PPF is based on the assumption, that resources of an economy are fixed. MRT is 2G: 1B. 2 - If an economy can produce various combinations of... Ch. Generally, the production possibility curve(PPC) is _____ to the origin. less and less units of a commodity are sacrificed to gain an additional unit of another commodity. Resources such as nonrenewable resources will decline, but labor remains fully employed and technology is unchanged. b. For, “How PPF will be affected by massive unemployment”, refer HOTS. ii. 8. Copyright 10. 2 - Which word or phrase best completes the following... Ch. Notice that, even with only two economies and the assumption of linear production possibilities curves for each, the combined curve … decreasing costs. Resources are fixed and fully employed, and technology advances at the rate of growth of the economy overall. 2 - Which of the following is not one of the three... Ch. View Answer. O a. income of the consumer O b. price of the product O c. taste and preferences O d. technological Question 47 Not yet answered Marked out of 100 Flag question The Production Possibility Curve is based on the assumption, "No changes in technology" because a. State the assumptions on which Production Possibility Curve is based || Important Question CBSE | 12 Important Questions for board exam for … b. As we include more and more production units, the curve will become smoother and smoother. Due to scarcity of resources, we cannot satisfy all our wants. Economists have traditionally represented this range of choices by what they call a ‘Production Possibility Schedule’ (Table 1.1). Content Guidelines 2. Disclaimer 9. Production Possibility Frontier (PPF) refers to graphical representation of possible combinations of two goods that can be produced with given resources and technology. View Answer "Massive unemployment shifts the … A production possibilities curve is drawn based on which of the following assumptions? b) If the economy is at point C, what is the cost of one more automobile? Why? The law of scarcity simply notes that economic resources — land, labor, capital, and talent — are limited, not infinite. The rotation can be either for the commodity on the X- axis or for commodity on the Y-axis. Which of the following is an assumption of Production Possibility Curve? (2) The same resources can be used to produce either or both of the two … Based on the findings, three cases are listed for positive economic growth in the ‘Three cases for … Economy cannot operate at any point outside PPF as it is unattainable with the available productive capacity. ii. For “An economy always produces on, but not y inside, a PPF”, refer HOTS. making a choice of its resources. 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In economics, an indifference curve connects points on a graph representing different quantities of two goods, points between which a consumer is indifferent.That is, any combinations of two products indicated by the curve will provide the consumer with equal levels of utility, and the consumer has no preference for one combination or bundle of goods over a different combination on the same curve. *Response times vary by subject and question complexity. In that the economy actually produces tens of thousands of different goods, this is one of these seemingly unrealistic assumptions. Second, the technology is given and unchanged. However, the analysis involved can be applied equally well, to any combination of goods. PPC—shows all the possible combinations of 2 goods or services. The two basic characteristics or features of PPF are: PPF shows all the maximum possible combination of two goods, which can be produced with the available resources and technology. iv. 2 - Suppose, unfortunately, your mathematics and... Ch. Production Possibility Curve is based upon following assumptions: (i) The amount of productive resources is fixed (ii) There is no change in technology (iii) All the productive resources are fully employed (iv) All resources are not equally efficient in the production of all goods. PPF illustrates the concept of opportunity cost. 1.1. i. What has happe... Job-Order Cost Sheets, Balance in Work in Process and Finished Goods Prull Company, a job-order costing firm, w... What documents are needed for cost accounting clerks to update the work-in-process accounts with standard charg... City 1 produces 500 tons of waste per day, and city 2 produces 400 tons of waste per day. In the given case, 2G is the opportunity cost of producing IB, i.e. Production possibility frontier is based on the following assumptions: 1. The bowed-out shape of the production possibilities curve results from allocating resources based on comparative advantage. In an actual economy, with a tremendous number of firms and workers, it is easy to see that the production possibilities curve will be smooth. The technology is not an important factor in the production possibility o b. i. Resources are fixed and fully employed and technology advances at the rate of growth of economy overall b. a) Show these data graphically. o. Characteristics of the Production Possibilities Frontier(Summary) ... As you can see, the production possibility curve is a straight line, so opportunity cost is constant and independent of the level of production of soap and eggs. Even if an economy uses all its resources in the best possible manner, its capabilities are restricted due to scarcity of resources. 2 - Explain why scarcity forces individuals and... Ch. so if resources are inefficiently utilized in an economy, it implies that the economy is not maximizing its output with the given resources. D. the change in efficiency is unclear. 2 - The present choice between investing in capital... Ch. Content Filtrations 6. A production possibilities curve illustrates how efficient an economy is by indicating the possibly opportunities in the economy. If the firm wishes to increase snowboard production, it will first use Plant 3, which has a comparative advantage in snowboards. a. Economy cannot operate at any point outside PPF (like point ‘E’), as it is unattainable with the available productive capacity. The concept of PPF can be better understood with the help of following imaginary (hypothetical) schedule and diagram: Table 1.1 shows the various possibilities of guns and butter. The opportunity cost of a product is the alternative that must be given up to produce that product. 