1.1.4 PPF

• At all points on a country's PPF


  productive efficiency is achieved
• an economy has achieved productive efficiency if...


  it is unable to produce more of one good without producing less of another
• a firm is productively efficient when


  it is operating at the lowest point on its AC curve
• A shift to the left of a country’s production possibility frontier reflects


  a fall in the country's productive capacity
• The government is concerned that the economy is not achieving productive efficiency. To achieve productive efficiency in the economy, the government should introduce policies that


  Move the economy to a point on its production possibility frontier
• An economy is always productively efficient if it


  Can produce more of one good only by producing less of another
• most likely to lead to greater labour productivity in an industry


  An increase in capital investment in the industry
• A company wishes to increase labour productivity. All other things being equal, this is most likely to be achieved if the company


  Invests in more capital equipment
• A production possibility frontier illustrates


  The various combinations of output an economy is currently capable of producing with its limited resources
• A firm is productively inefficient if


  It can lower its average cost of production by reducing its output.
• on a PPF it can never be what


  ALLOCATIVELY EFFICIENT
• example of Factor of production in relation to PPF


  Land owned or rented by firms
• what would be classified by an economist under the FoP known as land


  fish in the ocean
•  example of the immobility of a factor of production? Workers’ unwillingness to..


  Change Jobs
• something classified as a consumption activity

  Someone enjoying the flowers in a public park
• what would be classified by an economist as an example of the FoP of capital


  Delivery Van
•  likely to discourage the growth of a firm? The existence of

  Diseconomies of scale at low levels of output
• example of Diseconomies of Scale

  A firm expands but experiences management problems which increase its average costs.
• Diseconomies of scale might arise because

  Decision-making by management becomes more difficult in larger firms
• A firm increases the size of its business. As a result, its average costs fall because of better utilisation of its factory and the lower cost of buying advertising space. The firm therefore experiences greater

  Technical and marketing economies of scale