AP®︎ Microeconomics: Topic 1.3 Flashcards

Master key terms and definitions for Topic 1.3 of AP Microeconomics – Production Possibilities Curve to help you prep for quizzes and the AP exam.

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Term

Production Possibilities Curve (PPC) / Production Possibilities Frontier (PPF)

Definition

A graph showing the maximum combinations of two goods producible with fixed resources and technology.

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Production Possibilities Curve (PPC) / Production Possibilities Frontier (PPF)
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A graph showing the maximum combinations of two goods producible with fixed resources and technology.

MKT-1.CMKT-1.C.1
Assumptions of the PPC
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Two goods are produced, resources are fixed, and technology is fixed.

MKT-1.C
Efficient Output / Productive Efficiency on a PPC
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Any point on the curve where all available resources are fully and efficiently used.

MKT-1.CMKT-1.C.2
Underutilization of Resources / Inefficiency on a PPC
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Any point inside the curve where resources are unemployed or not fully used.

MKT-1.CMKT-1.C.2
Unattainable Output on a PPC
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Any point outside the curve that cannot be produced with current resources and technology.

MKT-1.CMKT-1.C.2
Trade-Offs on a PPC
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Getting more of one good requires giving up some of the other good.

MKT-1.CMKT-1.C.1
Opportunity Cost on a PPC
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The amount of one good forgone to gain an additional unit of the other.

MKT-1.CMKT-1.C.2
Calculating Opportunity Cost from a PPC or Table
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Divide the units of one good given up by the units of the other gained.

MKT-1.C
Slope of the PPC and Opportunity Cost
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The curve's slope measures the opportunity cost of producing more of one good.

MKT-1.CMKT-1.C.2
Constant, Increasing, and Decreasing Opportunity Cost
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Constant gives a straight line; increasing bows outward; decreasing bows inward.

MKT-1.CMKT-1.C.3
Allocative Efficiency on a PPC
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The output combination on the curve that best matches society's preferences.

MKT-1.C
Scarcity Illustrated by the PPC
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Limited resources prevent producing every desired combination of goods.

MKT-1.CMKT-1.C.2
PPC Shifts: Growth, Contraction, and Causes
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Changes in resources or technology shift the curve outward for growth or inward for contraction.

MKT-1.CMKT-1.C.4