumer good matches its demand (marginal benefit\])). Point is on the PPF and as such is also productively efficient since all resources are being used for production at all points on the PPF.

On the PPF, the unemployment rate is equal to the natural rate of unemployment which consists of frictional unemployment and structural employment but excludes cyclical unemployment.

The move from PPF1 to PPF2 represents an increase in the productive potential(possibilities) of the economy. This can be effected by an increase in the productive resources in the economy, which would be represented by an increase in the labour force.

The diagram shows an increase in the potential productive capacity of the consumer good production without a corresponding increase in the productive capacity of capital good production. The best answer then is that whatever change happened affected only the capacity to produce consumer goods. Labour force increases would increase the capacity to produce both goods, and so would an economic boom.

The definition of the opportunity cost is the value of the highest valued alternative that is foregone in the production of a good. It is not the sum of all the alternative options, but rather only the most highly valued one.