What does the production possibilities frontier show?

What does the 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.

How is opportunity cost shown on a production possibilities frontier quizlet?

Opportunity cost is represented by the slope of the frontier or can be viewed as how much we give up of one good to get one more unit of another good. Productive efficiency is represented by points on the frontier.

What would cause the production possibilities frontier to be bowed outward?

The bowed-out shape of the production possibilities curve results from allocating resources based on comparative advantage. Such an allocation implies that the law of increasing opportunity cost will hold.

Why are most production possibilities frontiers for goods bowed outward?

The curve bows outwards because of the Law of Increasing Opportunity Cost, which states that the amount of a good which has to be sacrificed for each additional unit of another good is more than was sacrificed for the previous unit.

What factors can cause the production possibilities frontier to shift?

Shifts in the production possibilities curve are caused by things that change the output of an economy, including advances in technology, changes in resources, more education or training (that’s what we call human capital) and changes in the labor force.

What are two factors that would shift the production possibilities frontier outward?

Ways of causing an outward shift of a country’s production possibility frontier:

  • Investment in capital i.e. plant and machinery and new technology.
  • Inward migration of younger, skilled workers.
  • Discovery of new natural resources.
  • Improved education, training and healthcare to lift labour productivity.