1. Assumptions of the Production Possibilities Frontier . [CBSE 2013 Q] Answer: The concept of PP curve is based on the following assumptions: First, the amount of resources in the economy is fixed. In short, production possibility curve is a curve which shows all possible combinations of two goods that can be produced by making full use of given resources and technology in an economy. Production Possibility Frontier (PPF) is a macroeconomics concept that shows various combinations of two products or services using almost the same and finite raw materials for production. TOS 7. As there exists an inverse relationship between changes in quantity of one commodity and change in quantity of the other commodity, PPF slopes downwards from left to right (see Fig. Prohibited Content 3. D) there is a fixed demand for the products. Technology remains constant 2. 1.10. Show these data graphically. c. Resources can vary; most resources experience times of unemployment; and technology advances, particularly during wartime. Which characteristic of the production possibilities curve reflects the law of increasing opportunity costs: its shape or its length? Explain how the production possibilities curve reflects the law of increasing opportunity costs. 2. Median response time is 34 minutes and may be longer for new subjects. We can measure MRT on the PPF. Production possibility schedule or production possibility curve is based on the assumption of two commodities, given quantity of resources, constant technology and … Based on the low of constant costs: The theory assumes that cost of production per unit remains constant even if production is increased or decreased. Production possibility frontier is based on the following assumptions: 1. Experts are waiting 24/7 to provide step-by-step solutions in as fast as 30 minutes!*. Discuss several reasons why managers often neglect the true costs of holding physical inventory. (iii) The amount of resources in an economy is fixed but these resources can be transferred from one use to … A production possibilities curve is drawn based on which of the following assumptions? Increase in the production at the full employment level is shown by an outward shift of production possibility ... sibility curve is ... are shown under Harrod-neutrality assumption. PPF shows transformation of one good into another, not physically, but by diverting resources from one use to the other. b. The assumption is not only unrealistic but unscientific also. Let us quickly revise the concept of PPF with the help of Fig. Read this article to learn about the assumptions, characteristics, opportunity cost, change in production possibility frontier and overview of production possibility frontier! 42. If you're seeing this message, it means we're having trouble loading external resources on our website. The resources are fully and efficiently utilised; 4. Classifying and Analyzing Business Activities Cowell Company had the following business activities during 2019:... Add necessary dashes, parentheses, or periods. We know that an economy always faces the problem of resource allocation i.e. Resources such as nonrenewable resources will decline, but labor remains fully employed, and technology is … At point A, Alpine Sports produces 350 pairs of skis per month and no snowboards. How could real GDP grow while, over the same period, real GDP per capita f... Would there be a need for a rationing device if scarcity did not exist? If the economy operates on PPF (like points A, B or C), it means resources are fully and efficiently utilised. However, in case of degradation in technology or a decrease in resources for production of guns, will rotate the PPF to the left from AB to DB as shown in Fig. The trial balance for Game Time on July 31 is as follows: Data for month-end adjustments are as follows: Expire... a. All of the following are assumptions of the production possibilities curve EXCEPT. Production possibility schedule or production possibility curve is based on the assumption of two commodities, given quantity of resources, constant technology and … Upon what specific assumptions is this production possibilities curve based? an economy can never operate at any point outside the PPF (like F). After that, possible shapes of PPF are shown under Harrod-neutrality assumption. b. If there is wastage or inefficient utilisation of resources, then economy will operate at any point inside the PPF (like E). (i) Rotation for commodity on the X-axis: When there is a technological improvement or an increase in resources for production of the commodity on the X-axis (say, butter), then PPF will rotate from AB to AC. The Production Possibilities Curve (PPC) is a model used to show the tradeoffs associated with allocating resources between the production of two goods. Production Possibility Frontier. A straight production possibility curve implies that costs are constant Question 14 Refer to the above diagrams. PPF primarily represents a hypothetical boundary between the maximum combination of goods and services that an economy can produce with the available resources and technology. There can be two attainable options: If the resources are used in the best possible manner, then economy will operate at any point (like, A, B, C or D) on PPF. 6. How doe... Answer these questions about GDP. However, in case of technological degradation or decrease in resources for production of butter, then PPF will rotate to the left from AB to AD (Fig. 1.7. D) shows the inverse relationship between price and quantity demanded. It must be remembered that PPF does not show the point at which the economy will actually operate. Because of this reason, PPF is known as “Transformation Curve.”. 2 - A production possibilities curve shows the various... Ch. 2 - Interpret the phrases There is no such thing as a... Ch. To draw this curve we take the help of production possibilities schedule, as shown below. Concept of PPF in Economics. PPF being a straight line or convex shaped) would not arise, as MRT always increases. 4. This data is graphically represented in Fig. When points A, B, C, D, E, F and G are joined, we get a curve AG, known as ‘Production Possibility Frontier’. Resources are fixed and fully employed, and technology advances at the rate of growth of the economy overall. Technological Progress: Technical progress enables an economy to get more output from the same quantities of resources. 20G + IB) can be produced by utilising the resources fully and efficiently. Refer to the graph below. a. After that, possible shapes of PPF are shown under Harrod-neutrality assumption. Linear segments and is almost a smooth curve quantities of resources in the of! 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